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 September 30, 2009





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)











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
                        
                        3Condensed
      Consolidated Balance Sheets - September 30, 2009 (Successor) (unaudited)
      and December 31, 2008 (Successor)
                        
                        
                        3Condensed
      Consolidated Statements of Operations (unaudited) – the three months ended
      September 30, 2009 (Successor) and September 30, 2008
      (Successor)
                        
                        
                        4Condensed
      Consolidated Statements of Operations (unaudited) – the nine months ended
      September 30, 2009 (Successor), the period February 21, 2008 through
      September 30, 2008 (Successor), and the period January 1, 2008 through
      February 20, 2008 (Predecessor)
                        
                        
                        5Condensed
      Consolidated Statements of Cash Flows (unaudited) – the nine months ended
      September 30, 2009 (Successor), the period February 21, 2008 through
      September 30, 2008 (Successor), and the period January 1, 2008 through
      February 20, 2008 (Predecessor)
                        
                        
                        6Condensed
      Consolidated Statement of Members’ Equity (unaudited) – the nine months
      ended September 30, 2009 (Successor)
                        
                        
                        7Notes
      to Condensed Consolidated Financial Statements (unaudited)
                        
                        
                        8Item
      2.
                        
                        Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
                        
                        
                        16Item
      3.
                        
                        Quantitative
      and Qualitative Disclosures About Market Risk
                        
                        
                        28Item
      4T.
                        
                        Controls
      and Procedures
                        
                        
                        28Part
      II
                        
                        
                        
                        Other
      InformationItem
      6.
                        
                        Exhibits
                        
                        
                        29


2


PART
I-FINANCIAL INFORMATION





Item
1. Unaudited Condensed Consolidated Financial Statements.





AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


CONDENSED
CONSOLIDATED BALANCE SHEETS





SuccessorAs
      of
                                                      
                                                      
                                                      As
      ofSeptember
      30, 2009
                                                      
                                                      
                                                      December
      31, 2008(Unaudited)(In
      thousands)AssetsCurrent
      Assets:Cash
      and cash equivalents
                                                      
                                                      $
                                                      107,960
                                                      
                                                      
                                                      $
                                                      30,366Restricted
      cash
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      30,353Investments-restricted
                                                      
                                                      
                                                      1,857
                                                      
                                                      
                                                      
                                                      1,857Accounts
      receivable, net
                                                      
                                                      
                                                      3,328
                                                      
                                                      
                                                      
                                                      3,841Accounts
      receivable, net - related party
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      653Other
      current assets
                                                      
                                                      
                                                      11,749
                                                      
                                                      
                                                      
                                                      12,857Total
      Current Assets
                                                      
                                                      
                                                      124,894
                                                      
                                                      
                                                      
                                                      79,927Property
      and equipment, net
                                                      
                                                      
                                                      1,152,708
                                                      
                                                      
                                                      
                                                      1,172,690Debt
      issuance and deferred financing costs, net
                                                      
                                                      
                                                      3,024
                                                      
                                                      
                                                      
                                                      3,800Debt
      issuance and deferred financing costs, net - related party
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      5,100Restricted
      cash
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      10,649Intangible
      and other assets
                                                      
                                                      
                                                      30,076
                                                      
                                                      
                                                      
                                                      31,144Total
      Other Assets
                                                      
                                                      
                                                      33,100
                                                      
                                                      
                                                      
                                                      50,693Total
      Assets
                                                      
                                                      $
                                                      1,310,702
                                                      
                                                      
                                                      $
                                                      1,303,310Liabilities
      and Members' EquityCurrent
      Liabilities:Accounts
      payable
                                                      
                                                      $
                                                      4,381
                                                      
                                                      
                                                      $
                                                      6,701Accrued
      expenses
                                                      
                                                      
                                                      22,571
                                                      
                                                      
                                                      
                                                      21,783Accounts
      payable and accrued expenses - related party
                                                      
                                                      
                                                      48
                                                      
                                                      
                                                      
                                                      3,657Accrued
      payroll and related expenses
                                                      
                                                      
                                                      10,736
                                                      
                                                      
                                                      
                                                      10,061Current
      portion of capital lease obligations
                                                      
                                                      
                                                      255
                                                      
                                                      
                                                      
                                                      861Total
      Current Liabilities
                                                      
                                                      
                                                      37,991
                                                      
                                                      
                                                      
                                                      43,063Long-Term
      Liabilities:Long-term
      debt, net of unamortized discount
                                                      
                                                      
                                                      350,471
                                                      
                                                      
                                                      
                                                      -Long-term
      debt - related party
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      1,108,000Capital
      lease obligations, less current portion
                                                      
                                                      
                                                      2,256
                                                      
                                                      
                                                      
                                                      949Total
      Long-Term Liabilities
                                                      
                                                      
                                                      352,727
                                                      
                                                      
                                                      
                                                      1,108,949Total
      Liabilities
                                                      
                                                      
                                                      390,718
                                                      
                                                      
                                                      
                                                      1,152,012Commitments
      and ContingenciesMembers'
      Equity:Members'
      Equity
                                                      
                                                      
                                                      919,984
                                                      
                                                      
                                                      
                                                      151,298Total
      Members' Equity
                                                      
                                                      
                                                      919,984
                                                      
                                                      
                                                      
                                                      151,298Total
      Liabilities and Members' Equity
                                                      
                                                      $
                                                      1,310,702
                                                      
                                                      
                                                      $
                                                      1,303,310





See notes
to condensed consolidated financial statements.


3





AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





SuccessorThree
      Months Ended
                                                      
                                                      
                                                      Three
      Months EndedSeptember
      30, 2009
                                                      
                                                      
                                                      September
      30, 2008(Unaudited)(In
      thousands)Revenues:Casino
                                                      
                                                      $
                                                      50,082
                                                      
                                                      
                                                      $
                                                      63,013Hotel
                                                      
                                                      
                                                      15,324
                                                      
                                                      
                                                      
                                                      19,826Food
      and beverage
                                                      
                                                      
                                                      18,685
                                                      
                                                      
                                                      
                                                      22,498Tower,
      retail and other
                                                      
                                                      
                                                      9,373
                                                      
                                                      
                                                      
                                                      11,120Gross
      Revenues
                                                      
                                                      
                                                      93,464
                                                      
                                                      
                                                      
                                                      116,457Less
      promotional allowances
                                                      
                                                      
                                                      5,795
                                                      
                                                      
                                                      
                                                      10,790Net
      Revenues
                                                      
                                                      
                                                      87,669
                                                      
                                                      
                                                      
                                                      105,667Costs
      and Expenses:Casino
                                                      
                                                      
                                                      16,912
                                                      
                                                      
                                                      
                                                      21,347Hotel
                                                      
                                                      
                                                      9,208
                                                      
                                                      
                                                      
                                                      8,831Food
      and beverage
                                                      
                                                      
                                                      15,595
                                                      
                                                      
                                                      
                                                      16,740Other
      operating expenses
                                                      
                                                      
                                                      3,397
                                                      
                                                      
                                                      
                                                      4,592Selling,
      general and administrative
                                                      
                                                      
                                                      27,885
                                                      
                                                      
                                                      
                                                      35,023Depreciation
      and amortization
                                                      
                                                      
                                                      10,384
                                                      
                                                      
                                                      
                                                      9,165Loss
      on disposal of assets
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      252Management
      fee - related party
                                                      
                                                      
                                                      375
                                                      
                                                      
                                                      
                                                      750Total
      Costs and Expenses
                                                      
                                                      
                                                      83,756
                                                      
                                                      
                                                      
                                                      96,700Income
      From Operations
                                                      
                                                      
                                                      3,913
                                                      
                                                      
                                                      
                                                      8,967Other
      Income (Expense):Interest
      income
                                                      
                                                      
                                                      32
                                                      
                                                      
                                                      
                                                      282Interest
      expense
                                                      
                                                      
                                                      (5,728
                                                      )
                                                      
                                                      
                                                      (582
                                                      )Interest
      expense - related party
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (16,634
                                                      )Total
      Other Expense, net
                                                      
                                                      
                                                      (5,696
                                                      )
                                                      
                                                      
                                                      (16,934
                                                      )Loss
      Before Income Taxes
                                                      
                                                      
                                                      (1,783
                                                      )
                                                      
                                                      
                                                      (7,967
                                                      )Benefit
      for income taxes
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      -Net
      Loss
                                                      
                                                      $
                                                      (1,783
                                                      )
                                                      
                                                      $
                                                      (7,967
                                                      )





See notes
to condensed consolidated financial statements.


4


AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS





Successor
                                                                    
                                                                    
                                                                    PredecessorPeriod
      from
                                                                    
                                                                    
                                                                    Period
      fromFebruary
      21, 2008
                                                                    
                                                                    
                                                                    January
      1, 2008Nine
      Months Ended
                                                                    
                                                                    
                                                                    through
                                                                    
                                                                    
                                                                    throughSeptember
      30, 2009
                                                                    
                                                                    
                                                                    September
      30, 2008
                                                                    
                                                                    
                                                                    February
      20, 2008(Unaudited)(In
      thousands)Revenues:Casino
                                                                    
                                                                    $
                                                                    165,438
                                                                    
                                                                    
                                                                    $
                                                                    162,212
                                                                    
                                                                    
                                                                    $
                                                                    36,539Hotel
                                                                    
                                                                    
                                                                    46,487
                                                                    
                                                                    
                                                                    
                                                                    53,207
                                                                    
                                                                    
                                                                    
                                                                    11,683Food
      and beverage
                                                                    
                                                                    
                                                                    56,870
                                                                    
                                                                    
                                                                    
                                                                    56,959
                                                                    
                                                                    
                                                                    
                                                                    12,354Tower,
      retail and other
                                                                    
                                                                    
                                                                    26,713
                                                                    
                                                                    
                                                                    
                                                                    24,901
                                                                    
                                                                    
                                                                    
                                                                    4,651Gross
      Revenues
                                                                    
                                                                    
                                                                    295,508
                                                                    
                                                                    
                                                                    
                                                                    297,279
                                                                    
                                                                    
                                                                    
                                                                    65,227Less
      promotional allowances
                                                                    
                                                                    
                                                                    19,998
                                                                    
                                                                    
                                                                    
                                                                    26,528
                                                                    
                                                                    
                                                                    
                                                                    5,608Net
      Revenues
                                                                    
                                                                    
                                                                    275,510
                                                                    
                                                                    
                                                                    
                                                                    270,751
                                                                    
                                                                    
                                                                    
                                                                    59,619Costs
      and Expenses:Casino
                                                                    
                                                                    
                                                                    53,399
                                                                    
                                                                    
                                                                    
                                                                    52,667
                                                                    
                                                                    
                                                                    
                                                                    12,363Hotel
                                                                    
                                                                    
                                                                    26,539
                                                                    
                                                                    
                                                                    
                                                                    21,448
                                                                    
                                                                    
                                                                    
                                                                    4,682Food
      and beverage
                                                                    
                                                                    
                                                                    45,366
                                                                    
                                                                    
                                                                    
                                                                    41,250
                                                                    
                                                                    
                                                                    
                                                                    9,183Other
      operating expenses
                                                                    
                                                                    
                                                                    10,539
                                                                    
                                                                    
                                                                    
                                                                    11,453
                                                                    
                                                                    
                                                                    
