UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 Form
10-Q
 
 (Mark
one)
 x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For the
quarterly period ended June 30, 2010
 
 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 Number: 000-52975
 
 American
Casino & Entertainment Properties LLC
 (Exact
name of registrant as specified in its charter)
 
 Delaware
                                    
                                    20-0573058(State
      or other jurisdiction of
                                    
                                    (I.R.S.
      Employerincorporation
      or organization)
                                    
                                    Identification
      No.)2000
      Las Vegas Boulevard SouthLas
      Vegas, NV
                                    
                                    89104(Address
      of principal executive offices)
                                    
                                    (Zip
      code)
  (702)
380-7777
 (Registrant's
telephone number, including area code)
 
  
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).   Yes
 ̈ No x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 Large
      accelerated filer  ̈
                Accelerated
      filer  ̈Non-accelerated
      filer x (Do
      not check if a smaller reporting company)
                Smaller
      reporting company  ̈
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes  ̈ No x
  
  TABLE
OF CONTENTS
 
 PagePart
      I
                          
                          
                          Financial
      InformationItem
      1.
                          Unaudited
      Condensed Consolidated Financial Statements
                          
                          1Condensed
      Consolidated Balance Sheets –June 30, 2010 (unaudited) and
      December 31, 2009
                          
                          1Condensed
      Consolidated Statements of Operations (unaudited) – the three months ended
      June 30, 2010 and June 30, 2009
                          
                          2Condensed
      Consolidated Statements of Operations (unaudited) – the six months ended
      June 30, 2010 and June 30, 2009
                          
                          3Condensed
      Consolidated Statements of Cash Flows (unaudited) – the six months ended
      June 30, 2010 and June 30, 2009
                          
                          4Condensed
      Consolidated Statement of Members’ Equity (unaudited) – the six months ended
      June 30, 2010
                          
                          5Notes
      to Condensed Consolidated Financial Statements (unaudited)
                          
                          6Item
      2.
                          Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          
                          12Item
      3.
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          
                          21Item
      4T.
                          Controls
      and Procedures
                          
                          21Part
      II
                          
                          
                          Other
      InformationItem
      6.
                          Exhibits
                          
                          22
  i
  PART
I-FINANCIAL INFORMATION
 
 Item
1. Unaudited Condensed Consolidated Financial Statements.
 
 AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 As of
                            
                            
                            As ofJune 30, 2010
                            
                            
                            December 31, 2009(Unaudited)(In thousands)AssetsCurrent
      Assets:Cash
      and cash equivalents
                            
                            $
                            101,812
                            
                            
                            $
                            101,092Investments-restricted
                            
                            
                            1,171
                            
                            
                            
                            1,857Accounts
      receivable, net
                            
                            
                            3,224
                            
                            
                            
                            3,250Other
      current assets
                            
                            
                            11,341
                            
                            
                            
                            10,418Total
      Current Assets
                            
                            
                            117,548
                            
                            
                            
                            116,617Property
      and equipment, net
                            
                            
                            1,137,759
                            
                            
                            
                            1,146,796Debt
      issuance costs, net
                            
                            
                            3,186
                            
                            
                            
                            2,940Intangible
      and other assets
                            
                            
                            20,741
                            
                            
                            
                            22,606Total
      Assets
                            
                            $
                            1,279,234
                            
                            
                            $
                            1,288,959Liabilities
      and Members' EquityCurrent
      Liabilities:Accounts
      payable
                            
                            $
                            3,854
                            
                            
                            $
                            3,236Accrued
      expenses
                            
                            
                            17,677
                            
                            
                            
                            18,646Accounts
      payable and accrued expenses - related party
                            
                            
                            43
                            
                            
                            
                            200Accrued
      payroll and related expenses
                            
                            
                            10,094
                            
                            
                            
                            10,818Current
      portion of capital lease obligations
                            
                            
                            269
                            
                            
                            
                            263Total
      Current Liabilities
                            
                            
                            31,937
                            
                            
                            
                            33,163Long-Term
      Liabilities:Long-term
      debt, net of unamortized discount
                            
                            
                            353,460
                            
                            
                            
                            351,436Capital
      lease obligations, less current portion
                            
                            
                            2,059
                            
                            
                            
                            2,195Total
      Long-Term Liabilities
                            
                            
                            355,519
                            
                            
                            
                            353,631Total
      Liabilities
                            
                            
                            387,456
                            
                            
                            
                            386,794Commitments
      and ContingenciesMembers'
      Equity:Members'
      Equity
                            
                            
                            891,778
                            
                            
                            
                            902,165Total
      Members' Equity
                            
                            
                            891,778
                            
                            
                            
                            902,165Total
      Liabilities and Members' Equity
                            
                            $
                            1,279,234
                            
                            
                            $
                            1,288,959
 
 See notes
to condensed consolidated financial statements.
  1
  AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three months ended June
                        30,2010
                      
                      
                      Three months ended June
                        30,2009(Unaudited)(In thousands)Revenues:Casino
                      
                      $
                      51,319
                      
                      
                      $
                      55,905Hotel
                      
                      
                      15,307
                      
                      
                      
                      16,182Food
      and beverage
                      
                      
                      17,486
                      
                      
                      
                      19,539Tower,
      retail and other
                      
                      
                      8,546
                      
                      
                      
                      9,148Gross
      revenues
                      
                      
                      92,658
                      
                      
                      
                      100,774Less
      promotional allowances
                      
                      
                      6,129
                      
                      
                      
                      6,623Net
      revenues
                      
                      
                      86,529
                      
                      
                      
                      94,151Costs
      And Expenses:Casino
                      
                      
                      16,629
                      
                      
                      
                      17,742Hotel
                      
                      
                      8,632
                      
                      
                      
                      9,024Food
      and beverage
                      
                      
                      12,997
                      
                      
                      
                      14,417Other
      operating expenses
                      
                      
                      3,386
                      
                      
                      
                      3,547Selling,
      general and administrative
                      
                      
                      27,664
                      
                      
                      
                      28,127Depreciation
      and amortization
                      
                      
                      10,922
                      
                      
                      
                      10,537Pre-opening
      costs
                      
                      
                      129
                      
                      
                      
                      -Loss
      on sale of assets
                      
                      
                      23
                      
                      
                      
                      563Management
      fee - related party
                      
                      
                      375
                      
                      
                      
                      250Impairment
      of assets
                      
                      
                      2,000
                      
                      
                      
                      -Total
      costs and expenses
                      
                      
                      82,757
                      
                      
                      
                      84,207Income
      From Operations
                      
                      
                      3,772
                      
                      
                      
                      9,944Other
      Income (Expense):Interest
      income
                      
                      
                      4
                      
                      
                      
                      19Interest
      expense
                      
                      
                      (11,471
                      )
                      
                      
                      (605
                      )Interest
      expense - related party
                      
                      
                      -
                      
                      
                      
                      (10,202
                      )Total
      other expense, net
                      
                      
                      (11,467
                      )
                      
                      
                      (10,788
                      )Net
      Loss
                      
                      $
                      (7,695
                      )
                      
                      $
                      (844
                      )
 
 See notes
to condensed consolidated financial statements.
  2
 
 AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Six months ended June 30,
                        2010
                      
                      
                      Six months ended June 30,
                        2009(Unaudited)(In thousands)Revenues:Casino
                      
                      $
                      107,222
                      
                      
                      $
                      115,356Hotel
                      
                      
                      29,152
                      
                      
                      
                      31,163Food
      and beverage
                      
                      
                      34,508
                      
                      
                      
                      38,185Tower,
      retail and other
                      
                      
                      15,837
                      
                      
                      
                      17,340Gross
      revenues
                      
                      
                      186,719
                      
                      
                      
                      202,044Less
      promotional allowances
                      
                      
                      12,417
                      
                      
                      
                      14,203Net
      revenues
                      
                      
                      174,302
                      
                      
                      
                      187,841Costs
      And Expenses:Casino
                      
                      
                      33,797
                      
                      
                      
                      36,669Hotel
                      
                      
                      16,789
                      
                      
                      
                      17,335Food
      and beverage
                      
                      
                      25,855
                      
                      
                      
                      27,671Other
      operating expenses
                      
                      
                      6,416
                      
                      
                      
                      6,996Selling,
      general and administrative
                      
                      
                      54,492
                      
                      
                      
                      56,983Depreciation
      and amortization
                      
                      
                      21,534
                      
                      
                      
                      20,439Pre-opening
      costs
                      
                      
                      283
                      
                      
                      
                      -Loss
      on sale of assets
                      
                      
                      4
                      
                      
                      
                      578Management
      fee - related party
                      
                      
                      750
                      
                      
                      
                      1,000Impairment
      of assets
                      
                      
                      2,000
                      
                      
                      
                      -Total
      costs and expenses
                      
                      
                      161,920
                      
                      
                      
                      167,671Income
      From Operations
                      
                      
                      12,382
                      
                      
                      
                      20,170Other
      Income (Expense):Interest
      income
                      
                      
                      8
                      
                      
                      
