##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-Q

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | For the quarterly period ended
    September 30, 2004                                       
|          
|          
|          
|          
|          
|or        
|          
|o          |  | 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 333-118149



---

American Casino & Entertainment
Properties LLC

(Exact name of registrant as specified in its
charter)




---

|                                                                                             |  |                                         
|-------------------------------------------------------------------------------------------- |  | ----------------------------------------
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|Delaware                                                                                     |  | 20-0573058                              
|(State or other jurisdiction of
    incorporation or organization)                           |  | (I.R.S. Employer
    Identification No.)
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|2000 Las Vegas Boulevard South
    Las Vegas, NV(Address of principal executive
    offices) |  | 89104(Zip Code)                         

(702) 383-5242

(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 o          No þ

Indicate by check mark whether the
registrant is an accelerated filer (as defined in
Rule 12b-2 of the Exchange
Act)     Yes o          No þ



---






---










INDEX

|                       |  |                                                                                                          |  |          |      | 
|---------------------- |  | -------------------------------------------------------------------------------------------------------- |  | -------- | ---- | 
|                       |  |                                                                                                          |  | Page No.
|                       |  |                                                                                                          |  |         
|                      
|                      
|                      
|                      
|Part I.                |  | FINANCIAL INFORMATION                                                                                    |  |          |      | 
|                       |  | Item 1.  Financial
    Statements                                                                        |  |          |      | 
|                      
|                      
|                      
|                      
|                       |  | Consolidated Balance
    Sheets
    September 30, 2004 (unaudited) and December 31,
    2003             |  |          | 2    | 
|                      
|                      
|                      
|                      
|                       |  | Consolidated Statements of
    Income
    Three Months Ended September 30, 2004 and 2003
    (unaudited) |  |          | 3    | 
|                      
|                      
|                      
|                      
|                       |  | Consolidated Statements of
    Income
    Nine Months Ended September 30, 2004 and 2003
    (unaudited)  |  |          | 4    | 
|                      
|                      
|                      
|                      
|                       |  | Consolidated Statements of
    Cash Flows
    Nine Months Ended September 30, 2004 and 2003              |  |          | 5    | 
|                      
|                      
|                      
|                      
|                       |  | Consolidated Statements of
    Stockholders Equity
    Nine Months Ended September 30, 2004 (unaudited) |  |          | 6    | 
|                      
|                      
|                      
|                      
|                       |  | Notes to Consolidated
    Financial Statements (unaudited)                                               |  |          | 7    | 
|                      
|                      
|                      
|                      
|                       |  | Item 2.  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations   |  |          | 10   | 
|                      
|                      
|                      
|                      
|                       |  | Item 3.  Quantitative
    and Qualitative Disclosures about Market Risk                                  |  |          | 17   | 
|                      
|                      
|                      
|                      
|                       |  | Item 4.  Controls
    and Procedures                                                                     |  |          | 18   | 
|                      
|                      
|                      
|                      
|                      
|Part II.               |  | OTHER
    INFORMATION                                                                                    |  |          |      | 
|                      
|                      
|                      
|                      
|                       |  | Item 6.  Exhibits                                                                                        |  |          | II-1 | 
|EX-31.1: CERTIFICATION
|EX-31.2: CERTIFICATION
|EX-32.1: CERTIFICATION
|EX-32.2: CERTIFICATION