                                                                    2,341Selling,
      general and administrative
                                                                    
                                                                    
                                                                    82,807
                                                                    
                                                                    
                                                                    
                                                                    82,460
                                                                    
                                                                    
                                                                    
                                                                    18,511Depreciation
      and amortization
                                                                    
                                                                    
                                                                    30,823
                                                                    
                                                                    
                                                                    
                                                                    21,452
                                                                    
                                                                    
                                                                    
                                                                    5,062Loss
      on disposal of assets
                                                                    
                                                                    
                                                                    578
                                                                    
                                                                    
                                                                    
                                                                    321
                                                                    
                                                                    
                                                                    
                                                                    -Management
      fee - related party
                                                                    
                                                                    
                                                                    1,375
                                                                    
                                                                    
                                                                    
                                                                    1,828
                                                                    
                                                                    
                                                                    
                                                                    -Total
      Costs and Expenses
                                                                    
                                                                    
                                                                    251,426
                                                                    
                                                                    
                                                                    
                                                                    232,879
                                                                    
                                                                    
                                                                    
                                                                    52,142Income
      From Operations
                                                                    
                                                                    
                                                                    24,084
                                                                    
                                                                    
                                                                    
                                                                    37,872
                                                                    
                                                                    
                                                                    
                                                                    7,477Other
      Income (Expense):Loss
      on early extinguishment of debt
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (13,580
                                                                    )Interest
      income
                                                                    
                                                                    
                                                                    91
                                                                    
                                                                    
                                                                    
                                                                    672
                                                                    
                                                                    
                                                                    
                                                                    322Interest
      expense
                                                                    
                                                                    
                                                                    (7,008
                                                                    )
                                                                    
                                                                    
                                                                    (1,635
                                                                    )
                                                                    
                                                                    
                                                                    (2,564
                                                                    )Interest
      expense - related party
                                                                    
                                                                    
                                                                    (21,398
                                                                    )
                                                                    
                                                                    
                                                                    (41,909
                                                                    )
                                                                    
                                                                    
                                                                    -Total
      Other Expense, net
                                                                    
                                                                    
                                                                    (28,315
                                                                    )
                                                                    
                                                                    
                                                                    (42,872
                                                                    )
                                                                    
                                                                    
                                                                    (15,822
                                                                    )Loss
      Before Income Taxes
                                                                    
                                                                    
                                                                    (4,231
                                                                    )
                                                                    
                                                                    
                                                                    (5,000
                                                                    )
                                                                    
                                                                    
                                                                    (8,345
                                                                    )Benefit
      for income taxes
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    2,920Net
      Loss
                                                                    
                                                                    $
                                                                    (4,231
                                                                    )
                                                                    
                                                                    $
                                                                    (5,000
                                                                    )
                                                                    
                                                                    $
                                                                    (5,425
                                                                    )





See notes
to condensed consolidated financial statements.


5





AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS





Successor
                                              
                                              
                                              PredecessorPeriod
      from
                                              
                                              
                                              Period
      fromNine
      Months
                                              
                                              
                                              February
      21, 2008
                                              
                                              
                                              January
      1, 2008Ended
                                              
                                              
                                              Through
                                              
                                              
                                              ThroughSeptember 30, 2009
                                              
                                              
                                              September 30, 2008
                                              
                                              
                                              February 20, 2008(Unaudited)(In
      thousands)Cash
      Flows From Operating Activities:Net
      loss
                                              
                                              $
                                              (4,231
                                              )
                                              
                                              $
                                              (5,000
                                              )
                                              
                                              $
                                              (5,425
                                              )Adjustments
      to reconcile net loss to net cash providedby
      (used in) operating activities:Depreciation
      and amortization
                                              
                                              
                                              30,823
                                              
                                              
                                              
                                              21,452
                                              
                                              
                                              
                                              5,062Amortization
      of debt issuance and deferred financing costs
                                              
                                              
                                              4,313
                                              
                                              
                                              
                                              4,774
                                              
                                              
                                              
                                              150Tax
      benefit
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (2,920
                                              )Write-off
      of deferred financing costs
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              4,405Loss
      on disposal of assets
                                              
                                              
                                              578
                                              
                                              
                                              
                                              321
                                              
                                              
                                              
                                              -Changes
      in operating assets and liabilities:Restricted
      cash
                                              
                                              
                                              41,002
                                              
                                              
                                              
                                              (15,019
                                              )
                                              
                                              
                                              -Accounts
      receivable, net
                                              
                                              
                                              513
                                              
                                              
                                              
                                              1,026
                                              
                                              
                                              
                                              95Other
      assets
                                              
                                              
                                              808
                                              
                                              
                                              
                                              5,408
                                              
                                              
                                              
                                              (95
                                              )Accounts
      payable and accrued expenses
                                              
                                              
                                              824
                                              
                                              
                                              
                                              (7,397
                                              )
                                              
                                              
                                              (9,543
                                              )Related
      party activity, net
                                              
                                              
                                              (2,956
                                              )
                                              
                                              
                                              2,538
                                              
                                              
                                              
                                              -Net
      Cash Provided By (Used In) Operating Activities
                                              
                                              
                                              71,674
                                              
                                              
                                              
                                              8,103
                                              
                                              
                                              
                                              (8,271
                                              )Cash
      Flows From Investing Activities:Decrease
      in investments - restricted
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,001
                                              
                                              
                                              
                                              -Acquisition
      of property and equipment
                                              
                                              
                                              (9,576
                                              )
                                              
                                              
                                              (20,224
                                              )
                                              
                                              
                                              (5,265
                                              )Acquisition
      of American Casino & Entertainment Properties LLC
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (1,299,066
                                              )
                                              
                                              
                                              -Proceeds
      from sale of property and equipment
                                              
                                              
                                              232
                                              
                                              
                                              
                                              122
                                              
                                              
                                              
                                              -Net
      Cash Used In Investing Activities
                                              
                                              
                                              (9,344
                                              )
                                              
                                              
                                              (1,318,167
                                              )
                                              
                                              
                                              (5,265
                                              )Cash
      Flows From Financing Activities:Debt
      issuance and deferred financing costs
                                              
                                              
                                              (8,047
                                              )
                                              
                                              
                                              (5,286
                                              )
                                              
                                              
                                              -Debt
      issuance and deferred financing costs - related party
                                              
                                              
                                              (7,664
                                              )
                                              
                                              
                                              (11,080
                                              )
                                              
                                              
                                              -Payments
      on line of credit
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (40,000
                                              )Payments
      on notes payable - related party
                                              
                                              
                                              (315,017
                                              )
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Capital
      distribution
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (15,439
                                              )Payments
      on capital lease obligation
                                              
                                              
                                              (258
                                              )
                                              
                                              
                                              (303
                                              )
                                              
                                              
                                              (85
                                              )Due
      to seller
                                              
                                              
                                              -
                                              
                                              
                                              
                                              7,379
                                              
                                              
                                              
                                              -Proceeds
      from notes payable
                                              
                                              
                                              311,250
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Proceeds
      from notes payable - related party
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,108,000
                                              
                                              
                                              
                                              -Equity
      contribution
                                              
                                              
                                              35,000
                                              
                                              
                                              
                                              202,390
                                              
                                              
                                              
                                              -Net
      Cash Provided By (Used In) Financing Activities
                                              
                                              
                                              15,264
                                              
                                              
                                              
                                              1,301,100
                                              
                                              
                                              
                                              (55,524
                                              )Net
      increase (decrease) in cash and cash equivalents
                                              
                                              
                                              77,594
                                              
                                              
                                              
                                              (8,964
                                              )
                                              
                                              
                                              (69,060
                                              )Cash
      and cash equivalents - beginning of period
                                              
                                              
                                              30,366
                                              
                                              
                                              
                                              38,205
                                              
                                              
                                              
                                              107,265Cash
      and Cash Equivalents - end of period
                                              
                                              $
                                              107,960
                                              
                                              
                                              $
                                              29,241
                                              
                                              
                                              $
                                              38,205Supplemental
      Disclosure of Cash Flow Information:Cash
      paid during the period for interest
                                              
                                              $
                                              91
                                              
                                              
                                              $
                                              84
                                              
                                              
                                              $
                                              9,455Cash
      paid during the period for interest - related party
                                              
                                              $
                                              26,171
                                              
                                              
                                              $
                                              33,159
                                              
                                              
                                              $
                                              -Supplemental
      Disclosure of Non-cash Items:Non-cash
      acquisition of property and equipment
                                              
                                              $
                                              967
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Non-cash
      equity contribution related to troubled debt restructure and gain on debt
      extinguishment
                                              
                                              $
                                              737,917
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -





See notes
to condensed consolidated financial statements.


6





AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


CONDENSED
CONSOLIDATED STATEMENT OF MEMBERS’ EQUITY





(Unaudited)


(In
thousands)




Class
      A
                  
                  
                  Class
      B
                  
                  
                  TotalEquity
                  
                  
                  Equity
                  
                  
                  EquitySuccessor:Balance
      at December 31, 2008
                  
                  $
                  -
                  
                  
                  $
                  151,298
                  
                  
                  $
                  151,298Net
      loss
                  
                  
                  -
                  
                  
                  
                  (4,231
                  )
                  
                  
                  (4,231
                  )Gain
      on debt restructure
                  
                  
                  -
                  
                  
                  
                  522,328
                  
                  
                  
                  522,328Gain
      on debt extinguishment
                  
                  
                  -
                  
                  
                  
                  215,589
                  
                  
                  
                  215,589Equity
      contribution
                  
                  
                  -
                  
                  
                  
                  35,000
                  
                  
                  
                  35,000Balance
      at September 30, 2009
                  
                  $
                  -
                  
                  
                  $
                  919,984
                  
                  
                  $
                  919,984





See notes
to condensed consolidated financial statements.


7


AMERICAN
CASINO & ENTERTAINMENT PROPERTIES LLC


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





Note
1. The Company




American
Casino & Entertainment Properties LLC was formed in Delaware on December 29,
2003.  ACEP refers to American Casino & Entertainment Properties
LLC and its subsidiaries. ACEP is a holding company and was formed for the
purpose of acquiring the entities that own and operate Stratosphere Casino Hotel
& Tower, or the Stratosphere, Arizona Charlie’s Decatur and Arizona
Charlie’s Boulder in Las Vegas, Nevada.  Stratosphere had been owned
by a subsidiary of our former indirect parent, Icahn Enterprises Holdings L.P.,
or IEH.  Arizona Charlie’s Decatur and Arizona Charlie’s Boulder were
owned by Carl C. Icahn and one of his affiliated entities.  We
purchased the Aquarius Casino Resort, or the Aquarius, on May 19, 2006, from
Harrah’s Operating Company, Inc.  The Aquarius operates in Laughlin,
Nevada.  Until February 20, 2008, ACEP was a subsidiary of American
Entertainment Properties Corp., or AEP, and its ultimate parent was Icahn
Enterprises L.P., or IELP, a Delaware master limited partnership the units of
which are traded on the New York Stock Exchange.





On April
22, 2007, 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 Global Real Estate Limited
Partnership 2007 and Whitehall Parallel Global Real Estate Limited Partnership
2007, or Whitehall, a series of real estate investment funds affiliated with
Goldman Sachs & Co., or Goldman Sachs, to sell all of our issued and
outstanding membership interests to Holdings for $1.3 billion plus or minus
certain adjustments such as working capital, as more fully described in the
Agreement, or, the Acquisition.  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.  The
Acquisition closed at a purchase price of approximately $1.2 billion on
February 20, 2008.