                      59Interest
      expense
                      
                      
                      (22,777
                      )
                      
                      
                      (1,280
                      )Interest
      expense - related party
                      
                      
                      -
                      
                      
                      
                      (21,398
                      )Total
      other expense, net
                      
                      
                      (22,769
                      )
                      
                      
                      (22,619
                      )Net
      Loss
                      
                      $
                      (10,387
                      )
                      
                      $
                      (2,449
                      )
 
 See notes
to condensed consolidated financial statements.
  3
  AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 SixmonthsendedJune
                    30,2010
                  
                  
                  SixmonthsendedJune
                    30,2009(Unaudited)(In thousands)Cash Flows From Operating Activities:Net
      loss
                  
                  $
                  (10,387
                  )
                  
                  $
                  (2,449
                  )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
                  
                  
                  21,534
                  
                  
                  
                  20,439Amortization
      of debt issuance costs
                  
                  
                  2,359
                  
                  
                  
                  3,851Loss
      on sale of assets
                  
                  
                  4
                  
                  
                  
                  578Loss
      on asset impairment
                  
                  
                  2,000
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Restricted
      Cash
                  
                  
                  -
                  
                  
                  
                  1,317Accounts
      receivable, net
                  
                  
                  26
                  
                  
                  
                  591Other
      assets
                  
                  
                  (923
                  )
                  
                  
                  (1,073
                  )Accounts
      payable and accrued expenses
                  
                  
                  (1,972
                  )
                  
                  
                  (4,861
                  )Related
      party activity, net
                  
                  
                  (157
                  )
                  
                  
                  (1,163
                  )Net
      Cash Provided by Operating Activities
                  
                  
                  12,484
                  
                  
                  
                  17,230Cash
      Flows From Investing Activities:Decrease
      in investments - restricted
                  
                  
                  686
                  
                  
                  
                  -Acquisition
      of property and equipment
                  
                  
                  (11,192
                  )
                  
                  
                  (6,711
                  )Increase
      in intangible assets
                  
                  
                  (645
                  )
                  
                  
                  -Proceeds
      from sale of property and equipment
                  
                  
                  98
                  
                  
                  
                  191Net
      Cash Used in Investing Activities
                  
                  
                  (11,053
                  )
                  
                  
                  (6,520
                  )Cash
      Flows From Financing Activities:Debt
      issuance costs
                  
                  
                  (581
                  )
                  
                  
                  -Debt
      issuance costs - related party
                  
                  
                  -
                  
                  
                  
                  (12,727
                  )Payments
      on capital lease obligation
                  
                  
                  (130
                  )
                  
                  
                  (236
                  )Equity
      Contribution
                  
                  
                  -
                  
                  
                  
                  35,000Net
      Cash Provided by (Used) in Financing Activities
                  
                  
                  (711
                  )
                  
                  
                  22,037Net
      increase in cash and cash equivalents
                  
                  
                  720
                  
                  
                  
                  32,747Cash
      and cash equivalents - beginning of period
                  
                  
                  101,092
                  
                  
                  
                  30,366Cash
      and cash equivalents - end of period
                  
                  $
                  101,812
                  
                  
                  $
                  63,113Supplemental
      Disclosures of Cash Flow Information:Cash
      paid during the period for interest, net of amounts
      capitalized
                  
                  $
                  20,417
                  
                  
                  $
                  49Cash
      paid during the period for interest - related party, net of amounts
      capitalized
                  
                  $
                  -
                  
                  
                  $
                  19,973Supplemental
      Disclosures of Non-Cash Items:Accrued
      intangible assets
                  
                  $
                  400
                  
                  
                  $
                  -Accrued
      capital expenditures
                  
                  $
                  497
                  
                  
                  $
                  -Non-cash
      acquisition of property and equipment
                  
                  $
                  -
                  
                  
                  $
                  940Non-cash
      equity contribution related to troubled debt restructure
                  
                  $
                  -
                  
                  
                  $
                  520,186
 
 See notes
to condensed consolidated financial statements.
  4
  AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 CONDENSED
CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY
 (Unaudited)
 (In
thousands)
 
 Class A
                        Equity
                      
                      
                      Class B
                        Equity
                      
                      
                      Total EquityBalances
      at December 31, 2009
                      
                      $
                      -
                      
                      
                      $
                      902,165
                      
                      
                      $
                      902,165Net
      loss
                      
                      
                      -
                      
                      
                      
                      (10,387
                      )
                      
                      
                      (10,387
                      )Balances
      at June 30, 2010
                      
                      $
                      -
                      
                      
                      $
                      891,778
                      
                      
                      $
                      891,778
 
 See notes
to condensed consolidated financial statements.
  5
  AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  Note 1.  The
Company
  American
Casino & Entertainment Properties LLC, or ACEP, was formed in Delaware on
December 29, 2003. As used in this Quarterly Report on Form 10-Q, the terms
“ACEP”, “company”, “we”, “our”, “ours”, and “us” refer to American Casino &
Entertainment Properties LLC and its subsidiaries, unless the context suggests
otherwise. ACEP is a holding company that was formed for the purpose of
acquiring the entities that own and operate the Stratosphere Casino Hotel &
Tower, or the Stratosphere, Arizona Charlie’s Decatur and Arizona Charlie’s
Boulder in Las Vegas, Nevada.  We purchased the Aquarius Casino
Resort, or the Aquarius, on May 19, 2006.  The Aquarius operates in
Laughlin, Nevada.
 
 On April
22, 2007, American Entertainment Properties Corp., or AEP, our former direct
parent, entered into a Membership Interest Purchase Agreement, or the Agreement,
with W2007/ACEP Holdings, LLC, or Holdings, an affiliate of Whitehall Street
Real Estate Funds, or Whitehall, a series of real estate investment funds
affiliated with Goldman, Sachs & Co., to sell all of our issued and
outstanding membership interests to Holdings, for approximately $1.3
billion.  Pursuant to the Assignment and Assumption Agreement, dated
December 4, 2007, between Holdings and W2007/ACEP Managers Voteco, LLC, or
Voteco, Holdings assigned all of its rights, obligations and interests under the
Agreement to Voteco. Voteco’s acquisition of ACEP, or the Acquisition, closed at
a purchase price of $1.2 billion on February 20, 2008.
 
 On
February 23, 2010, ACEP and ACEP Finance Corp., or ACEP Finance and, together
with ACEP, the Issuers, completed an exchange offer registered with the
Securities and Exchange Commission, or SEC, in which the Issuers issued
approximately $374.9 million aggregate principal amount of their 11% Senior
Secured Notes due 2014, or SEC-Registered Notes, in exchange for $374.9 million
of their outstanding, 11% Senior Secured Notes due 2014, or the Unregistered
Notes, issued in a transaction pursuant to Rule 144A and Regulation S under the
Securities Act of 1933, as amended, or the Securities Act. The SEC-Registered
Notes have substantially identical terms to the Unregistered Notes, except that
the SEC-Registered Notes were issued in a transaction registered under the
Securities Act. The SEC-Registered Notes and the Unregistered Notes are
collectively referred to herein as the 11% Senior Secured Notes.
  Note 2.  Basis of
Presentation
  The
accompanying condensed consolidated financial statements included herein have
been prepared by ACEP, without audit, in accordance with the accounting
policies described in our 2009 audited consolidated financial statements and
pursuant to the rules and regulations of the SEC. Certain information and
footnote disclosures normally included in financial statements, prepared in
accordance with accounting principles generally accepted in the United States,
have been condensed or omitted pursuant to such rules and regulations. We
believe that the disclosures are adequate to make the information presented not
misleading. In the opinion of management, the accompanying condensed
consolidated financial statements include all adjustments (consisting only of
those of a normal recurring nature), which are necessary for a fair presentation
of the results for the interim periods presented. Interim results are not
necessarily indicative of results to be expected for any future interim period
or for the entire fiscal year.
 
 These
condensed consolidated financial statements should be read in conjunction with
the notes to the 2009 consolidated audited financial statements presented in our
annual report on Form 10-K for the year ended December 31, 2009, filed with the
SEC on March 22, 2010 (SEC File No. 000-52975). Our reports are available
electronically by visiting the SEC website at http://www.sec.gov.
You may also visit the investor relations section of the American Casino &
Entertainment Properties LLC website at http://www.acepllc.com.
 
 Principles
of Consolidation
  The
condensed consolidated financial statements include the accounts of ACEP and its
wholly-owned subsidiaries. All material intercompany balances and transactions
have been eliminated in consolidation.
  6
 
 Recently
Issued Accounting Pronouncements
 
 In
January 2010, the Financial Accounting Standards Board, or FASB, issued guidance
that clarifies and requires new disclosures about fair value measurements in
Accounting Standards Codification, or ASC 815, Derivatives andHedging,subtopic 10-50-4B
for derivative instruments and ASC 320, Investments – Debts and Equity
Securities, subtopic 10-50-1B for debt and equity securities. The
clarifications and requirement to disclose the amount and reasons for
significant transfers in and out of Level 1 and Level 2, as well as significant
transfers in and out of Level 3 of the fair value hierarchy were adopted by us
in the first quarter of 2010.  The new guidance also requires that
purchases, sales, issuances and settlements be presented gross in the Level 3
reconciliation and that requirement is effective for the fiscal years beginning
after December 15, 2010 and for interim periods within those years, with early
adoption permitted. We early adopted the disaggregation guidance on January 1,
2010. Since this new guidance only amends the disclosures requirements, it did
not impact our consolidated balance sheet, statement of operations or statement
of cash flows.
 