On
February 20, 2008, upon consummation of the Acquisition, we issued and sold 100%
of our Class B membership interests, or Class B Interests, to Holdings
for approximately $200.1 million.  Except as otherwise expressly
required by law, holders of our Class B Interests have no voting
rights.  We issued the Class B Interests to Holdings in reliance
on the exemption from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended.   Voteco acquired 100% of our voting
securities by purchasing 100% of our newly issued Class A Interests in
exchange for consideration in the amount of $30.  The source of funds
used by Voteco to purchase the Class A Interests were contributions of
capital made to Voteco by each of its three members.




“Successor ” refers to the Company
following the Acquisition on February 20, 2008 and the term “Predecessor ” refers to the Company
prior to the Acquisition. The
following table reconciles the effects of the Acquisition, accounted for as a
purchase business combination, on our February 20, 2008 (Predecessor) balance
sheet to the February 21, 2008 (Successor) balance sheet.





Predecessor
                      
                      
                      Fair
      Value
                      
                      
                      SuccessorBalance Sheet
                      
                      
                      Adjustments
                      
                      
                      Balance
      SheetTotal
      current assets
                      
                      $
                      58,762
                      
                      
                      $
                      49,484
                      
                      
                      $
                      108,246Property
      and equipment, net
                      
                      
                      432,254
                      
                      
                      
                      735,886
                      
                      
                      
                      1,168,140Intangible
      assets, net
                      
                      
                      1,858
                      
                      
                      
                      43,015
                      
                      
                      
                      44,873Total
      other assets
                      
                      
                      
                      
                      
                      
                      16,366
                      
                      
                      
                      16,366Total
      Assets
                      
                      $
                      492,874
                      
                      
                      $
                      844,751
                      
                      
                      $
                      1,337,625Total
      current liabilities
                      
                      $
                      40,477
                      
                      
                      $
                      7,372
                      
                      
                      $
                      47,849Long-term
      debt and capital leases
                      
                      
                      1,720
                      
                      
                      
                      1,108,000
                      
                      
                      
                      1,109,720Total
      members' equity
                      
                      
                      450,677
                      
                      
                      
                      (270,621
                      )
                      
                      
                      180,056Total
      Liabilities and Members' Equity
                      
                      $
                      492,874
                      
                      
                      $
                      844,751
                      
                      
                      $
                      1,337,625




In
addition, upon the closing of the Acquisition, ACEP, Voteco and Holdings entered
into an Amended and Restated Limited Liability Company Agreement of ACEP, or the
ACEP Operating Agreement.  In connection with the closing of the
Acquisition, each of the initial members of Voteco (Stuart Rothenberg, Brahm
Cramer and Jonathan Langer), Holdings and Voteco entered into a Transfer
Restriction Agreement.  Mr. Rothenberg resigned as a member of Voteco
on March 9, 2009 and Mr. Cramer resigned as a member of Voteco on September 11,
2009.





On
February 20, 2008, in connection with the closing of the Acquisition, certain of
our wholly owned indirect subsidiaries obtained the term loans in an aggregate
amount of approximately $1.1 billion from Goldman Sachs Mortgage Company,
or GSMC, pursuant to certain mortgage and mezzanine loan agreements, or, the
Goldman Term Loans.


8




On June
25, 2009, ACEP and GSMC closed the restructuring of the Goldman Term Loans (as
defined below).  In connection with the restructuring, (i) Whitehall
invested $200 million of new capital, $165 million of which was paid to Holdings
and used to repay a portion of the Goldman Term Loans and $35 million of which
was contributed in cash to ACEP, (ii) ACEP and certain of its wholly-owned
indirect subsidiaries entered into a new loan agreement with GSMC evidencing a
five-year term loan with an aggregate principal amount of $350 million, or the
2014 Term Loans (as defined below), (iii) Holdings agreed to issue to an
affiliate of GSMC a 22% interest in Holdings upon receipt of necessary gaming
approvals and (iv) GSMC agreed to terminate the Goldman Term Loans.





On
August 14, 2009, ACEP and ACEP Finance Corp., a wholly-owned subsidiary of
ACEP, collectively the Issuers,
issued $375 million aggregate principal amount of 11% Senior Secured Notes
due 2014, or Senior Secured Notes. The Senior Secured Notes were issued pursuant
to an indenture, dated as of August 14, 2009, or, the Indenture, among the
Issuers, all of the then existing subsidiaries of ACEP other than ACEP Finance,
as guarantors, or, the Guarantors, and The Bank of New York Mellon, as
trustee.The Senior
Secured Notes mature on June 15, 2014. The Senior Secured Notes bear
interest at a rate of 11% per annum. Interest on the Senior Secured Notes 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 under the Senior Secured Notes are jointly, severally and
unconditionally guaranteed (the “Guarantees”) 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 gross
proceeds from the issuance of the Senior Secured 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, or
approximately $38.8 million of the 2014 Term Loans was forgiven by
GSMC.





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 2008 audited consolidated financial statements and
pursuant to the rules and regulations of the Securities and Exchange Commission,
or 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 2008 consolidated audited financial statements presented in our
annual report on Form 10-K for the year ended December 31, 2008, filed with the
SEC on March 31, 2009 (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.


9





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.





Throughout
this document we refer to Successor and Predecessor. The term "Successor" refers
to the Company following the Acquisition on February 20, 2008 and the term
"Predecessor" refers to the Company prior to the Acquisition.





Recently
Issued Accounting Pronouncements





In May 2009, the Financial Accounting
Standards Board issued FASB ASC 855,Subsequent
Events, to incorporate the
accounting and disclosure requirements for subsequent events into U.S. generally
accepted accounting principles. FASB ASC 855 introduces new terminology, defines
a date through which management must evaluate subsequent events, and lists the
circumstances under which an entity must recognize and disclose events or
transactions occurring after the balance-sheet date. The Company adopted FASB
ASC 855 as of June 30, 2009, which was the required effective
date.The
Company evaluated its September 30, 2009 financial statements for subsequent
events throughNovember10, 2009, the date the financial statements
were available to be issued. The Company is not aware of any subsequent events
which would require recognition or disclosure in the financial
statements.





In
December 2007, the Financial Accounting Standards Board, or FASB, issued FASB
ASC 805, Business
Combinations.  FASB ASC 805 establishes principles and
requirements for determining how an enterprise recognizes and measures the fair
value of certain assets and liabilities acquired in a business combination,
including non-controlling interests, contingent consideration, and certain
acquired contingencies. FASB ASC 805 also requires acquisition-related
transaction expenses and restructuring costs be expensed as incurred rather than
capitalized as a component of the business combination. FASB ASC 805 will be
applicable prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008. The implementation of FASB ASC 805 did not have a
material impact on our consolidated financial statements.





In
December 2007, the FASB issued FASB ASC 810, Noncontrolling Interests in
Consolidated Financial Statements.  FASB ASC 810’s objective is to
improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  FASB ASC 810 is effective for fiscal years and interim periods
within those fiscal years, beginning on or after December 15, 2008. 
The implementation of FASB ASC 810 did not have a material impact on our
consolidated financial statements.





Reclassifications





Certain
reclassifications have been made to the period February 21,
2008 through September 30, 2008(Successor), and the
period January 1, 2008 through February 20, 2008 (Predecessor)
consolidated financial statements to conform to the September 30, 2009
presentation.  These reclassifications had no effect on net income
(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 the Goldman Term
Loans in an aggregate amount of approximately $1.1 billion from
GSMC.  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 2014 Term Loans of approximately $6.2 million for the three
months ended September 30, 2009 compared to $17.0 million on the Goldman Term
Loans for the three months ended September 30, 2008 (See Note 5. Debt for an
explanation of the accounting treatment of interest paid on the 2014 Term
Loans). We paid interest on the Goldman Term Loans and 2014 Term Loans,
collectively, of approximately $26.2 million for the nine months ended September
30, 2009, compared to $33.2 million for the combined nine months ended September
30, 2008. As of December 31, 2008, we owed $1.1 billion on the Goldman Term
Loans.  Included in accounts payable and accrued expenses – related
party, on the condensed consolidated balance sheets is accrued interest of $2.2
million on the Goldman Term Loans as of December 31, 2008. We also paid Goldman
Sachs $34,000 during the nine months ended September 30, 2008 in connection with
financial advisory services.  We also paid GSMC $7.0 million and
Goldman Sachs and affiliated entities approximately $700,000 in fees and
reimbursement of expenses related to the issuance of the 2014 Term
Loans.




10


On August
17, 2009, we issued an aggregate principal amount of $375 million of Senior
Secured Notes.  Goldman Sachs was the initial purchaser of the Senior
Secured Notes.  We used the gross proceeds from the offering of Senior
Secured Notes, approximately $311.3, 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 Senior Secured Notes
was credited directly to Members Equity.
  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 is
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. 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 and nine months ended September 30, 2009, the three
months ended September 30, 2008, or the combined nine months ended September 30,
2008. We received $0.00 in Hotel revenues and promotional incentives for the
three months ended September 30, 2009 compared to $1.2 million in Hotel
revenues, $28,000 in Casino revenues, $107,000 in Food and beverage revenues and
$287,000 in Tower, retail and other revenues for the three months ended
September 30, 2008.  We received approximately $397,000 in Hotel
revenues, $66,000 in Casino revenues, $97,000 in Food and beverage revenues, and
$238,000 in Tower, retail, and other revenues for the nine months ended
September 30, 2009 compared to $3.6 million in Hotel revenues, $67,000 in Casino
revenues, $245,000 in Food and beverage revenues and $671,000 in Tower, retail
and other revenues for the combined nine months ended September 30, 2008. 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 $0 and $750,000, respectively, for rent under the lease agreement for the
three and nine months ended September 30, 2009, compared to $383,000 for both
the three and nine months ended September 30, 2008. CRI owed us $184,000 as of
September 30, 2009, which is fully reserved, and approximately $653,000 as of
December 31, 2008, which is recorded in related party accounts receivable on the
condensed consolidated balance sheet.
 
 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. 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. Highgate owns a less than 5% membership
interest 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 EDITDA results at the properties and development
fees at 4% of the aggregate costs of any agreed upon development projects. We
incurred Highgate consulting fees of approximately $375,000 for the three months
ended September 30, 2009 compared to $750,000 for the three months ended
September 30, 2008. We incurred Highgate fees of approximately $1.4 million for
the nine months ended September 30, 2009 compared to $1.8 million for the
combined nine months ended September 30, 2008. We incurred no development fees
for the three and nine month periods ended September 30, 2009 compared to
approximately $1,000 for the three months ended September 30, 2008 and
approximately $699,000 for the nine months ended September 30,
2008.   We have reimbursed Highgate $0 for travel and
entertainment expenses for both the three and nine month periods ended September
30, 2009 compared to approximately $16,000 and $106,000 for the three and
combined nine month periods ended September 30, 2008,
respectively.  As of September 30, 2009 and December 31, 2008, we owed
Highgate approximately $0 and $1.4 million, 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 $122,000 for
the three months ended September 30, 2009 compared to $90,000 for the three
months ended September 30, 2008.  We expensed fees of approximately
$427,000 for the nine months ended September 30, 2009 and $90,000 for the
combined nine months ended September 30, 2008.  As of September 30,
2009 and December 31, 2008, we owed TTL approximately $45,000 and $60,000,
respectively.
 