 Reclassifications
 
 Certain
reclassifications have been made to the prior year’s consolidated financial
statements to conform to the current fiscal year presentation. For the three and
six months ended June 30, 2009 we have reclassified the estimated cost of
providing complimentaries included in casino, hotel, food and beverage, other
operating expenses and selling, general and administrative
expenses.  These reclassifications had no effect on net
loss.
 
 Note
3.   Related Party Transactions
  On
February 20, 2008, in connection with the closing of the Acquisition,
certain of our wholly owned indirect subsidiaries obtained term loans in an
aggregate amount of approximately $1.1 billion, or the Goldman Term Loans,
from Goldman Sachs Mortgage Company, or GSMC, pursuant to certain mortgage and
mezzanine loan agreements. On June 25, 2009, the Goldman Term Loans were
restructured and, as a result of such restructuring, we became party to a loan
with GSMC in the original principal amount of $350 million, or the 2014 Term
Loans. We paid interest on the Goldman Term Loans of approximately $8.9 million
for the three months ended June 30, 2009 and approximately $18.8 million for the
six months ended June 30, 2009.
 
 On August
14, 2009, we issued an aggregate principal amount of $375 million of
Unregistered Notes. Goldman, Sachs & Co., or Goldman Sachs, was the
initial purchaser of the Unregistered Notes. We used the gross proceeds
from the offering of the 11% Senior Secured Notes, approximately $311.3 million,
to repay the 2014 Term Loans, which were held by GSMC, an affiliate of Goldman
Sachs and Whitehall 2007, owners of a majority of our indirect
interests. Upon such payment, the remaining balance of 2014 Term Loans was
forgiven by GSMC.  Due to the related party nature of the transaction, the
difference between the carrying amount of the 2014 Term Loans and the aggregate
principal amount of the Unregistered Notes was credited directly to Members'
Equity. Goldman Sachs has advised us that they intend to make a market in
the 11% Senior Secured Notes.
 
 As of
November 29, 2007, the Stratosphere entered into a master room agreement with
Consolidated Resorts, Inc., or CRI, which was effective from January 1, 2008
through December 31, 2008. Even though it had expired, the parties continued to
operate under the agreement in a month-to-month arrangement. CRI was
approximately 75% owned by Whitehall. Whitehall is affiliated with Holdings, the
100% holder of our Class B membership interests, and Goldman Sachs. On July 10,
2009, CRI filed under Chapter 7 of the U.S. Bankruptcy Code in United States
Bankruptcy Court for the District of Nevada, and it is therefore unlikely that
we will be able to collect amounts owed to us by CRI. We no longer have a
relationship with CRI and it is no longer a related party. Under the agreement,
CRI purchased a minimum number, which varied by month, of room nights from the
Stratosphere. In addition, CRI was required to purchase promotional incentives
such as show, restaurant and gaming packages for each guest. Revenues for
promotional incentives are included in Casino revenues, Food and beverage
revenues and Tower, retail and other revenues. There was also a sales incentive
component whereby CRI was to pay us a fee for the resultant of net timeshare
sales generated by CRI guests divided by total monthly tours solicited at the
property when in excess of $2,499 per solicited tour. There were no sales
incentives earned during either the three or six months ended June 30,
2009.  We received approximately $80,000 in Hotel revenues, $31,000 in
Casino revenues, $46,000 in Food and beverage revenues, and $113,000 in Tower,
retail, and other revenues for the three months ended June 30,
2009.  We received approximately $397,000 in Hotel revenues, $65,000
in Casino revenues, $97,000 in Food and beverage revenues, and $239,000 in
Tower, retail, and other revenues for the six months ended June 30,
2009.  CRI also leased space from the Stratosphere for three marketing
kiosks. The lease agreement was effective from July 1, 2008 through September
30, 2011. The base rent was $125,000 per month plus common area maintenance
charges. The Stratosphere received additional rent for tours over 1,250 guests
per month that originate from the Stratosphere. Stratosphere received Tower,
retail and other revenues of $375,000 for rent under the lease agreement for the
three months ended June 30, 2009.  Stratosphere received Tower, retail
and other revenues of $750,000 for rent under the lease agreement for the six
months ended June 30, 2009.  CRI owed us $184,000 as of June 30, 2010
and December 31, 2009, which is fully reserved on the condensed consolidated
balance sheets.
  7
 
 On
February 20, 2008, we entered into a consulting agreement with Highgate Hotels,
L.P., or Highgate, pursuant to which Highgate provides asset management
consulting services to us.Highgate owns a less than 5% membership interest in Holdings. The
agreement was amended to reduce fees payable thereunder on June 25, 2009
and Highgate converted amounts due them from ACEP to contributed capital in
Holdings.The
consulting agreement expires on June 20, 2013.  Highgate is
entitled to receive a $1.5 million per year base consulting fee for the periods
through February 20, 2011 and a $1.0 million per year consulting fee for
the periods after February 20, 2011, additional consulting fees up to
$500,000 per year for periods after February 20, 2011 based on EBITDA
results at the properties and development fees at 4% of the aggregate costs of
any agreed upon development projects. We incurred Highgate fees of approximately
$375,000 and $250,000 for the three months ended June 30, 2010 and June 30,
2009, respectively. We incurred Highgate fees of approximately $750,000 and $1.0
million for the six months ended June 30, 2010 and June 30, 2009, respectively.
We incurred no development fees for either the three months or six months ended
June 30, 2010 and June 30, 2009. As of June 30, 2010 and December 31, 2009, we
owed Highgate approximately $0 and $192,000, respectively.
 
 On June
16, 2008, we entered into an agreement with Travel Tripper LLC, or TTL, to
utilize their technology for online hotel reservations. TTL is owned by an
affiliate of Goldman Sachs (9%), an affiliate of Highgate (9%) and an employee
of Highgate (40%). TTL is paid 4% of room revenues booked utilizing its system.
We expensed fees of approximately $107,000 and $126,000 for the three months
ended June 30, 2010 and June 30, 2009, respectively.  We expensed fees
of approximately $209,000 and $305,000 for the six months ended June 30, 2010
and June 30, 2009, respectively.  As of June 30, 2010 and December 31,
2009, we owed TTL approximately $34,000 and $6,000, respectively.
 
 Archon
Group, LP, or Archon, an affiliate of Goldman Sachs, provides various services
to us such as construction management, cash management and insurance
brokers.  We expensed fees of approximately $1,000 and $37,000 for the
three months ended June 30, 2010 and June 30, 2009, respectively. We expensed
fees of approximately $24,000 and $38,000 for the six months ended June 30, 2010
and June 30, 2009, respectively. As of June 30, 2010 and December 31, 2009, we
owed Archon approximately $4,000 and $1,000, respectively. Additionally, Archon
was the administrative agent under the 2014 Term Loans.
 
 On
October 3, 2008, we entered into a participation agreement with Nor1, Inc., or
Nor1, to utilize their technology to help sell perishable suite and room
inventories. Nor1 gives the guest who books on-line the opportunity to book
a non-guaranteed suite or upgraded rooms at a discounted rate if such is
available at check-in. If the suite or upgraded room is awarded, Nor1 is
paid 25% of the upgrade fee. Goldman Sachs owns less than 5% of Nor1. We
expensed fees of approximately $12,000 and $7,000 for the three months ended
June 30, 2010 and June 30, 2009, respectively. We expensed fees of approximately
$24,000 and $14,000 for the six months ended June 30, 2010 and June 30, 2009,
respectively. As of June 30, 2010 and December 31, 2009, we owed Nor1
approximately $6,000 and $1,000, respectively.
 
 We follow
a related party transaction approval policy for reviewing related person
transactions. These procedures are intended to ensure that transactions with
related persons are fair to us and in our best interests. If a proposed
transaction appears to or does involve a related person, the transaction is
presented to our audit committee for review. The audit committee is authorized
to retain and pay such independent advisors as it deems necessary to properly
evaluate the proposed transaction, including, without limitation, outside legal
counsel and financial advisors to determine the fair value of the
transaction.
  8
 
 Note
4.   Intangible Assets
 
 We
account for intangible assets in accordance with FASB ASC 350, Goodwill and Intangible
Assets.
 
 Our
finite-lived acquired intangible assets include our player loyalty plan and a
non-compete agreement. Our infinite-lived acquired intangible assets include
trade names.  Acquired assets are recorded at fair value on the date
of acquisition and finite-lived assets are amortized over the estimated period
to be benefited.
 
 In
accordance with Financial Accounting Standards Board, or FASB ASC 350, Goodwill
and Other Intangible Assets, we perform an annual impairment test of
indefinite-lived intangible assets in the fourth quarter of each year and
whenever a triggering event occurs which causes us to perform an impairment
test.  During the three months ended June 30, 2010, due to continued
weakness in consumer spending, increased room supply in the Las Vegas market and
decreased spending by visitors to the Stratosphere we revised our Stratosphere
revenue forecasts.  We considered this revision to Stratosphere’s
forecasted revenues to be a triggering event.  As of June 30, 2010 we
performed impairment tests that resulted in the non-cash write-down of the
Stratosphere trade names of $2.0 million.  The impairment of these
assets was due primarily to our decrease in revenues, which was an indication
that these assets may not be recoverable. We believe the on-going economic
recession in the U.S. and Southern Nevada economies has reduced overall industry
valuations.
 
 As of
June 30, 2010 and December 31, 2009, we had the following intangible
assets.
 
 (inthousands)June30,2010
                              
                              
                              December31,2009(Unaudited)Gross
                              
                              
                              
                              
                              
                              Net
                              
                              
                              Gross
                              
                              
                              
                              
                              
                              NetAsset
                              
                              Carrying
                              
                              
                              Accumulated
                              
                              
                              Carrying
                              
                              
                              Carrying
                              
                              
                              Accumulated
                              
                              
                              CarryingLife
                              
                              Amount
                              
                              
                              Amortization
                              
                              
                              Amount
                              
                              
                              Amount
                              
                              
                              Amortization
                              
                              
                              AmountAmortizing intangible assets:Player
      Loyalty Plan
                              
                              5
      Years
                              
                              $
                              7,450
                              
                              
                              $
                              (3,476
                              )
                              
                              $
                              3,974
                              
                              
                              $
                              7,450
                              
                              
                              $
                              (2,731
                              )
                              
                              $
                              4,719Non-Compete
      Agreement
                              
                              38
      Months
                              
                              
                              1,045
                              
                              
                              
                              (165
                              )
                              
                              
                              880
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -$
                              8,495
                              
                              
                              $
                              (3,641
                              )
                              
                              $
                              4,854
                              
                              
                              $
                              7,450
                              
                              
                              $
                              (2,731
                              )
                              
                              $
                              4,719Non-amortizing
      intangible assets:Trade
      Name
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              15,797
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              17,797Total
      intangible assets
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              20,651
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              22,516
 
 Note
5.   Debt
 
 Long-term
debt and capital lease obligations consist of the following:
 
 As of
                    
                    
                    As ofJune 30, 2010
                    
                    
                    December 31, 2009(Unaudited)(In thousands)11%
      Senior Secured Notes due June 15, 2014
                    
                    $
                    375,000
                    
                    
                    $
                    375,000Unamortized
      discount
                    
                    
                    (21,540
                    )
                    
                    
                    (23,564
                    )Capital
      lease obligations
                    
                    
                    2,328
                    
                    
                    
                    2,458Total
      long-term debt and capital lease obligations
                    
                    
                    355,788
                    
                    
                    
                    353,894Current
      portion of capital lease obligations
                    
                    
                    269
                    
                    
                    
                    263Total
      long-term debt and capital lease obligations, net
                    
                    $
                    355,519
                    
                    
                    $
                    353,631
  9
 
 11%
Senior Secured Notes
 
 On
August 14, 2009, the Issuers issued the Unregistered Notes pursuant to the
Indenture among the Issuers, certain subsidiary guarantors and The Bank of New
York Mellon, as trustee, or the Indenture.The 11% Senior Secured
Notes mature on June 15, 2014 and bear interest at a rate of 11% per annum.
Interest is computed on the basis of a 360-day year composed of twelve 30-day
months and is payable semi-annually on June 15 and December 15 of each
year, beginning on December 15, 2009. The obligations are jointly,
severally and unconditionally guaranteed by all of the subsidiaries of ACEP
other than ACEP Finance and will be so guaranteed by any future domestic
subsidiaries of ACEP, subject to certain exceptions. The 11% Senior Secured
Notes are collateralized by substantially all fee and leasehold real property
comprising the Stratosphere, the Aquarius, Arizona Charlie’s Decatur and Arizona
Charlie’s Boulder.
 
 On
February 23, 2010, the Issuers completed an exchange offer registered with the
SEC in which the Issuers issued approximately $374.9 million aggregate principal
amount of their SEC-Registered Notes in exchange for $374.9 million of their
Unregistered Notes. The SEC-Registered Notes have substantially identical terms
to the Unregistered Notes, except that the SEC-Registered Notes were issued in a
transaction registered under the Securities Act.
 
 In
accordance with positions established by the SEC, separate financial information
with respect to the parent, co-issuer, guarantor subsidiaries and non-guarantor
subsidiaries is not required as the parent and co-issuer have no independent
assets or operations, the guarantees are full and unconditional and joint and
several, and the total assets, stockholders’ equity, revenues, income from
operations before income taxes and cash flows from operating activities of the
non-guarantor subsidiaries is less than 3% of ACEP’s consolidated
amounts.
 
 The gross
proceeds from the issuance of the Unregistered Notes, approximately $311.3
million, were used to repay a portion of the then outstanding balance of the
2014 Term Loans.  Upon such payment, the remaining balance of the 2014
Term Loans was forgiven by GSMC. We increased Members’ Equity by $215.6 million
for the gain on debt extinguishment.
 
 The fair
value of our debt is estimated based on market prices for the same or similar
issues. We issued the Unregistered Notes on August 14, 2009. The estimated fair
value of the 11% Senior Secured Notes was approximately $354.4 million as of
June 30, 2010.
 
 On or
after June 15, 2012,  the Issuers may redeem all or a part of the
11% Senior Secured Notes at the redemption prices set forth in the Indenture,
plus accrued and unpaid interest to the applicable redemption date. In addition,
at any time prior to June 15, 2012, the Issuers may, on one or more than
one occasion, redeem some or all of the 11% Senior Secured Notes at a redemption
price equal to 100% of the principal amount of the 11% Senior Secured Notes
redeemed, plus a “make-whole” premium, and accrued and unpaid interest to the
applicable redemption date. At any time prior to June 15, 2012, we may also
redeem up to 35% of the aggregate principal amount of the 11% Senior Secured
Notes, using the proceeds of certain qualified equity offerings, at a redemption
price of 111% of the principal amount thereof, plus accrued and unpaid interest
to the applicable redemption date.  We may, not more than once in any
12-month period ending on June 15, 2010, 2011 and 2012, redeem up to 5% of the
original aggregate principal amount of the 11% Senior Secured Notes at a
redemption price equal to 102% of the principal amount of the 11% Senior Secured
Notes redeemed plus accrued and unpaid interest to the applicable redemption
date.
 
 If
certain change of control events occur as specified in the Indenture, we must
offer to repurchase the 11% Senior Secured Notes at a repurchase price equal to
101% of the principal amount of the 11% Senior Secured Notes repurchased, plus
accrued and unpaid interest to the applicable repurchase date.
 
 If ACEP
or its subsidiaries sell assets under certain circumstances or experience
certain events of loss, we must offer to repurchase the 11% Senior Secured Notes
at a repurchase price equal to 100% of the principal amount of the Notes
repurchased, plus accrued and unpaid interest to the date of purchase,
prepayment or redemption, as the case may be.
 
 We are
bound by certain covenants contained and defined in the Indenture that requires
us to file quarterly and annual reports, and among other things, restricts our
ability to:
  10
 
 •
              declare
      or pay dividends and distributions on our equity interests, purchase,
      redeem, or otherwise retire for value any equity interest, make payments
      on debt, or make investments;
 
 •
              incur
      indebtedness or issue preferred
stock;
 
 •
              sell,
      create liens, or otherwise encumber our assets or equity interests;
      and
 
 •
              enter
      into transactions with affiliates.
 
 These
covenants contained in the Indenture are subject to a number of important
limitations and exceptions.
 
 The
Indenture provides for events of default, including, but not limited to, cross
defaults to certain other debt of ACEP and its subsidiaries. In the case of an
event of default arising from specified events of bankruptcy or insolvency, all
outstanding 11% Senior Secured Notes will become due and payable immediately
without further action or notice. Management believes that we are in compliance
with the provisions of the Indenture as of quarter end and the date of this
filing.
 
 Note
6.  Legal Proceedings
 
 We are,
from time to time, a party to various legal proceedings arising out of our
businesses.  We believe, however, there are no proceedings pending or
threatened against us, which, if determined adversely, would have a material
adverse effect upon our financial conditions, results of operations or
liquidity.
  11
  Item
2.    Management’s Discussion and Analysis of Financial
Condition and Results of Operations
 
 With the
exception of historical facts, the matters discussed in this quarterly report on
Form 10-Q are forward looking statements. Forward-looking statements may relate
to, among other things, future actions, future performance generally, business
development activities, future capital expenditures, strategies, the outcome of
contingencies such as legal proceedings, future financial results, financing
sources and availability and the effects of regulation and competition. When we
use the words “believe”, “intend”, “expect”, “may”, “will”, “should”,
“anticipate”, “could”, “estimate”, “plan”, “predict”, “project”, or their
negatives, or other similar expressions, the statements which include those
words are usually forward-looking statements. When we describe strategy that
involves risks or uncertainties, we are making forward-looking
statements.
 