 Archon
Group, LP, or Archon, is an affiliate of Goldman Sachs which provides various
services to us such as construction management, cash management and insurance
brokers.  We expensed fees of approximately $35,000 for the three
months ended September 30, 2009 compared to $6,000 for the three months ended
September 30, 2008. We expensed fees of approximately $73,000 for the nine
months ended September 30, 2009 compared to $20,000 for the combined nine months
ended September 30, 2008. As of September 30, 2009 and December 31, 2008, we
owed Archon approximately $0 and $3,000, respectively. Additionally, Archon was
the administrative agent under the 2014 Term Loans.


11


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 $11,400 for the three months ended September 30,
2009 and $23,000 for the nine months ended September 30, 2009.  As of
September 30, 2009 and December 31, 2008, we owed Nor1 $3,800 and $0,
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.




Note
4.  Intangible Assets





The
Company accounts for intangible assets in accordance with FASB ASC 350, Goodwill and Other Intangible
Assets.





The
Company’s finite-lived acquired intangible assets include its player loyalty
plan.  The Company’s infinite-lived acquired intangible assets include
its 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.





As of
September 30, 2009 and December 31, 2008, respectively, we had the following
intangible assets.





(In
      thousands)September
      30, 2009 (Successor)
                                  
                                  
                                  December
      31, 2008 (Successor)(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
                                  
                                  
                                  $
                                  (2,358
                                  )
                                  
                                  $
                                  5,092
                                  
                                  
                                  $
                                  7,450
                                  
                                  
                                  $
                                  (1,242
                                  )
                                  
                                  $
                                  6,208Non-amortizing
      intangible assets:Trade
      Name
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  24,910
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  24,910$
                                  30,002
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  31,118





In
connection with the Acquisition we recorded approximately $7.0 million in
goodwill. Upon completion of our 2008 annual impairment tests of goodwill and
indefinite-lived intangible assets the entire goodwill balance of $7.0 was
impaired and written off.


12





Note
5. Debt





Long-term
debt and capital lease obligations consist of the following.





As
      of
                              
                              
                              As
      ofSeptember
      30, 2009
                              
                              
                              December
      31, 2008(In
      thousands)(Unaudited)Goldman
      Term Loans and related mezzanine financings,due
      March 11, 2010, interest at a 3% margin aboveLIBOR
      (restructured June 25, 2009)
                              
                              $
                              -
                              
                              
                              $
                              1,108,0002014
      Term Loans due June 9, 2014, interest ata
      10% margin above LIBOR, with a 2.5% LIBOR floor(paid
      in full August 14, 2009)
                              
                              
                              -
                              
                              
                              
                              -11%
      Senior Secured Notes due June 15, 2014
                              
                              
                              375,000
                              
                              
                              
                              -Unamortized
      discount
                              
                              
                              (24,529
                              )
                              
                              
                              -Capital
      lease obligations
                              
                              
                              2,511
                              
                              
                              
                              1,810Total
      long-term debt and capital lease obligations
                              
                              
                              352,982
                              
                              
                              
                              1,109,810Less
      current portion of capital lease obligations
                              
                              
                              255
                              
                              
                              
                              861Total
      long-term debt and capital lease obligations, net
                              
                              $
                              352,727
                              
                              
                              $
                              1,108,949





Senior
Secured Notes





On
August 14, 2009, the Issuers issued the Senior Secured Notes. The Senior
Secured Notes were issued pursuant to the Indenture.The Senior Secured Notes
mature on June 15, 2014. The Senior Secured Notes bear interest at a rate
of 11% per annum. Interest on the Senior Secured Notes 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 under the Senior Secured Notes are
jointly, severally and unconditionally guaranteed by all of the subsidiaries of
ACEP other than ACEP Finance and will be so guaranteed by any of our future
domestic subsidiaries of ACEP, subject to certain exceptions.





In
accordance with positions established by the SEC, separate 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 Senior Secured 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.





On or
after June 15, 2012, the Issuers may redeem all or a part of the 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 Senior Secured Notes at any time at a redemption price
equal to 100% of the principal amount of the Notes redeemed, plus a “make-whole”
premium as of, and accrued and unpaid interest to the applicable redemption
date. At any time prior to June 15, 2012, the Issuers may also redeem up to
35% of the aggregate principal amount of 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.  The Issuers 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 Senior Secured Notes at a redemption price
equal to 102% of the principal amount of the 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, the
Issuers must offer to repurchase the Senior Secured Notes at a repurchase price
equal to 101% of the principal amount of the Notes repurchased, plus accrued and
unpaid interest to the applicable repurchase date.


13





If ACEP
or its subsidiaries sell assets under circumstances or experience events of
loss, the Issuers must offer to repurchase the 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 our Indenture that requires
us to file quarterly and annual reports, and among other things, restricts our
ability to:





•
            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 our 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 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 our Indenture as of the date of this filing.





In
connection with the redemption of the 2014 Term Loans we terminated all the cash
management agreements that we were required to maintain.  Accordingly,
the amounts recorded as restricted cash related to the cash management agreement
have been released and are now included in our cash balance on the condensed
consolidated balance sheet.





2014
Term Loans





On June
25, 2009, we closed the restructuring of the Goldman Term Loans.  In
connection with the restructuring, (i) Holdings paid GSMC $165 million as a
repayment of the Goldman Term Loans; (ii) Holdings agreed to issue a 22%
membership interest in Holdings to an affiliate of GSMC, upon receipt of
necessary gaming approvals; (iii) ACEP and certain of its wholly-owned indirect
subsidiaries entered into the 2014 Term Loans with GSMC evidencing a loan with
an aggregate principal amount of $350 million; and (iv) GSMC agreed to terminate
the Goldman Term Loans.





ACEP and
certain of its wholly-owned indirect subsidiaries were co-borrowers and were
jointly and severally liable under the 2014 Term Loans.  The 2014 Term
Loans had a term of five years and an annual interest rate of LIBOR (with a
LIBOR floor of 2.5%) plus 10.00%.  The 2014 Term Loans were guaranteed
by all our subsidiaries and were collateralized by substantially all fee and
leasehold real property comprising the Stratosphere, the Aquarius, Arizona
Charlie’s Decatur and Arizona Charlie’s Boulder.





In
connection with the restructure, we are required to account for the transaction
under FASB ASC 470-60, Accounting by Debtors and Creditors
for Troubled Debt Restructurings.  As a result, we presented
our restructured debt obligation on the balance sheet as of June 30, 2009 in the
amount of $571.8 million, the FASB ASC 470-60 Liability, which was the sum of
$350 million, the Note Amount, and the minimum scheduled interest payments
during the term. In our case, that amount is the interest expense calculated at
12.5%.  In accordance with FASB ASC 470-60, we increased our Members’
Equity by the difference between the Goldman Term Loans and the FASB ASC 470-60
Liability less the closing costs and expenses paid in connection with the
restructure.  Due to the related party nature of the transaction, the
difference was credited directly to Members’ Equity and had no impact on the
statement of operations.  All interest payments were accounted for as
a reduction to the outstanding balance of the FASB ASC 470-60
Liability.  As a result, we did not report any interest expense
related to the 2014 Term Loans on our condensed consolidated statement of
operations.





The
restructuring of the Goldman Term Loans is expected to result in the recognition
of a significant amount of cancellation of indebtedness taxable income by our
owners.  However, there is no current plan for us to make tax
distributions in respect of such income and the terms of the Senior Secured
Notes restricts our ability to make any such tax distributions.


14





The
gross proceeds from the issuance of the Senior Secured 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.





Goldman
Term Loans





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, which were amended on June 13, 2008, from
Goldman Sachs Commercial Mortgage Capital, L.P., or the Lender, pursuant to
certain mortgage and mezzanine loan agreements. The Goldman Term Loans would
have matured on March 11, 2010 with two one-year extension
options.  Interest was due and payable monthly at a blended annual
interest rate of LIBOR (0.25% at September 30, 2009) plus 3.00% during the
initial term and LIBOR plus 3.25% during any extension
term.    In connection with the Goldman Term Loans, an
interest rate cap agreement was purchased to cap LIBOR at
4.75%.    The Goldman Term Loans were collateralized by
substantially all fee and leasehold real property comprising the Stratosphere,
the Aquarius, Arizona Charlie’s Decatur and Arizona Charlie’s
Boulder.  The Goldman Term Loans were satisfied by the restructuring
related to the 2014 Term Loans.





The fair
value of our debt is estimated based on the quoted market prices for the same or
similar issues or on the current rates offered to us for debt of the same
remaining maturities.  The Issuers issued the Senior Secured Notes on
August 14, 2009.  The estimated fair value of the Senior Secured Notes
was approximately $333.8 million as of September 30, 2009.





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.


15


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 31, 2009 (SEC File No. 000-52975), and
Item 1A of our quarterly report on Form 10-Q, filed with the SEC on August
3, 2009 (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, 2008.




Overview,
Background and History




We own
and operate four gaming and entertainment properties in Clark County,
Nevada.  The four properties are:





·
            the
      Stratosphere Casino Hotel & Tower, which is located at the northern
      end of the Las Vegas Strip and caters to visitors to Las
      Vegas,




·
            two
      off-Strip casino and hotel properties, 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, which caters to visitors to
      Laughlin.




We
believe that the Stratosphere is one of the most recognizable 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 what we believe are competitive odds in
our casinos, quality rooms in our hotels, high-quality 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 despite the challenging economic environment
we currently face.