 These
forward-looking statements are based on the current plans and expectations of
our management and are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical results or those
anticipated. These factors include, but are not limited to: the size of our
indebtedness, our indebtedness' effect on our business, the adverse effect of
government regulation and other matters affecting the gaming industry, increased
operating costs of our properties, increased competition in the gaming industry,
adverse effects of economic downturns and terrorism, our failure to make
necessary capital expenditures, increased costs associated with our growth
strategy, the loss of key personnel, risks associated with geographical market
concentration, our failure to satisfy our working capital needs from operations
or our indebtedness, our inability to raise additional money, our dependence on
water, energy and technology services, adverse effects of increasing energy
costs, and the availability of and costs associated with potential sources of
financing.
 
 You
should also read, among other things, the risks and uncertainties described in
the section entitled Risk Factors in Item 1A of our annual report on Form 10-K,
filed with the SEC on March 22, 2010 (SEC File No. 000-52975).
 
 We
warn you that forward-looking statements are only predictions. Actual events or
results may differ as a result of risks that we face. Forward-looking statements
speak only as of the date they were made, and we undertake no obligation to
update them.
 
 The
following discussion contains management’s discussion and analysis of financial
condition and results of operations. Management’s discussion and analysis should
be read in conjunction with “Item 1. Financial Statements” of this quarterly
report on Form 10-Q and Management’s Discussion and Analysis of Financial
Condition and Results of Operations presented in our annual report on Form 10-K
for the year ended December 31, 2009.
 
 Overview
 
 We own
and operate four gaming and entertainment properties in Clark County, Nevada.
The four properties are the Stratosphere Casino Hotel & Tower, or the
Stratosphere, which is located on the Las Vegas Strip and caters to visitors to
Las Vegas, two off-Strip casinos, Arizona Charlie's Decatur and Arizona
Charlie's Boulder, which cater primarily to residents of Las Vegas and the
surrounding communities, and the Aquarius Casino Resort, in Laughlin, Nevada, or
the Aquarius, which caters to visitors to Laughlin. The Stratosphere is one of
the most recognized landmarks in Las Vegas, our two Arizona Charlie’s properties
are well-known casinos in their respective marketplaces and the Aquarius has the
largest hotel by number of rooms in Laughlin. Each of our properties offers
customers a value-oriented experience by providing competitive odds in our
casinos, quality rooms in our hotels, award-winning dining facilities and, at
the Stratosphere and Aquarius, an offering of competitive value-oriented
entertainment attractions. We believe the value we offer our patrons, together
with a strong focus on customer service, will enable us to continue to attract
customers to our properties.
 
 Our
operating results are greatly dependent on the volume of customers at our
properties, which in turn affects the price we can charge for our non-gaming
amenities. A substantial portion of our operating income is generated from our
gaming operations, more specifically slot play. The majority of our revenue is
cash based through customers wagering with cash or paying for non-gaming
amenities with cash or credit card.  Because our business is capital
intensive, we rely heavily on the ability of our properties to generate
operating cash flow to repay debt financing, fund maintenance capital
expenditures and provide excess cash for future development.
  12




Las Vegas
is one of the largest entertainment markets in the country. Las Vegas hotel
occupancy rates are among the highest of any major market in the United States.
We believe that the Las Vegas gaming market has two distinct sub-segments: the
tourist market, which tends to be concentrated on the Las Vegas Strip and
Downtown Las Vegas, and the local market, which includes the surrounding Las
Vegas area.





We use
certain key measurements to evaluate operating revenue.  Casino
revenue measurements include “table games drop” and “slot coin-in,” which are
measures of the total amounts wagered by patrons. Win or hold percentage
represents the percentage of table games drop or slot coin-in that is retained
by the casino and recorded as casino revenue.  Hotel revenue
measurements include hotel occupancy rate, which is the average percentage of
available hotel rooms occupied during a period, and average daily room rate,
which is the average price of occupied rooms per day.  Food and
beverage revenue measurements include number of covers, which is the number of
guests served, and the average check amount per guest.





Results
of Operations





Three
Months Ended June 30, 2010 Compared to Three Months Ended June 30,
2009





The
following table sets forth the results of our operations for the periods
indicated.





Three months
                          ended
                        
                        
                        Three months
                          endedJune 30, 2010
                        
                        
                        June 30, 2009(in
      millions)Income
      Statement Data:Revenues:Casino
                        
                        $
                        51.3
                        
                        
                        $
                        55.9Hotel
                        
                        
                        15.3
                        
                        
                        
                        16.2Food
      and beverage
                        
                        
                        17.5
                        
                        
                        
                        19.5Tower,
      retail and other
                        
                        
                        8.6
                        
                        
                        
                        9.1Gross
      revenues
                        
                        
                        92.7
                        
                        
                        
                        100.7Less
      promotional allowances
                        
                        
                        6.1
                        
                        
                        
                        6.6Net
      revenues
                        
                        
                        86.6
                        
                        
                        
                        94.1Costs
      and expenses:Casino
                        
                        
                        16.6
                        
                        
                        
                        17.7Hotel
                        
                        
                        8.6
                        
                        
                        
                        9.0Food
      and beverage
                        
                        
                        13.0
                        
                        
                        
                        14.4Other
      operating expenses
                        
                        
                        3.4
                        
                        
                        
                        3.6Selling,
      general and administrative
                        
                        
                        28.2
                        
                        
                        
                        29.0Pre-opening
      costs
                        
                        
                        0.1
                        
                        
                        
                        -Depreciation
      and amortization
                        
                        
                        10.9
                        
                        
                        
                        10.5Impairment
      of assets
                        
                        
                        2.0
                        
                        
                        
                        -Total
      costs and expenses
                        
                        
                        82.8
                        
                        
                        
                        84.2Income
      from operations
                        
                        $
                        3.8
                        
                        
                        $
                        9.9EBITDA
      Reconciliation:Net
      loss
                        
                        $
                        (7.7
                        )
                        
                        $
                        (0.8
                        )Interest
      income
                        
                        
                        -
                        
                        
                        
                        -Interest
      expense
                        
                        
                        11.5
                        
                        
                        
                        10.8Depreciation
      and amortization
                        
                        
                        10.9
                        
                        
                        
                        10.5EBITDA
                        
                        $
                        14.7
                        
                        
                        $
                        20.5




13





We
believe that our presentation of EBITDA is an important supplemental measure of
our operating performance to investors. EBITDA is a commonly used measure of
performance in our industry which we believe, when considered with measures
calculated in accordance with United States Generally Accepted Accounting
Principles (GAAP), gives investors a more complete understanding of operating
results before the impact of investing and financing transactions and income
taxes and facilitates comparisons between us and our competitors. Although
EBITDA is a non-GAAP measure, we believe this measure will be used by investors
in their assessment of our operating performance and the valuation of our
company.





Our
consolidated gross revenues decreased 7.9% to $92.7 million for the three months
ended June 30, 2010 from $100.7 million for the three months ended June 30,
2009. Generally weak economic conditions, increased personal and business
bankruptcies, increased unemployment, difficult consumer credit markets,
reductions in airline capacity and passenger volumes to Las Vegas’ McCarran
International Airport, and declining consumer confidence have all precipitated
an economic slowdown which has negatively impacted our operations. In addition,
the high level of unemployment and declining real estate values in Clark County,
Nevada have had a significant negative impact on our properties which cater to
local customers. In addition, as of May 31, 2010,  Las Vegas room
inventories have experienced a 5.6% increase that has negatively impacted room
rates and occupancy throughout Las Vegas, despite the Las Vegas Convention and
Visitors Authority reports of year-over-year increases in
visitation.




Our
consolidated income from operations decreased 61.6% to $3.8 million for the
three months ended June 30, 2010 as compared to $9.9 million for the three
months ended June 30, 2009. The decrease is due to a decrease in revenues as a
result of the general economic slowdown and increase in rooms in Las Vegas
discussed above.  As a result, our consolidated operating margin
decreased to 4.4% for the three months ended June 30, 2010 from 10.5% for the
three months ended June 30, 2009. Our EBITDA for the three months ended June 30,
2010 decreased 28.3% to $14.7 million compared to $20.5 million for the three
months ended June 30, 2009. The business environment in Southern Nevada
continues to be impacted by lower occupancy and decrease visitor
spend.




Both our
income from operations and EBITDA were affected by our declining revenues;
however, we also incurred expenses that we did not incur in the three months
ended June 30, 2009. During the three months ended June 30, 2010, we incurred
pre-opening expenses of approximately $129,000 related to Sky Jump Las Vegas,
which is a harnessed “controlled free-fall” from the top of the Stratosphere
Tower. In addition, we recognized a $2.0 million non-cash charge for impairment
of intangible assets during the three months ended June 30, 2010. We also
incurred $182,000 in licensing costs associated with the Board of
Directors.





Casino





Casino
revenues consist of revenues from slot machines, table games, poker, race and
sports book, bingo and keno. Casino revenues decreased 8.2% to $51.3 million for
the three months ended June 30, 2010, compared to $55.9 million for the three
months ended June 30, 2009.  This decrease was primarily due to a 3.4%
decrease in slot coin-in, a decrease in slot hold percentage to 6.7% from 7.1%,
and a 9.8% decrease in table drop.  For the three months ended June
30, 2010, slot machine revenues were 85.0% of casino revenues, and table game
revenues were 12.3% of casino revenues, compared to 84.6% and 12.0% of casino
revenues, respectively, for the three months ended June 30,
2009.  Other casino revenues, consisting of race and sports book,
poker, bingo and keno, decreased 26.3% for the three months ended June 30, 2010
compared to the three months ended June 30, 2009.  The reduction in
other casino revenues were driven by an 8.9% reduction in race and sports book
handle and a 1.8% lower hold percentage, and lower bingo and poker
revenues.  Casino operating expenses decreased 6.2% to $16.6 million,
for the three months ended June 30, 2010, from $17.7 million for the three
months ended June 30, 2009. This decrease was primarily due to decreased labor
costs, revenue taxes and participation expenses.  Participation
expense consists of fees paid to game owners for use of their
games.


14


Hotel





Hotel
revenues decreased 5.6% to $15.3 million for the three months ended June 30,
2010 from $16.2 million for the three months ended June 30, 2009.  The
decrease in revenues is primarily the result of lower occupancy and average
daily room rate for the Stratosphere and Arizona Charlie’s properties. Overall
room occupancy fell to 70.9% for the three months ended June 30, 2010 compared
to 72.1% for the three months ended June 30, 2009 and the average daily room
rate decreased 2.9% for the three months ended June 30, 2010 compared to the
three months ended June 30, 2009. The decrease in both occupancy and
average daily room rate at our Las Vegas properties is primarily a result of
sharp decreases in rates across our markets, an increase in Las Vegas citywide
room inventories and an increased reliance on wholesale room
sales.  Due to increased marketing and direct mail efforts our comp
room sales increased for the three months ended June 30, 2010, while our cash
room sales declined. Our comp room sales increased 26.1% and our cash room sales
decreased 7.1% for the three months ended June 30, 2010 compared to the three
months ended June 30, 2009. Our hotel expenses were down 4.4% to $8.6
million for the three months ended June 30, 2010, compared to $9.0 million for
the three months ended June 30, 2009. The Stratosphere, which accounts for
approximately 50% of our 4,895 rooms, maintained occupancy of 91.7% for the
three months ended June 30, 2010 compared to 95.5% for the three months ended
June 30, 2009.  Due to the relatively stable occupancy and the need to
maintain guest service, we have not significantly reduced our hotel expenses
year-over-year at the Stratosphere.   Due to the decline in revenues,
our hotel operating margin decreased to 43.8% for the three months ended June
30, 2010 as compared to 44.4% for the three months ended June 30,
2009.





Food
& Beverage





Food and
beverage revenues decreased 10.3% to $17.5 million for the three months ended
June 30, 2010 compared to $19.5 million for the three months ended June 30,
2009.  The decline in revenues was driven largely by the reduction in
food and beverage covers at our properties. Food covers and beverage covers
for the three months ended June 30, 2010 decreased 17.0% and 11.7%,
respectively, compared to the three months ended June 30,
2009.  Average revenue per cover for the three months ended June 30,
2010 increased 7.9% compared to the three months ended June 30,
2009. Our food and beverage expenses decreased 9.7% to $13.0 million for
the three months ended June 30, 2010 compared to $14.4 million for the three
months ended June 30, 2009 due to an overall decrease in our food and beverage
costs and payroll and related expenses. As a result, our food and beverage
operating margin decreased to 25.7% for the three months ended June 30, 2010 as
compared to 26.2% for the three months ended June 30, 2009.





Tower,
Retail and Other





Tower,
retail and other revenues decreased 5.5% to $8.6 million for the three months
ended June 30, 2010 from $9.1 million for the three months ended June 30, 2009.
Tower revenues increased 12.4% for the three months ended June 30, 2010,
compared to the three months ended June 30, 2009.  The primary reason
for the increase in Tower revenues was the introduction of the Sky Jump Las
Vegas ride. Entertainment revenue declined 34.3% for the three months ended June
30, 2010, compared to the three months ended June 30, 2009. The decrease in
revenue was due to reduced showroom occupancy at the Stratosphere and a
reduction in the number of events at the Aquarius. Retail revenue decreased
30.6% for the three months ended June 30, 2010, compared to the three months
ended June 30, 2009.  Retail revenues declined due to rent concessions
and increased tenant vacancies.  Other operating income increased 2.2%
for the three months ended June 30, 2010, compared to the three months ended
June 30, 2009.  The increase in revenue was primarily due to higher
commission revenues.  Other operating expenses decreased 5.6% to $3.4
million for the three months ended June 30, 2010, compared to $3.6 million for
the three months ended June 30, 2009. This decrease was primarily due to a
decrease in entertainer fees and labor costs.  Entertainer fees
declined due to the decline in entertainment revenues and the reduction in
events at the Aquarius.





Promotional
Allowances





Promotional
allowances are comprised of the retail value of goods and services provided to
casino patrons under various marketing programs. As a percentage of casino
revenues, promotional allowances increased to 11.9% for the three months ended
June 30, 2010 from 11.8% for the three months ended June 30, 2009. This increase
was primarily due to increased room promotions at the Stratosphere and the
Aquarius.





Selling,
General and Administrative (‘‘SG&A’’)





Selling,
general and administrative expenses are primarily comprised of payroll,
marketing, advertising, utilities and other administrative expenses. These
expenses decreased 2.8% to $28.2 million, or 30.4% of gross revenues, for the
three months ended June 30, 2010, compared to $29.0 million, or 28.8% of gross
revenues for the three months ended June 30, 2009. This decrease was primarily
due to lower loss on disposal of assets, utilities expenses and marketing
related expenses. We also accrued $350,000 to our discretionary management bonus
pool, which we will continue to evaluate throughout the year.


15





Pre-opening
Expense





We
incurred $129,000 in pre-opening costs for the three months ended June 30,
2010.  Pre-opening costs were primarily comprised of marketing related
expenses, labor costs and supplies for Sky Jump Las Vegas.  Sky Jump
Las Vegas opened to the public on April 21, 2010.





Impairment
of Assets





In
accordance with Financial Accounting Standards Board, or FASB ASC 350, Goodwill
and Other Intangible Assets, we perform an annual impairment test of
indefinite-lived intangible assets in the fourth quarter of each year and
whenever a triggering event occurs which causes us to perform an impairment
test.  During the three months ended June 30, 2010, due to continued
weakness in consumer spending, increased room supply in the Las Vegas market and
decreased spending by visitors to the Stratosphere we revised our Stratosphere
revenue forecasts.  We considered this revision to Stratosphere’s
forecasted revenues to be a triggering event.  As of June 30, 2010 we
performed impairment tests that resulted in the non-cash write-down of the
Stratosphere trade names of $2.0 million.  The impairment of these
assets was due primarily to our decrease in revenues, which was an indication
that these assets may not be recoverable. We believe the on-going economic
recession in the U.S. and Southern Nevada economies has reduced overall industry
valuations.





Interest
Expense





Interest
expense increased 6.5% to $11.5 million for the three months ended June 30,
2010, compared to $10.8 million for the three months ended June 30, 2009. The
increase was due primarily to the restructuring of the Goldman Term Loans and
issuance of our 11% Senior Secured Notes.  For the three months ended
June 30, 2009 we did not report any interest expense related to the 2014 Term
Loans on our consolidated statements of operations.  All outstanding
interest payments were accounted for as a reduction to the outstanding balance
of the 2014 Term Loans in accordance with FASB ASC 470-60.





Six
Months Ended June 30, 2010 Compared to Six Months Ended June 30,
2009





The
following table sets forth the results of our operations for the periods
indicated.