16




The
following table provides certain summary information for each of our properties
for the three and nine months ended September 30, 2009 and 2008:




Three
      Months
                
                
                Three
      Months
                
                
                Nine
      Months
                
                
                Nine
      MonthsEnded
                
                
                Ended
                
                
                Ended
                
                
                EndedSeptember
      30, 2009
                
                
                September
      30, 2008
                
                
                September
      30, 2009
                
                
                September
      30, 2008Win
      per unit-SlotsStratosphere
                
                $
                85.89
                
                
                $
                106.24
                
                
                $
                99.38
                
                
                $
                113.46Decatur
                
                
                109.70
                
                
                
                122.89
                
                
                
                116.59
                
                
                
                128.46Boulder
                
                
                73.21
                
                
                
                93.90
                
                
                
                80.13
                
                
                
                99.46Aquarius
                
                
                111.75
                
                
                
                144.80
                
                
                
                123.77
                
                
                
                153.69Consolidated
                
                $
                96.49
                
                
                $
                118.12
                
                
                $
                106.43
                
                
                $
                124.82Win
      per unit-TablesStratosphere
                
                $
                759.75
                
                
                $
                974.61
                
                
                $
                810.59
                
                
                $
                997.75Decatur
                
                
                543.48
                
                
                
                507.25
                
                
                
                549.45
                
                
                
                559.61Boulder
                
                
                362.32
                
                
                
                407.61
                
                
                
                411.52
                
                
                
                433.10Aquarius
                
                
                556.76
                
                
                
                669.16
                
                
                
                584.38
                
                
                
                660.10Consolidated
                
                $
                628.87
                
                
                $
                745.45
                
                
                $
                660.64
                
                
                $
                753.26Average
      Daily Room RateStratosphere
                
                $
                43.77
                
                
                $
                57.42
                
                
                $
                44.99
                
                
                $
                65.47Decatur
                
                
                47.52
                
                
                
                47.62
                
                
                
                49.52
                
                
                
                52.06Boulder
                
                
                36.40
                
                
                
                44.69
                
                
                
                37.80
                
                
                
                49.62Aquarius
                
                
                48.07
                
                
                
                39.46
                
                
                
                45.91
                
                
                
                38.14Consolidated
                
                $
                44.75
                
                
                $
                50.70
                
                
                $
                45.08
                
                
                $
                55.20Hotel
      Occupancy RateStratosphere
                
                
                93.2
                %
                
                
                97.1
                %
                
                
                93.0
                %
                
                
                95.7
                %Decatur
                
                
                44.7
                %
                
                
                90.2
                %
                
                
                51.8
                %
                
                
                85.7
                %Boulder
                
                
                42.2
                %
                
                
                69.7
                %
                
                
                51.4
                %
                
                
                73.5
                %Aquarius
                
                
                46.9
                %
                
                
                65.1
                %
                
                
                46.3
                %
                
                
                68.0
                %Consolidated
                
                
                69.5
                %
                
                
                82.6
                %
                
                
                70.1
                %
                
                
                83.1
                %Net
      Revenue ($ in millions)Stratosphere
                
                $
                41.8
                
                
                $
                49.2
                
                
                $
                126.2
                
                
                $
                152.1Decatur
                
                
                15.2
                
                
                
                18.7
                
                
                
                50.0
                
                
                
                59.3Boulder
                
                
                8.8
                
                
                
                11.5
                
                
                
                30.0
                
                
                
                38.2Aquarius
                
                
                21.9
                
                
                
                26.2
                
                
                
                69.3
                
                
                
                80.8Consolidated
                
                $
                87.7
                
                
                $
                105.6
                
                
                $
                275.5
                
                
                $
                330.4





We use
certain key measurements to evaluate operating revenues.  Casino
revenue measurements include “table games drop,” “keno write” 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 won by the casino and recorded as casino revenues.  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, net of fees, 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.


17





Regulation
G, “Conditions for Use of Non-GAAP Financial Measures,” prescribes the
conditions for use of non-GAAP financial information in public disclosures. We
believe that our presentation of EBITDA and Adjusted 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. We use Adjusted EBITDA because we believe it is useful to investors
in allowing greater transparency related to a significant measure used by
management in its financial and operational decision making. Adjusted EBITDA is
among the more significant factors in management’s internal evaluation of total
company and individual property performance and in the evaluation of incentive
compensation related to property management. Management also uses Adjusted
EBITDA as a measure in determining the value of acquisitions and dispositions.
Adjusted EBITDA is also widely used by management in the annual budget process.
Externally, we believe these measures will be used by investors in their
assessment of our operating performance and the valuation of our company.
Adjusted EBITDA reflects adjustments for gain/loss on the disposition of assets
and expenses associated with the 2008 Acquisition.





Our
operating results greatly depend on the volume of customers at our properties,
which in turn affects our gaming revenues and the price we can charge for our
non-gaming amenities.  A substantial portion of our revenue is
generated from our gaming operations; more specifically slot play (including
video poker).  The majority of our revenue is cash-based through
customers wagering with cash or paying for non-gaming amenities with cash or
credit card.





Our
expenses also depend on the volume of customers at our
properties.  The volume of customers that visit our properties
directly affects our labor, which represented approximately 46.2% of our
expenses during fiscal year 2008, and the amount we spend on marketing, which
represented approximately 4.6% of our expenses during fiscal year
2008.  However, we incur a significant amount of costs that do not
vary directly with changes in the volume of customers.  As a result,
it is difficult to reduce costs to match reductions in demand, which results in
reduced operating margins.  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.




The
Las Vegas and Laughlin Markets





All of
our properties are located in the Las Vegas and Laughlin, Nevada
markets.  Accordingly, our results of operations are driven by
economic conditions in these markets.





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.





According
to the Las Vegas Convention and Visitors Authority, or LVCVA, the number of
visitors traveling to Las Vegas has increased over the last ten years from
30.6 million visitors in 1998 to 37.5 million visitors in 2008, a
compound annual growth rate of 2.1%.  The number of hotel and motel
rooms in Las Vegas has increased from 109,365 at the end of 1998 to 140,529 at
the end of 2008, a compound annual growth rate of 2.5%.  Despite this
significant increase in the supply of rooms, the Las Vegas hotel occupancy rate
exceeded 88% for each of the years from 1998 through 2008.





Las Vegas
saw declines in tourism in 2008 as the combined economic factors of the housing
crisis, frozen credit markets, volatile gas prices and increased unemployment
translated to reduced consumer confidence and travel spending in much of the
country.  According to the LVCVA statistical reports, even with
attempts to stimulate demand in the slowed economy with discounted room rates,
visitor volume in Las Vegas decreased approximately 4.4% in 2008 compared to
2007, while average daily room rate decreased by approximately 9.8% and hotel
occupancy decreased by approximately 4.2%.  Much of the decrease in
average daily room rate occurred in the June through December period when the
average monthly year-over-year decrease in average daily room rate was
approximately 14.1%.  The monthly year-over-year decrease in hotel
occupancy was most pronounced in the fourth quarter of 2008 averaging
approximately 8.5%.





The
year-over-year decrease in visitor volume, average daily room rate, and hotel
occupancy has continued in 2009.  For the nine month period ended
September 30, 2009, the LVCVA reported visitor volume decreased approximately
4.7%, average daily room rate decreased approximately 24.7% and hotel occupancy
decreased approximately 5.5% compared to the same period in 2008.  The
year-over-year decline in hotel occupancy has resulted in reduced average daily
room rates and increased promotional activities as operators have tried to fill
rooms.


18





Las Vegas
is a significant destination for trade shows. According to the LVCVA, the number
of trade show and convention attendees in Las Vegas increased from approximately
3.3 million in 1998 to 5.9 million in 2008, representing a compound
annual growth rate of 6.0%.  Trade show and convention attendees spent
approximately $8.5 billion in Las Vegas in 2008.  For the nine
months ended September 30, 2009, meetings held declined by 18.2% and convention
attendance declined by approximately 1.3 million people, or 27.1% compared to
the same period ended in 2008.





All of
our properties are located in Clark County, Nevada.  Clark County
gaming revenue has grown as Las Vegas visitation and hotel room counts have
grown.  Between 1998 and 2008, Clark County gaming revenue experienced
compound annual growth of 4.4%.  Clark County gaming revenue for 2008
was approximately $9.8 billion, a 9.9% decrease from 2007, due to combined
economic factors of the housing crisis, frozen credit markets, volatile gas
prices and increased unemployment, which resulted in reduced consumer confidence
and travel spending in Las Vegas and in much of the country.





For the
nine month period ended September 30, 2009, the LVCVA reported that Clark County
gaming revenue decreased 12.0% compared to the same period in 2008.





Based on
projects that have opened or were under construction as of June 5, 2009, the
LVCVA projects room inventory will reach 149,279 by the end of 2009 and 156,698
by the end of 2010  Currently there are no projects scheduled to open
after 2010.  Assuming all of the rooms are completed, room inventory
will increase at a compound average growth rate of 5.6% from the end of 2008 to
2010 compared to the 2.5% growth rate from 1998 to 2008.  Construction
on approximately 3,800 rooms scheduled to open in 2010 on the Las Vegas Strip
has stopped and opening of those rooms may be delayed.





Nevada
has historically enjoyed a strong economy and demographics that include an
increasing number of retirees and other active gaming patrons.  A
majority of Nevada’s growth has occurred in Las Vegas, which is located in Clark
Country.  The population of Clark County has grown from 1,246,150 in
1998 to 1,986,146 in 2008, a compound annual growth rate of 4.8%.  In
comparison, the United States population increased at a compound annual growth
rate of 1.0% during this period.





The Las
Vegas economy has been relatively weak during 2008 and 2009.  In
September 2009, Las Vegas unemployment increased to 13.9% compared to 9.8%
nationally.  From 2007 to 2008, Las Vegas experienced a 0.5% decrease
in population, likely the result of the combined economic factors of the local
housing crisis and increased foreclosures.  Frozen credit markets,
volatile gas prices and increased unemployment contributed to a reduction of
consumer confidence and spending in Las Vegas.





Laughlin,
Nevada is located approximately 98 miles south of Las Vegas on the Colorado
River at the southern end of the state and has an estimated 2008 population of
8,843 people according to the Clark County Department of Comprehensive
Planning.  Bullhead City, Arizona, is directly across the
river.  According to the U.S. Department of Commerce Census Division,
Bullhead City’s 2008 estimated population is 40,868.  Bullhead City is
located in Mohave County, which has a population of approximately
204,000.  Additionally, Laughlin draws visitors from Phoenix, Arizona
(230 miles), Los Angeles (290 miles) and San Diego, California (350
miles).





The
Laughlin area economy is primarily dependent on the gaming and tourism
industry.  Laughlin visitor volume and hotel occupancy rates have
declined on an annual basis over the past several years while the number of
hotel rooms has remained fairly constant.  The declining trend in
these primary indicators began in 1994 after nearly 10 years of economic
growth in the area’s primary industry.  According to the LVCVA as of
December 31, 2008, the Laughlin market consisted of approximately 10,655 hotel
rooms and its gaming revenue for 2008 was approximately $571 million, down
9.5% from 2007.  Visitor volume decreased 7.6% year-over-year to
approximately 2.9 million compared to 3.1 million in 2007.  Occupancy
in 2008 declined 2.8% to 69% while average daily room rate increased 3.8% to
$43.51.





Like Las
Vegas, much of the year-over-year decrease in occupancy in Laughlin occurred
from June to December with an average monthly year-over-year decline of
4.7%.  The fourth quarter incurred the largest
decline.  From October through December, year-over-year visitor volume
decreased 10.5%, 11.0%, and 12.2%, respectively, and hotel occupancy and gaming
revenue followed.





The
year-over-year decrease in visitor volume, average daily room rate, and hotel
occupancy has continued in 2009.  For the nine month period ended
September 30, 2009, the LVCVA reported visitor volume decreased approximately
10.1%, average daily room rate decreased approximately 3.5% and hotel occupancy
decreased approximately 2.0% compared to the same period in
2008.


19




Debt
Restructuring





On August 14, 2009,
the Issuers issued the Senior Secured Notes. The Senior Secured Notes were
issued pursuant to the Indenture.  The Senior Secured Notes mature on
June 15, 2014. The Senior Secured Notes bear interest at a rate of 11% per
annum. Interest on the Senior Secured Notes 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 under the Senior Secured Notes 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 gross proceeds from the issuance of the
Senior Secured 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 approximately $38.8 million 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 Senior Secured Notes was credited directly to Members’ Equity.





On June
25, 2009, ACEP and GSMC closed the restructuring of the Goldman Term
Loans.  In connection with the restructuring, (i) Whitehall invested
$200 million of new capital, $165 million of which was used to repay a portion
of the Goldman Term Loans and $35 million of which was contributed to ACEP, (ii)
ACEP and certain of its wholly-owned indirect subsidiaries entered into a new
loan agreement with GSMC evidencing the 2014 Term Loans, (iii) Holdings agreed
to issue an affiliate of GSMC a 22% interest in Holdings upon receipt of
necessary gaming approvals and (iv) GSMC agreed to terminate the Goldman Term
Loans.