16





Six monthsended
                          
                          
                          Six monthsendedJune 30, 2010
                          
                          
                          June 30, 2009(in
      millions)Income
      Statement Data:Revenues:Casino
                          
                          $
                          107.2
                          
                          
                          $
                          115.4Hotel
                          
                          
                          29.2
                          
                          
                          
                          31.2Food
      and beverage
                          
                          
                          34.5
                          
                          
                          
                          38.2Tower,
      retail and other
                          
                          
                          15.8
                          
                          
                          
                          17.3Gross
      revenues
                          
                          
                          186.7
                          
                          
                          
                          202.1Less
      promotional allowances
                          
                          
                          12.4
                          
                          
                          
                          14.2Net
      revenues
                          
                          
                          174.3
                          
                          
                          
                          187.9Costs
      and expenses:Casino
                          
                          
                          33.8
                          
                          
                          
                          36.7Hotel
                          
                          
                          16.8
                          
                          
                          
                          17.3Food
      and beverage
                          
                          
                          25.9
                          
                          
                          
                          27.7Other
      operating expenses
                          
                          
                          6.4
                          
                          
                          
                          7.0Selling,
      general and administrative
                          
                          
                          55.2
                          
                          
                          
                          58.6Pre-opening
      costs
                          
                          
                          0.3
                          
                          
                          
                          -Depreciation
      and amortization
                          
                          
                          21.5
                          
                          
                          
                          20.4Impairment
      of assets
                          
                          
                          2.0
                          
                          
                          
                          -Total
      costs and expenses
                          
                          
                          161.9
                          
                          
                          
                          167.7Income
      from operations
                          
                          $
                          12.4
                          
                          
                          $
                          20.2EBITDA
      Reconciliation:Net
      loss
                          
                          $
                          (10.4
                          )
                          
                          $
                          (2.4
                          )Interest
      income
                          
                          
                          -
                          
                          
                          
                          -Interest
      expense
                          
                          
                          22.8
                          
                          
                          
                          22.7Depreciation
      and amortization
                          
                          
                          21.5
                          
                          
                          
                          20.4EBITDA
                          
                          $
                          33.9
                          
                          
                          $
                          40.7





Our
consolidated gross revenues decreased 7.6% to $186.7 million for the six months
ended June 30, 2010 from $202.1 million for the six months ended June 30, 2009.
Generally weak economic conditions, increased personal and business
bankruptcies, increased unemployment, difficult consumer credit markets,
reductions in airline capacity and passenger volumes to Las Vegas’ McCarran
International Airport, and declining consumer confidence have all precipitated
an economic slowdown which has negatively impacted our operations. In addition,
the high level of unemployment and declining real estate values in Clark County,
Nevada have had a significant negative impact on our properties which cater to
local customers. In addition, as of May 31, 2010, Las Vegas Strip room
inventories have experienced a 5.6% increase that has negatively impacted room
rates and occupancy throughout Las Vegas.




Our
consolidated income from operations decreased 38.6% to $12.4 million for the six
months ended June 30, 2010 as compared to $20.2 million for the six months ended
June 30, 2009. The decrease is due to a decrease in revenues as a result of the
general economic slowdown and increase in rooms in Las Vegas discussed
above.  In addition we recognized a $2.0 million non-cash charge for
impairment of intangible assets during the six months ended June 30,
2010.  As a result, our consolidated operating margin decreased to
7.1% for the six months ended June 30, 2010 from 10.8% for the six months ended
June 30, 2009. Our EBITDA for the six months ended June 30, 2010 decreased 16.7%
to $33.9 million compared to $40.7 million for the six months ended June 30,
2009. The business environment in Southern Nevada continues to be impacted by
lower occupancies and decreased visitor spend.




Both our
income from operations and EBITDA were affected by our declining revenues;
however, we also incurred expenses that we did not incur in the six months ended
June 30, 2009. During the six months ended June 30, 2010, we incurred
pre-opening expenses of approximately $283,000 related to Sky Jump Las Vegas,
which is a harnessed “controlled free-fall” from the top of the Stratosphere
Tower. We also expensed approximately $252,000 to appeal our property taxes,
approximately $182,000 in regulatory fees, and we accrued approximately $550,000
to our discretionary bonus pool, which we will continue to evaluate throughout
the year.


17





Casino





Casino
revenues consist of revenues from slot machines, table games, poker, race and
sports book, bingo and keno. Casino revenues decreased 7.1% to $107.2 million
for the six months ended June 30, 2010, compared to $115.4 million for the six
months ended June 30, 2009.  This decrease was primarily due to a 4.4%
decrease in slot coin-in and a 9.9% decrease in table drop.  For the
six months ended June 30, 2010, slot machine revenues were 84.3% of casino
revenues, and table game revenues were 12.2% of casino revenues, compared to
84.5% and 11.6% of casino revenues, respectively, for the six months ended June
30, 2009.  Other casino revenues, consisting of race and sports book,
poker, bingo and keno, decreased 17.8% for the six months ended June 30, 2010
compared to the six months ended June 30, 2009.  The primary reason
for the decline was a 13.3% decrease in race and sports book handle and lower
poker and bingo revenues.  Casino operating expenses decreased 7.9% to
$33.8 million, for the six months ended June 30, 2010, from $36.7 million for
the six months ended June 30, 2009. This decrease was primarily due to decreased
labor costs, participation expenses and revenue tax
expenses.  Participation expense consists of fees paid to game owners
for use of their games.





Hotel





Hotel
revenues decreased 6.4% to $29.2 million for the six months ended June 30, 2010
from $31.2 million for the six months ended June 30, 2009.  The
decrease in revenues is primarily the result of lower occupancy for the
Stratosphere and Arizona Charlie’s properties and a decreased average daily room
rate at the Stratosphere and Arizona Charlie’s Decatur.  Overall room
occupancy fell to 68.5% for the six months ended June 30, 2010 compared to 70.4%
for the six months ended June 30, 2009 and the average daily room rate decreased
2.9% for the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. The decrease in both occupancy and average daily room rate
at our Las Vegas properties is primarily a result of sharp decreases in rates
across our markets, an increase in Las Vegas citywide room inventories, and an
increased reliance on wholesale room sales.   Our hotel expenses were
down 2.9% to $16.8 million for the six months ended June 30, 2010, compared to
$17.3 million for the six months ended June 30, 2009. The Stratosphere,
which accounts for approximately 50% of our 4,895 rooms, maintained occupancy of
88.0% for the six months ended June 30, 2010 compared to 92.9% for the six
months ended June 30, 2009.  Due to the relatively stable occupancy
and the need to maintain guest service, we have not significantly reduced our
hotel expenses year-over-year at the Stratosphere Due to the decline in
revenues, our hotel operating margin decreased to 42.5% for the six months ended
June 30, 2010 as compared to 44.6% for the six months ended June 30,
2009.





Food
& Beverage





Food and
beverage revenues decreased 9.7% to $34.5 million for the six months ended June
30, 2010 compared to $38.2 million for the six months ended June 30,
2009.  The decline in revenues was driven largely by the reduction in
food and beverage covers at our properties. Food covers and beverage covers
for the six months ended June 30, 2010 decreased 12.3% and 10.1%, respectively,
compared to the six months ended June 30, 2009.  Average revenue per
cover for the six months ended June 30, 2010 increased 3.0% compared to the
six months ended June 30, 2009. Our food and beverage expenses decreased
6.5% to $25.9 million for the six months ended June 30, 2010 compared to $27.7
million for the six months ended June 30, 2009 due to an overall decrease in our
food and beverage costs and payroll and related expenses. As a result, our
food and beverage operating margin decreased to 24.9% for the six months ended
June 30, 2010 as compared to 27.5% for the six months ended June 30,
2009.


18





Tower,
Retail and Other





Tower,
retail and other revenues decreased 8.7% to $15.8 million for the six months
ended June 30, 2010 from $17.3 million for the six months ended June 30, 2009.
Tower revenues increased 7.0% for the six months ended June 30, 2010, compared
to the six months ended June 30, 2009.  The primary reason for the
increase in Tower revenues for the six months ended June 30, 2010 compared to
the six months ended June 30, 2009 was the introduction of the Sky Jump Las
Vegas ride. Entertainment revenue declined 30.4% for the six months ended June
30, 2010, compared to the six months ended June 30, 2009. The decrease in
revenue was due to reduced showroom occupancy at the Stratosphere and a
reduction in the number of events at the Aquarius. Retail revenue decreased
30.2% for the six months ended June 30, 2010, compared to the six months ended
June 30, 2009.  Retail revenues declined due to rent concessions and
increased tenant vacancies.  Other operating income increased 3.2% for
the six months ended June 30, 2010, compared to the six months ended June 30,
2009.  The increase in revenue was primarily due to higher commission
revenues.  Other operating expenses decreased 8.6% to $6.4 million for
the six months ended June 30, 2010, compared to $7.0 million for the six months
ended June 30, 2009. This decrease was primarily due to a decrease in
entertainer fees and labor costs.  Entertainer fees declined due to
the decline in entertainment revenues and the reduction in events at the
Aquarius.





Promotional
Allowances





Promotional
allowances are comprised of the retail value of goods and services provided to
casino patrons under various marketing programs. As a percentage of casino
revenues, promotional allowances decreased to 11.6% for the six months ended
June 30, 2010 from 12.3% for the six months ended June 30, 2009. This decrease
was primarily due to reduced marketing promotions, especially at the
Stratosphere and the Aquarius.





Selling,
General and Administrative (‘‘SG&A’’)





Selling,
general and administrative expenses are primarily comprised of payroll,
marketing, advertising, utilities and other administrative expenses. These
expenses decreased 5.8% to $55.2 million, or 29.6% of gross revenues, for the
six months ended June 30, 2010, compared to $58.6 million, or 29.0% of gross
revenues for the six months ended June 30, 2009. This decrease was primarily due
to lower labor costs and marketing related expenses. We also incurred expenses
of $252,000 to appeal our property taxes and we accrued $550,000 to our
discretionary management bonus pool, which we will continue to evaluate
throughout the year.





Pre-opening
Expense





We
incurred $283,000 in pre-opening costs for the six months ended June 30,
2010.  Pre-opening costs were primarily comprised of marketing related
expenses, labor costs and supplies for Sky Jump Las Vegas.  Sky Jump
Las Vegas opened to the public on April 21, 2010.





Impairment
of Assets





In
accordance with Financial Accounting Standards Board, or FASB ASC 350, Goodwill
and Other Intangible Assets, we perform an annual impairment test of
indefinite-lived intangible assets in the fourth quarter of each year and
whenever a triggering event occurs which causes us to perform an impairment
test.  During the three months ended June 30, 2010, due to continued
weakness in consumer spending, increased room supply in the Las Vegas market and
decreased spending by visitors to the Stratosphere we revised our Stratosphere
revenue forecasts.  We considered this revision to Stratosphere’s
forecasted revenues to be a triggering event.  As of June 30, 2010 we
performed impairment tests that resulted in the non-cash write-down of the
Stratosphere trade names of $2.0 million.  The impairment of these
assets was due primarily to our decrease in revenues, which was an indication
that these assets may not be recoverable. We believe the on-going economic
recession in the U.S. and Southern Nevada economies has reduced overall industry
valuations.





Interest
Expense





Interest
expense increased 0.4% to $22.8 million for the six months ended June 30, 2010,
compared to $22.7 million for the six months ended June 30, 2009. The increase
was due primarily to the restructuring of the Goldman Term Loans and issuance of
our 11% Senior Secured Notes.


19





Financial
Condition





Liquidity and
Capital Resources





The
following liquidity and capital resources discussion contains certain
forward-looking statements with respect to our business, financial condition,
results of operations, dispositions, acquisitions, renovation projects and our
subsidiaries, which involve risks and uncertainties that cannot be predicted or
quantified, and consequently, actual results may differ materially from those
expressed or implied herein. Such risks and uncertainties include, but are not
limited to, financial market risks, the ability to maintain existing management,
competition within the gaming industry, the cyclical nature of the hotel
business and gaming business, economic conditions, regulatory matters and
litigation and other risks described in our filings with the SEC. In addition,
renovation projects entail significant risks, including shortages of materials
or skilled labor, unforeseen regulatory problems, work stoppages, weather
interference, floods, unanticipated cost increases, and disruption to business.
The anticipated costs and construction periods are based on budgets, conceptual
design documents and construction schedule estimates. There can be no assurance
that the budgeted costs or construction period will be met. All forward-looking
statements are based on our current expectations and projections about future
events.





Net cash
provided by operating activities was $12.5 million for the six months ended June
30, 2010 compared to $17.2 million for the six months ended June 30,
2009.  The primary reason for the decrease was the approximate $13.6
million decrease in net revenues.





During
the six months ended June 30, 2010, our total capital expenditures were
$11.7 million (including approximately $497,000 in non-cash items), of
which approximately $2.4 million was spent on slot machine replacements and
conversions, $2.3 million on hotel room renovations and upgrades, $1.7 million
was spent on the Sky Jump Las Vegas ride, $2.5 million for renovations of our
food and beverage venues and public areas and $2.8 million on our facilities,
operations and information technology.  For the six months ended June
30, 2009, our total capital expenditures were $7.7 million (including
approximately $940,000 in non-cash items), of which approximately $2.2 million
was used on pool renovations at the Stratosphere, $720,000 for pool renovations
at the Aquarius, $980,000 on slot machines and conversions, $380,000 on
renovations for our food and beverage venues, $470,000 to replace our phone
switches and approximately $2.9 million on our facilities, operations, and
information technology.





Our
primary cash requirements for the next twelve months are expected to include
(i) expenses associated with ongoing day-to-day operations, (ii) interest
payments on indebtedness, (iii) payments for design and development costs
of future projects, and (iv) regular maintenance and other capital
expenditures.  We currently anticipate that we will spend
approximately $31.0 million on regular maintenance and renovation capital
projects between June 30, 2010 and December 31, 2010. Approximately $11.0
million of that amount is associated with regular maintenance of our properties
and operations. We are currently evaluating our budgets for 2011. At this time,
we anticipate that our capital expenditures for regular maintenance during the
first six months of 2011 will be consistent with our capital expenditures for
regular maintenance of approximately $8.7 million during the first six months of
2010.





On
February 23, 2010, the Issuers completed an exchange offer registered with the
SEC in which the Issuers issued approximately $374.9 million aggregate principal
amount of their SEC-Registered Notes in exchange for $374.9 million of their
Unregistered Notes. The SEC-Registered Notes have substantially identical terms
to the Unregistered Notes, except that the SEC-Registered Notes were issued in a
transaction registered under the Securities Act.  We may from time to
time seek to retire or repurchase our outstanding 11% Senior Secured Notes
through cash purchases in the open market, privately negotiated transactions or
otherwise.  Such repurchases, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other
factors.  The amounts involved may be material.





We
believe our cash flow from operations and our cash balances will be sufficient
to fund our operations, interest payments and capital expenditures for the next
12 months. However, our ability to fund our operations, make payments on our
debt and fund planned capital expenditures will depend on our ability to
generate cash in the future. This is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control as well as the factors described in the section entitled Risk Factors in
Item 1A of our annual report on Form 10-K, filed with the SEC on March 22, 2010
(SEC File No. 000-52975).





Off-Balance
Sheet Arrangements





We do not
have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K.


20





Recently
Issued Accounting Pronouncements





In
January 2010, the Financial Accounting Standards Board, or FASB, issued guidance
that clarifies and requires new disclosures about fair value measurements in
Accounting Standards Codification, or ASC 815, Derivatives and Hedging,subtopic 10-50-4B for derivative instruments and ASC 320, Investments – Debts and Equity
Securities, subtopic 10-50-1B for debt and equity
securities.  The clarifications and requirement to disclose the amount
and reasons for significant transfers in and out of Level 1 and Level 2, as well
as significant transfers in and out of Level 3 of the fair value hierarchy were
adopted by us in the first quarter of 2010.  The new guidance also
requires that purchases, sales, issuances and settlements be presented gross in
the Level 3 reconciliation and that requirement is effective for the fiscal
years beginning after December 15, 2010 and for interim periods within those
years, with early adoption permitted.  We early adopted the
disaggregation guidance on January 1, 2010.  Since this new guidance
only amends the disclosures requirements, it did not impact our consolidated
balance sheet, statement of operations or statement of cash flows.





Item
3. Quantitative and Qualitative Disclosures About 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 risk exposure relates to interest rate
risk.  All of our long-term debt is subject to fixed rates of interest
at 11% and does not mature until June 15, 2014.





The fair
value of our debt is estimated based on the quoted market prices for the same or
similar issues. ACEP issued the Unregistered Notes on August 14,
2009.  The estimated fair value of the 11% Senior Secured Notes was
approximately $354.4 million as of June 30, 2010.





For the
six months ended June 30, 2010, we incurred approximately $22.8 million in
interest expense.





We do not
invest in derivative financial instruments, interest rate swaps or other
investments that alter interest rate exposure.





Item
4T. Controls and Procedures





Our
principal executive officer and principal financial officer, based on their
evaluation of our disclosure controls and procedures (as such terms are defined
in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended the
Exchange Act) as of the end of the period covered by this quarterly report on
Form 10-Q, have concluded that our disclosure controls and procedures are
effective for ensuring that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and
forms.





There
were no changes in our internal control over financial reporting that occurred
during the first six months of 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable and not absolute assurance that the objectives of the
system are met.  In addition, the design of any control system is
based in part upon certain assumptions about the likelihood of certain
events.  Because of these and other inherent limitations of control
systems, there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions, regardless of how
remote.


21


PART
II-OTHER INFORMATION





You
should also read, among other things, the risks and uncertainties described in
the section entitled Risk Factors in Item 1A of our annual report on Form
10-K, filed with the SEC on March 22, 2010 (SEC File No. 000-52975). There
were no material changes to those risk factors during the three months ended
June 30, 2010.





Item
6.   Exhibits





The list
of exhibits required by Item 601 of Regulation S-K and filed as part of this
report is set forth in the exhibits index.


22


SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.





AMERICAN
      CASINO & ENTERTAINMENT PROPERTIES LLCBy:
                    /s/ EDWARD W. MARTIN, IIIEdward
      W. Martin, IIIAuthorized
      Officer, Chief Financial Officer
                      and
      Treasurer
                      (Principal
      Financial and Accounting Officer)Date:
                    August
      11, 2010




23


EXHIBITS
INDEX





EXHIBIT NO.
                DESCRIPTION31.1
                Certification
      of Principal Executive Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.31.2
                Certification
      of Principal Financial Officer pursuant to Section 302(a) of the
      Sarbanes-Oxley Act of 2002.32.1
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.32.2
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.




24