In
connection with the restructure, we are required to account for the transaction
under the provisions of FASB ASC 470-60, Accounting by Debtors and Creditors
for Troubled Debt Restructurings.  As a result, we have
presented our restructured debt obligation on the balance sheet as of June 30,
2009 in the amount of $571.8 million (the FASB ASC 470-60 Liability), which is
the sum of $350 million (the Note Amount) and the minimum scheduled interest
payments during the term. In our case, that amount is the interest expense
calculated at 12.5%.  In accordance with FASB ASC 470-60, we have
increased our Members’ Equity by the difference between the Goldman Term Loans
and the FASB ASC 470-60 Liability less the closing costs and expenses paid in
connection with the restructure. Due to the related party nature of the
transaction, the difference of $522.3 million was credited directly to Members’
Equity and had no impact on the statement of operations.  All interest
payments were accounted for as a reduction of the outstanding balance of the
FASB ASC 470-60 Liability.  As a result, we did not report any
interest expense related to the 2014 Term Loans on our statement of
operations.  On August 14, 2009, the 2014 Term Loans was repaid with
the proceeds of the Senior Secure Notes.





Results
of Operations





As
discussed in Note 2 to our condensed consolidated financial statements, our
financial data for the nine months ended September 30, 2008 are divided into
predecessor and successor periods. The data for these periods that are presented
and discussed in this “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” are on a combined
basis.





Cost
Savings Initiatives





During
the fourth quarter of 2008 and into 2009, we increased our focus on cost savings
across our corporate and property operations.  We have evaluated our
staffing levels, implemented changes to our scheduling and benefits, and
eliminated certain positions.  As of September 30, 2009, we decreased
our Full-Time Equivalent staff 14.8% to 3,647 compared to 4,282 as of September
30, 2008.  As a result, our total labor cost for the three month
period ended September 30, 2009 decreased 11.1% to $40.8 million from $45.9
million in the three month period ended September 30, 2008 we have cut back or
eliminated marketing and promotional programs that were
unprofitable.  As a result, we have decreased promotional allowances
to 6.2% of gross revenues for the three months ended September 30, 2009 from
9.3% in three months ended September 30, 2008.  In addition, we have
worked diligently to find savings across all areas of the
organization.  For the three-month period ended September 30, 2009 our
general operating expenses, exclusive of cost of goods sold and labor, decreased
22.2% to $25.2 million from $32.4 million for the three months ended September
30, 2008.  We believe our cost saving initiatives will continue to
benefit us through the rest of 2009.


20




Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008




The
following table highlights the results of our operations (dollars in
millions):




SuccessorThree
      Months
                                                  
                                                  
                                                  Three
      MonthsEnded
                                                  
                                                  
                                                  EndedSeptember
      30, 2009
                                                  
                                                  
                                                  September
      30, 2008Income
      Statement Data:Revenues:Casino
                                                  
                                                  $
                                                  50.1
                                                  
                                                  
                                                  $
                                                  63.0Hotel
                                                  
                                                  
                                                  15.3
                                                  
                                                  
                                                  
                                                  19.8Food
      and beverage
                                                  
                                                  
                                                  18.7
                                                  
                                                  
                                                  
                                                  22.5Tower,
      retail and other
                                                  
                                                  
                                                  9.4
                                                  
                                                  
                                                  
                                                  11.1Gross
      revenues
                                                  
                                                  
                                                  93.5
                                                  
                                                  
                                                  
                                                  116.4Less
      promotional allowances
                                                  
                                                  
                                                  5.8
                                                  
                                                  
                                                  
                                                  10.8Net
      revenues
                                                  
                                                  
                                                  87.7
                                                  
                                                  
                                                  
                                                  105.6Costs
      and expenses:Casino
                                                  
                                                  
                                                  16.9
                                                  
                                                  
                                                  
                                                  21.3Hotel
                                                  
                                                  
                                                  9.2
                                                  
                                                  
                                                  
                                                  8.8Food
      and beverage
                                                  
                                                  
                                                  15.6
                                                  
                                                  
                                                  
                                                  16.7Other
      operating expenses
                                                  
                                                  
                                                  3.4
                                                  
                                                  
                                                  
                                                  4.6Selling,
      general and administrative
                                                  
                                                  
                                                  28.3
                                                  
                                                  
                                                  
                                                  36.0Depreciation
      and amortization
                                                  
                                                  
                                                  10.4
                                                  
                                                  
                                                  
                                                  9.2Total
      costs and expenses
                                                  
                                                  
                                                  83.8
                                                  
                                                  
                                                  
                                                  96.6Income
      from operations
                                                  
                                                  $
                                                  3.9
                                                  
                                                  
                                                  $
                                                  9.0EBITDA
      and Adjusted EBITDA Reconciliation:Net
      loss
                                                  
                                                  $
                                                  (1.8
                                                  )
                                                  
                                                  $
                                                  (7.9
                                                  )Benefit
      for income taxes
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -Interest
      income
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  (0.3
                                                  )Interest
      expense
                                                  
                                                  
                                                  5.7
                                                  
                                                  
                                                  
                                                  17.2Depreciation
      and amortization
                                                  
                                                  
                                                  10.4
                                                  
                                                  
                                                  
                                                  9.2EBITDA
                                                  
                                                  
                                                  14.3
                                                  
                                                  
                                                  
                                                  18.2Loss
      on sale of assets
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  0.3Acqusition
      related adjustments
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  0.2Adjusted
      EBITDA
                                                  
                                                  $
                                                  14.3
                                                  
                                                  
                                                  $
                                                  18.7





Consolidated
gross revenues decreased 19.7% to $93.5 million for the three months ended
September 30, 2009 from $116.4 million for the three months ended September 30,
2008.  The decrease in gross revenues for the period was due primarily
to an overall decrease in gaming, hotel and food & beverage revenues across
the majority of our properties as the result of the weakening Las Vegas and U.S.
economies that has continued in 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 has had
a significant negative impact on our properties which cater to local
customers.





Consolidated
income from operations decreased 56.7% for the three months ended September 30,
2009 as compared to the three months ended September 30, 2008.  The
decrease is due to a decrease in revenues as a result of the general economic
slowdown discussed above.  As a result, our consolidated operating
margin decreased to 4.4% for the three months ended September 30, 2009 from 8.5%
for the three months ended September 30, 2008.  Due primarily to the
decrease in revenues as discussed above, EBITDA and Adjusted EBITDA decreased
21.4% and 23.5% respectively for the three months ended September 30, 2009 as
compared to the three months ended September 30, 2008.


21





Casino




Casino
revenue consists of revenue from slot play, table games, race and sports book,
bingo and keno.  Casino revenues decreased 20.5% to $50.1
million for the three months ended September 30, 2009 from $63.0
million for the three months ended September 30, 2008.  The
decrease in casino revenues is primarily due to the general economic slowdown
discussed above. Revenue from slot play decreased 21.4% during the three months
ended September 30, 2009 as compared to the same period in 2008 due to a 23.5%
decrease in coin in.  The decrease in coin in is due in large part to
decreased customer visits and average spend per customer and a 28.1% reduction
in slot free play issued by us to customers for the three months ended September
30, 2009 compared to the same period in 2008.  Revenue from table
games decreased 19.5% for the three months ended September 30, 2009 compared to
the same period in 2008 due to a 26.0% decrease in drop.  Other casino
revenues increased 6.3% for the three months ended September 30, 2009 compared
to the same period in 2008 due to a 41.7% increase in race and sports book
revenues.  Our race and sports book hold increased to 9.7% for the
three months ended September 30, 2009 compared to a hold of 4.3% for the three
months ended September 30, 2008. Casino expenses decreased 20.7% to $16.9
million for the three months ended September 30, 2009, from $21.3 million
for the three months ended September 30, 2008.  This was primarily due
to a reduction in labor costs, participation expenses, decreased revenue taxes
and overall efficiency efforts.   Participation expenses consist
of fees paid to game owners for use of their games. As a result of our
efficiency initiatives, our casino operating margin increased slightly to 66.3%
for the three months ended September 30, 2009 as compared to 66.2% for the three
months ended September 30, 2008.




Hotel




Hotel
revenues decreased 22.7% to $15.3 million for the three months ended September
30, 2009 from $19.8 million for the three months ended September 30,
2008.  The decrease in revenues is the result of a decrease in room
occupancy to 69.5% for the three months ended September 30, 2009 as compared to
82.6% for the three months ended September 30, 2008 and an 11.7% decrease in
average daily room rate for the three months ended September 30, 2009 compared
to the three months ended September 30, 2008.  The decrease in both
occupancy and average daily room rate across our properties is primarily a
result of sharp decreases in rates across our markets and our increased reliance
on wholesale room sales, which are primarily generated on the
internet.  Due to our focus on profitable promotions, revenue from
complimentary room sales has fallen more sharply than cash room sales. Our comp
room sales decreased 73.2% and our cash room sales decreased 16.2% for the three
months ended September 30, 2009 compared to the three months ended September 30,
2008.  Our hotel expenses increased 4.5% to $9.2 million for the three
months ended September 30, 2009, from $8.8 million for the three months
ended September 30, 2008.  This increase was primarily due to 55.0%
increase in commissions paid for wholesale room sales and increased repair &
maintenance expenses.  The Stratosphere, which accounts for 50% of our
4,912 rooms, has maintained occupancy of 93.2% for the three months ended
September 30, 2009 compared to 97.1% for the three months ended September 30,
2008.  Due to the relatively stable occupancy at Stratosphere and the
need to maintain guest service, we have not reduced our hotel expenses
year-over-year at Stratosphere.  Due primarily to the decline in
revenues discussed above, our Hotel operating margin decreased to 39.9% for the
three months ended September 30, 2009 as compared to 55.6% for the three months
ended September 30, 2008.




Food
and Beverage




Food and
beverage revenues decreased 16.9% to $18.7 million for the three months ended
September 30, 2009 from $22.5 million for the three months ended September 30,
2008. Food covers for the three month period ended September 30, 2009 decreased
13.1% compared to the three months ended September 30, 2008.  Average
revenue per cover for the three months ended September 30, 2009 fell 4.4%
compared to the three months ended September 30, 2008.  Most
responsible for the decline in revenues were complimentary
revenues.  Food and beverage complimentary revenues decreased 40.0%
and 28.0% respectively for the three months ended September 30, 2009 as compared
to the three months ended September 30, 2008.  Our food and beverage
expenses decreased 6.6% to $15.6 million for the three months ended September
30, 2009 as compared to $16.7 million for the three months ended September 30,
2008 due to an overall decrease in our Food and beverage costs, payroll and
expenses related to the number of covers.   As a result, our food
and beverage operating margin decreased to 16.6% for the three months ended
September 30, 2009 as compared to 25.8% for the three months ended September 30,
2008.




Tower,
Retail and Other




Tower,
retail and other revenues decreased 15.3% to $9.4 million for the three months
ended September 30, 2009, compared to $11.1 million for the three months ended
September 30, 2008.  This decrease was due to reduced showroom
occupancy to 53.6% for the three months ended September 30, 2009 compared to
59.8% the three months ended September 30, 2008 at Stratosphere and an 85.7%
decrease in the number of special events at Aquarius. In addition, we
discontinued our Turn-A-Twenty-Promotion at the Aquarius, which resulted in a
$145,000 reduction in revenues.  Revenue from admissions and rides in
our Tower were $5.1 million for both the three months ended September 30, 2009
the three months ended September 30, 2008.  Retail revenues decreased
30.8% to $1.8 million for the three months ended September 30, 2009 compared to
$2.6 million for the three months ended September 30, 2008 due to higher tenant
vacancies, rent concessions and the Consolidated Resorts
bankruptcy.  We recorded no revenue from Consolidated Resorts for the
three months ended September 30, 2009 compared to approximately $383,000 in
revenue for the three months ended September 30, 2008.  Other
operating expenses decreased 26.1% to $3.4 million for the three months ended
September 30, 2009, compared to $4.6 million for the three months ended
September 30, 2008.  This decrease was due to lower payroll,
entertainer fees and equipment rental expenses.




22


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
gross revenues, promotional allowances decreased to 6.2% for the three months
ended September 30, 2009 and from 9.3% for the three months ended September
30, 2008.  This decrease was primarily due to our focus on the
profitability of our promotions.  As a result, fewer casino patrons
were provided complimentary food and beverage, hotel rooms and show tickets,
particularly at the Aquarius and the Stratosphere, under such
programs.





Selling,
General and Administrative




Selling,
General and Administrative, or SG&A, expenses were primarily comprised of
payroll and related expenses, utilities, marketing, advertising, maintenance
contracts, property taxes and other administrative expenses.  These
expenses decreased 21.4% to $28.3 million for the three months
ended September 30, 2009, from $36.0 million for the three months ended
September 30, 2008.  This decrease was primarily due to
lower labor costs, general supplies expenses and marketing related
expenses.  Primarily due to the decline in expenses, SG&A
decreased to 30.3% of gross revenues for the three months ended September
30, 2009 as compared to 30.9% for the three months ended September 30,
2008.




Interest
Expense




Interest
expense decreased 66.9% to $5.7 million for the three months ended September 30,
2009, from $17.2 million for the three months ended September 30,
2008.  The decrease was due to lower LIBOR rates compared to the three
months ended September 30, 2008, the restructuring of the Goldman Term Loans and
recording no interest expense for the 2014 Term Loans.  Interest
payments totaling $6.2 million for the 2014 Term Loans were recorded as a
reduction to long term debt on the balance sheet.


23





Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008
(combined)




The
following table highlights the results of our operations (dollars in
millions):




Successor
                                                    
                                                    
                                                    PredecessorPeriod
      from
                                                    
                                                    
                                                    Period
      fromNine
      Months
                                                    
                                                    
                                                    February
      21, 2008
                                                    
                                                    
                                                    January
      1, 2008Ended
                                                    
                                                    
                                                    Through
                                                    
                                                    
                                                    ThroughSeptember
      30, 2009
                                                    
                                                    
                                                    September
      30, 2008
                                                    
                                                    
                                                    February
      20, 2008Income
      Statement Data:Revenues:Casino
                                                    
                                                    $
                                                    165.4
                                                    
                                                    
                                                    $
                                                    162.3
                                                    
                                                    
                                                    $
                                                    36.5Hotel
                                                    
                                                    
                                                    46.5
                                                    
                                                    
                                                    
                                                    53.2
                                                    
                                                    
                                                    
                                                    11.6Food
      and beverage
                                                    
                                                    
                                                    56.9
                                                    
                                                    
                                                    
                                                    57.0
                                                    
                                                    
                                                    
                                                    12.4Tower,
      retail and other
                                                    
                                                    
                                                    26.7
                                                    
                                                    
                                                    
                                                    24.8
                                                    
                                                    
                                                    
                                                    4.7Gross
      revenues
                                                    
                                                    
                                                    295.5
                                                    
                                                    
                                                    
                                                    297.3
                                                    
                                                    
                                                    
                                                    65.2Less
      promotional allowances
                                                    
                                                    
                                                    20.0
                                                    
                                                    
                                                    
                                                    26.5
                                                    
                                                    
                                                    
                                                    5.6Net
      revenues
                                                    
                                                    
                                                    275.5
                                                    
                                                    
                                                    
                                                    270.8
                                                    
                                                    
                                                    
                                                    59.6Costs
      and expenses:Casino
                                                    
                                                    
                                                    53.4
                                                    
                                                    
                                                    
                                                    52.6
                                                    
                                                    
                                                    
                                                    12.4Hotel
                                                    
                                                    
                                                    26.5
                                                    
                                                    
                                                    
                                                    21.4
                                                    
                                                    
                                                    
                                                    4.7Food
      and beverage
                                                    
                                                    
                                                    45.4
                                                    
                                                    
                                                    
                                                    41.2
                                                    
                                                    
                                                    
                                                    9.2Other
      operating expenses
                                                    
                                                    
                                                    10.5
                                                    
                                                    
                                                    
                                                    11.5
                                                    
                                                    
                                                    
                                                    2.3Selling,
      general and administrative
                                                    
                                                    
                                                    84.8
                                                    
                                                    
                                                    
                                                    84.7
                                                    
                                                    
                                                    
                                                    18.5Depreciation
      and amortization
                                                    
                                                    
                                                    30.8
                                                    
                                                    
                                                    
                                                    21.5
                                                    
                                                    
                                                    
                                                    5.0Total
      costs and expenses
                                                    
                                                    
                                                    251.4
                                                    
                                                    
                                                    
                                                    232.9
                                                    
                                                    
                                                    
                                                    52.1Income
      from operations
                                                    
                                                    $
                                                    24.1
                                                    
                                                    
                                                    $
                                                    37.9
                                                    
                                                    
                                                    $
                                                    7.5EBITDA
      and Adjusted EBITDA Reconciliation:Net
      loss
                                                    
                                                    $
                                                    (4.2
                                                    )
                                                    
                                                    $
                                                    (4.9
                                                    )
                                                    
                                                    $
                                                    (5.5
                                                    )Benefit
      for income taxes
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (2.9
                                                    )Interest
      income
                                                    
                                                    
                                                    (0.1
                                                    )
                                                    
                                                    
                                                    (0.7
                                                    )
                                                    
                                                    
                                                    (0.3
                                                    )Interest
      expense
                                                    
                                                    
                                                    28.4
                                                    
                                                    
                                                    
                                                    43.5
                                                    
                                                    
                                                    
                                                    2.6Depreciation
      and amortization
                                                    
                                                    
                                                    30.8
                                                    
                                                    
                                                    
                                                    21.5
                                                    
                                                    
                                                    
                                                    5.0EBITDA
                                                    
                                                    
                                                    54.9
                                                    
                                                    
                                                    
                                                    59.4
                                                    
                                                    
                                                    
                                                    (1.1
                                                    )Loss
      on early extinguishment of debt
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    13.6Loss
      on sale of assets
                                                    
                                                    
                                                    0.6
                                                    
                                                    
                                                    
                                                    0.3
                                                    
                                                    
                                                    
                                                    -Acqusition
      related adjustments
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    0.6
                                                    
                                                    
                                                    
                                                    0.9Adjusted
      EBITDA
                                                    
                                                    $
                                                    55.5
                                                    
                                                    
                                                    $
                                                    60.3
                                                    
                                                    
                                                    $
                                                    13.4





The
results for the nine months ended September 30, 2008, which we refer to as
“Combined”, represents the period January 1, 2008 through February 20, 2008
(Predecessor) and the period February 21, 2008 through September 30, 2008
(Successor). The use of the Predecessor and Successor periods was necessitated
by the Acquisition of ACEP on February 20, 2008.  The acquisition of
ACEP did not materially effect the company’s operations with the exceptions of
interest and depreciation and amortization expenses.  The presentation
of financial information for Combined herein may yield results that are not
fully comparable on a period-by-period basis, particularly related to
depreciation and amortization, primarily due to the impact of the Acquisition on
February 20, 2008.  Combined does not comply with Generally Accepted
Accounting Principles, GAAP, or with the SEC’s rules for pro forma presentation;
however, it is presented because we believe that it provides the most meaningful
comparison of our results for the nine months ended September 30, 2008 to our
results for the nine months ended September 30, 2009.





Consolidated
gross revenues decreased 18.5% to $295.5 million for the nine months ended
September 30, 2009 from the amount for the Combined nine months ended September
30, 2008.  The decrease in gross revenues for the period was due
primarily to an overall decrease in gaming and hotel revenues across the
majority of our properties as the result of the weakening Las Vegas and U.S.
economies that has continued in 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 has had
a significant negative impact on our properties which cater to local
customers.


24





Consolidated
income from operations decreased 46.9% for the nine months ended September 30,
2009 as compared to the Combined nine months ended September 30,
2008.  The decrease is due to a decrease in revenues as a result of
the general economic slowdown discussed above.  As a result, our
consolidated operating margin decreased to 8.7% for the nine months ended
September 30, 2009 from 13.7% for the Combined nine months ended September 30,
2008.  Due primarily to the decrease in revenues as discussed above,
EBITDA and Adjusted EBITDA decreased 5.8% and 12.9% respectively for the nine
months ended September 30, 2009 as compared to the Combined nine months ended
September 30, 2008.





Casino




Casino
revenue consists of revenue from slot play, table games, race and sports book,
bingo and keno.  Casino revenues decreased 16.8% to $165.4
million for the nine months ended September 30, 2009 from the amount for
the Combined nine months ended September 30, 2008.  Revenue from slot
play decreased 16.8% during the nine months ended September 30, 2009 as compared
to the Combined nine months ended September 30, 2008 due to a 20.2% decline in
coin in.  The decrease in coin in is due in large part to decreased
customer visits and average spend per customer and a 23.8% reduction in slot
free play issued by us to customers for the nine months ended September 30, 2009
compared to the same period in 2008.  Revenue from table games
decreased 19.6% during the nine months ended September 30, 2009 as compared to
the Combined nine months ended September 30, 2008 due to a 25.8% decline in
drop.  Other gaming revenue declined 4.8% for the nine months ended
September 30, 2009 compared to the Combined nine months ended September 30,
2008. Our race and sports book revenues increased 15.0% and hold increased to
10.4% for the nine months ended September 30, 2009 compared to a hold of 5.9%
for the Combined nine months ended September 30, 2008.   Keno
revenues declined 28.5% for the nine months ended September 30, 2009 compared to
the Combined nine months ended September 30, 2008 due to a 34.7% decline in
write.  Casino expenses decreased 17.8% to $53.4 million for the
nine months ended September 30, 2009, from the amount for the Combined nine
months ended September 30, 2008.  This was primarily due to a
reduction in labor costs, participation expenses, decreased revenue taxes and
overall efficiency efforts.   Participation expenses consist of
fees paid to game owners for use of their games. As a result of our efficiency
initiatives, our casino operating margin increased to 67.7% for the nine months
ended September 30, 2009 as compared to 67.3% for the Combined nine months ended
September 30, 2008.




Hotel




Hotel
revenues decreased 28.4% to $46.5 million for the nine months ended September
30, 2009 from the amount for the Combined nine months ended September 30,
2008.  The decrease in revenues is the result of a decrease in room
occupancy to 70.1% for the nine months ended September 30, 2009 as compared to
83.1% for the Combined nine months ended September 30, 2008 and a 18.3% decrease
in average daily room rate for the nine months ended September 30, 2009 compared
to the Combined nine months ended September 30, 2008.  The decrease in
both occupancy and average daily room rate across our properties is primarily a
result of sharp decreases in rates across our markets, a slight increase in Las
Vegas citywide room inventories, lower numbers of invited casino guests and an
increased reliance on wholesale room sales.  Due to our focus on
profitable promotions, revenue from complimentary room sales has fallen more
sharply than cash room sales. Our comp room sales decreased 61.4% and our cash
room sales decreased 26.5% for the nine months ended September 30, 2009 compared
to the nine months ended September 30, 2008.   Our Hotel expenses
increased 1.5% to $26.5 million for the nine months ended September 30, 2009,
compared to the amount for the Combined nine months ended September 30,
2008.  The increase was primarily due to a 98.9% increase in
commissions paid for wholesale room sales and higher repair and maintenance
expenses.  The Stratosphere, which accounts for 50% of our 4,912
rooms, has maintained occupancy of 93.0% for the nine months ended September 30,
2009 compared to 95.7% for the Combined nine months ended September 30,
2008.  Due to the relatively stable occupancy and the need to maintain
guest service, we have not reduced our hotel expenses year-over-year
significantly at Stratosphere.  Due to the decline in revenues, our
Hotel operating margin decreased to 43.0% for the nine months ended September
30, 2009 as compared to 59.8% for the Combined nine months ended September 30,
2008.




Food
and Beverage




Food and
beverage revenues decreased 17.9% to $56.9 million for the nine months ended
September 30, 2009 from the amount for the Combined nine months ended September
30, 2008.  The decline in revenues was driven largely by the reduction
in food and beverage promotions offered to our gaming customers.  Food
covers and beverage covers for the nine month period ended September 30, 2009
decreased 16.4% and 14.8%, respectively, compared to the Combined nine months
ended September 30, 2008.  Average revenue per cover for the nine
month period ended September 30, 2009 declined 1.9% compared to the Combined
nine months ended September 30, 2008.  Our food and beverage expenses
decreased 9.9% to $45.4 million for the nine months ended September 30, 2009
from the amount for the Combined nine months ended September 30, 2008 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 20.2% for the nine months ended September 30, 2009 as compared to
27.3% for the Combined nine months ended September 30, 2008.


25


Tower,
Retail and Other




Tower,
retail and other revenues decreased 9.5% to $26.7 million for the nine months
ended September 30, 2009, compared to the amount for the Combined nine months
ended September 30, 2008.  This decrease was due to reduced showroom
occupancy to 50.5% for the nine months ended September 30, 2009 compared to
66.5% for the Combined nine months ended September 30, 2008 at Stratosphere and
a 65.0% decrease in the number of special events at Aquarius, decreased
telephone and commission revenues and the discontinuance our
Turn-A-Twenty-Promotion at the Aquarius, which resulted in a $451,000 reduction
in revenues.  Revenue from admissions and rides in our Tower increased
3.1% to $13.1 million for the nine months ended September 30, 2009 compared the
amount for the Combined nine months ended September 30, 2008 due to a 3.4%
increase in Tower guests.  Retail revenues decreased 14.3% to $6.0
million for the nine months ended September 30, 2009 compared to the amount for
the Combined nine months ended September 30, 2008 due to higher tenant vacancies
and rent concessions at the Stratosphere and Aquarius and lower customer levels
at Arizona Charlie’s Decatur and Boulder.  Other operating expenses
decreased 23.9% to $10.5 million for the nine months ended September 30, 2009
from the amount for the Combined nine months ended September 30, 2008, due to
decreased entertainer fee expenses and reduced equipment rental
expenses.




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
gross revenues, promotional allowances decreased to 6.8% for the Nine months
ended September 30, 2009 from 8.9% for the Combined nine months ended September
30, 2008.  This decrease was primarily due to our focus on the
profitability of our promotions.  As a result, fewer casino patrons
were provided complimentary food and beverage, hotel rooms and show tickets,
particularly at the Aquarius and the Stratosphere, under such
programs.





Selling,
General and Administrative




Selling,
General and Administrative, or SG&A, expenses were primarily comprised of
payroll and related expenses, utilities, marketing, advertising, maintenance
contracts, property taxes and other administrative expenses.  These
expenses decreased 17.8% to $84.8 million for the nine months
ended September 30, 2009, from the amount for the Combined nine months
ended September 30, 2008.  This decrease was primarily due to
lower labor costs, marketing related expenses, utilities, bad debt expenses
and insurance expenses.  Primarily due to the decline in revenues,
SG&A increased slightly to 28.7% of gross revenues for the nine months
ended September 30, 2009 as compared to 28.5% for the Combined nine months
ended September 30, 2008.




Interest
Expense




Interest
expense decreased 38.4% to $28.4 million for the nine months ended September 30,
2009, from the amount for the Combined nine months ended September 30,
2008.  The decrease was primarily due to lower LIBOR rates compared to
the Combined nine months ended September 30, 2008, restructuring of the Goldman
Term Loans and recording no interest expense for the 2014 Term
Loans.  Interest payments totaling $6.2 million for the 2014 Term
Loans were recorded as a reduction to long term debt on the balance
sheet.





Financial
Condition





Liquidity and Capital
Resources




Since the
Acquisition, our primary use of cash has been significantly driven by the
financing needs of the Acquisition and our debt.  The Goldman Term
Loans included cash that was escrowed to and from specific reserve accounts and
requirements for us to set up and maintain reserve
accounts.  Accordingly, our primary source of cash was from the
operation of our properties and restricted cash escrowed upon funding the
Goldman Term Loans.





In
connection with the Acquisition, on February 20, 2008 we received loan
proceeds of approximately $1.1 billion pursuant to the Goldman Term
Loans.  On June 25, 2009, we closed the restructuring of the
Goldman Term Loans and the reduction of the $1.1 billion Goldman Term
Loans.  As part of the restructuring, (i) Holdings
paid  GSMC $165 million to repay  a portion of the Goldman
Term Loans; (ii) Holdings agreed to issue a 22% membership interest in Holdings
to MTGLQ Investors, L.P., an affiliate of GSMC, upon receipt of necessary gaming
approvals; (iii) ACEP and certain of its wholly-owned indirect subsidiaries
entered into a new loan agreement with GSMC evidencing a five-year term loan
with an aggregate principal amount of $350 million, or the2014 Term Loans; (iv)
ACEP received $35 million in cash from Holdings; and (vi) GSMC agreed to
terminate the remaining Goldman Term Loans.  On August 14, 2009,
the Issuers issued $375 million aggregate principal amount of 11% Senior
Secured Notes due 2014 the gross proceeds of which were used to repay a
portion of the principal balance of the 2014 Term Loans.  The
remaining balance of the 2014 Term Loans were forgiven by GSMC. At September 30,
2009, we had unrestricted cash and cash equivalents of $108.0
million.


26





Our
capital spending was approximately $10.5 million (including approximately
$1.0 million in non-cash items) and $25.5 million for the nine months ended
September 30, 2009 and the combined nine months ended September 30, 2008,
respectively.  During the nine months ended September 30, 2009, we
spent approximately $1.7 million on slot machine replacements and conversions,
$520,000 to upgrade our information technology, $2.5 million to improve our
facilities, and approximately $4.3 million on our hotels, including
approximately $3.2 million on the pools at Aquarius and Stratosphere, $286,000
to renovate suites at Stratosphere, and $607,000 to replace our phone switches
and consolidate our PBX function.





Our total
forecasted capital expenditures for 2009 are approximately $16.0 million. Our
planned capital expenditures for 2009 are significantly less than in comparable
periods in 2008 due to the completion of renovations at the
Aquarius.





We are
currently completing our capital expenditure budget for 2010.  At this
time we have identified approximately $22.3 million in capital expenditures that
may be completed in 2010.  This amount includes approximately $2.5
million to complete the amusement ride at Stratosphere, $4.1 million to upgrade
to a digital surveillance system, and approximately $4.5 million to complete
improvements to our Stratosphere facilities that began in 2009.  In
addition to the $22.3 million in capital expenditures, we are evaluating
additional improvements to our properties that we believe will enhance the
overall guest experience.





Our
current interest expense is approximately $3.5 million per month.  We
pay interest on our Senior Secured Notes semi-annually and we will pay
approximately $14.1 million in interest on the notes on December 15,
2009.  After that payment, we will make payments on every June 15 and
December 15 of approximately $20.9 million until maturity.





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 31, 2009 (SEC File No. 000-52975), and Item 1A of our quarterly report on
Form 10-Q, filed with the SEC on August 3, 2009 (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 SEC
Regulation S-K.





Recently
Issued Accounting Pronouncements





In May 2009, the Financial Accounting
Standards Board issued FASB ASC855,Subsequent
Events, to incorporate the
accounting and disclosure requirements for subsequent events into U.S. generally
accepted accounting principles. FASB ASC855introduces new terminology, defines a
date through which management must evaluate subsequent events, and lists the
circumstances under which an entity must recognize and disclose events or
transactions occurring after the balance-sheet date. The Company adopted FASB
ASC855as of June 30, 2009, which was the
required effective date.The Company evaluated itsSeptember 30, 2009 financial statements for
subsequent eventsthroughNovember 10, 2009, the date the financial statements
were available to be issued. The Company is not aware of any subsequent events
which would require recognition or disclosure in the financial
statements.


27





In
December 2007, the Financial Accounting Standards Board, or FASB, issued FASB
ASC 805, Business
Combinations.  FASB ASC 805 establishes principles and
requirements for determining how an enterprise recognizes and measures the fair
value of certain assets and liabilities acquired in a business combination,
including non-controlling interests, contingent consideration, and certain
acquired contingencies. FASB ASC 805 also requires acquisition-related
transaction expenses and restructuring costs be expensed as incurred rather than
capitalized as a component of the business combination. FASB ASC 805 will be
applicable prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on
or after December 15, 2008. The implementation of FASB ASC 805 did not have a
material impact on our consolidated financial statements.





In
December 2007, the FASB issued FASB ASC 810-10-65, Noncontrolling Interests in
Consolidated Financial Statements.  SFAS 160’s objective is to
improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary.  FASB ASC 810-10-65 is effective for fiscal years and interim
periods within those fiscal years, beginning on or after December 15,
2008.  The implementation of FASB ASC 810-10-65 did not have a material
impact on our consolidated financial statements.





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.





For the
nine months ended September 30, 2009, we incurred approximately $28.4 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 Exchange Act Rule 13a-15(e)) 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 nine months of 2009 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.


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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 31, 2009 (SEC File No. 000-52975), and
Item 1A of our quarterly report on Form 10-Q, filed with the SEC on August
3, 2009 (SEC File No. 000-52975). There were no material changes to those risk
factors during the nine months ended September 30, 2009.





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.


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SIGNATURES





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





AMERICAN
      CASINO & ENTERTAINMENT PROPERTIES LLCDate:
      November 13, 2009
              By:
              /s/
      Edward W. Martin, IIIEdward
      W. Martin, IIIAuthorized
      Officer, Chief Financial Officer and Treasurer(Principal
      Financial and Accounting
Officer)


30


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.




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