1



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC



CONSOLIDATED BALANCE SHEETS


|                                               |                                                   |               |         |              |  |   |         |         | 
|---------------------------------------------- | ------------------------------------------------- | ------------- | ------- | ------------ |  | - | ------- | ------- | 
|                                               |                                                   | September 30, |         | December 31,
|                                               |                                                   | 2004          |         | 2003        
|                                               |                                                   |               |         |             
|                                               |                                                   | (Unaudited)   |         |             
|                                               |                                                   |              
|                                               |                                                   | (In $000s)  
|                                              
|                                              
|                                              
|                                              
|ASSETS                                        
|                                              
|                                              
|                                              
|                                              
|Current Assets:                                |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                         |               | $       | 58,488       |  |   | $       | 77,258  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents-restricted              |               |         | 447          |  |   |         |        | 
|                                              
|                                              
|                                              
|                                              
|                                               | Marketable securities                             |               |         |             |  |   |         | 4,200   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Investments-restricted                            |               |         | 2,546        |  |   |         | 2,973   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net                          |               |         | 3,965        |  |   |         | 4,051   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Related party receivables                         |               |         | 354          |  |   |         | 233     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                             |               |         | 3,232        |  |   |         | 2,982   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Other current assets                              |               |         | 9,864        |  |   |         | 9,213   | 
|                                               |                                                   |               |         |              |  |   |         |        
|Total Current Assets                           |                                                   |               | 78,896  |              |  |   | 100,910 |        
|                                               |                                                   |               |         |              |  |   |         |        
|Property and Equipment, Net                    |                                                   |               | 318,664 |              |  |   | 324,548 |        
|                                               |                                                   |               |         |              |  |   |         |        
|Other Assets:                                  |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Debt issuance and deferred financing costs, net   |               |         | 7,562        |  |   |         | 272     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Lessee incentive                                  |               |         | 417          |  |   |         | 567     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Other receivable                                  |               |         |             |  |   |         | 84      | 
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                             |               |         | 60,738       |  |   |         | 54,357  | 
|                                               |                                                   |               |         |              |  |   |         |        
|Total Other Assets                             |                                                   |               | 68,717  |              |  |   | 55,280  |        
|                                               |                                                   |               |         |              |  |   |         |        
|Total Assets                                   |                                                   | $             | 466,277 |              |  | $ | 480,738 |        
|                                               |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|LIABILITIES AND STOCKHOLDERS
    EQUITY      
|                                              
|                                              
|                                              
|                                              
|Current Liabilities:                           |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable-trade                            |               | $       | 2,944        |  |   | $       | 5,048   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable-construction                     |               |         | 805          |  |   |         | 805     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued expenses                                  |               |         | 20,763       |  |   |         | 17,801  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued payroll and related expenses              |               |         | 11,339       |  |   |         | 12,395  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Current portion of capital lease obligation       |               |         | 444          |  |   |         | 436     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Current portion of notes payable to related party |               |         |             |  |   |         | 14,796  | 
|                                               |                                                   |               |         |              |  |   |         |        
|Total Current Liabilities                      |                                                   |               | 36,295  |              |  |   | 51,281  |        
|                                               |                                                   |               |         |              |  |   |         |        
|Long-Term Liabilities:                         |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Notes payable to related party                    |               |         |             |  |   |         | 86,456  | 
|                                              
|                                              
|                                              
|                                              
|                                               | Notes payable                                     |               |         | 215,000      |  |   |         |        | 
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued lessee incentive                          |               |         | 568          |  |   |         | 568     | 
|                                              
|                                              
|                                              
|                                              
|                                               | Capital lease obligations, less current portion   |               |         | 3,413        |  |   |         | 3,555   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                             |               |         |             |  |   |         | 5,134   | 
|                                              
|                                              
|                                              
|                                              
|                                               | Other                                             |               |         | 5,257        |  |   |         | 3,399   | 
|                                               |                                                   |               |         |              |  |   |         |        
|Total Long-Term Liabilities                    |                                                   |               | 224,238 |              |  |   | 99,112  |        
|                                               |                                                   |               |         |              |  |   |         |        
|Total Liabilities                              |                                                   |               | 260,533 |              |  |   | 150,393 |        
|                                               |                                                   |               |         |              |  |   |         |        
|Commitments and Contingencies (note 3)         |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|Stockholders Equity:                          |                                                   |               |         |              |  |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock                                      |               |         |             |  |   |         | 10      | 
|                                              
|                                              
|                                              
|                                              
|                                               | Additional paid-in-capital                        |               |         | 171,396      |  |   |         | 293,460 | 
|                                              
|                                              
|                                              
|                                              
|                                               | Retained earnings                                 |               |         | 34,348       |  |   |         | 36,875  | 
|                                               |                                                   |               |         |              |  |   |         |        
|Total Stockholders Equity                     |                                                   |               | 205,744 |              |  |   | 330,345 |        
|                                               |                                                   |               |         |              |  |   |         |        
|Total Liabilities and Stockholders
    Equity |                                                   | $             | 466,277 |              |  | $ | 480,738 |        
|                                               |                                                   |               |         |              |  |   |         |        

See notes to consolidated financial statements.

2



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC



CONSOLIDATED STATEMENTS OF INCOME


Three Months Ended September 30, 2004 and 2003


|                           |                                     |                          |        |        |        |   |        |        |        |  
|-------------------------- | ----------------------------------- | ------------------------ | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                           |                                     |                         
|                           |                                     | Three Months Ended      
|                           |                                     | September 30,           
|                           |                                     |                         
|                           |                                     | 2004                     |        | 2003  
|                           |                                     |                          |        |       
|                           |                                     |                         
|                           |                                     | (Unaudited)             
|                           |                                     | (In $000s)             
|                          
|                          
|                          
|                          
|Revenues:                  |                                     |                          |        |        |        |   |        |       
|                          
|                          
|                          
|                          
|                           | Casino                              |                          | $      | 42,188 |        |   | $      | 37,382 |       
|                          
|                          
|                          
|                          
|                           | Hotel                               |                          |        | 12,893 |        |   |        | 11,910 |       
|                          
|                          
|                          
|                          
|                           | Food and beverage                   |                          |        | 16,705 |        |   |        | 14,456 |       
|                          
|                          
|                          
|                          
|                           | Tower, retail and other income      |                          |        | 9,169  |        |   |        | 8,362  |       
|                           |                                     |                          |        |        |        |   |        |       
|                           |                                     | Gross Revenues           |        |        | 80,955 |   |        |        | 72,110 |  
|                          
|                          
|                          
|                          
|                           | Less promotional allowances         |                          |        | 5,816  |        |   |        | 5,153  |       
|                           |                                     |                          |        |        |        |   |        |       
|Net Revenues               |                                     |                          | 75,139 |        |        |   | 66,957 |       
|                           |                                     |                          |        |        |        |   |        |       
|Costs and Expenses:        |                                     |                          |        |        |        |   |        |       
|                          
|                          
|                          
|                          
|                           | Casino                              |                          |        | 15,386 |        |   |        | 15,684 |       
|                          
|                          
|                          
|                          
|                           | Hotel                               |                          |        | 6,509  |        |   |        | 5,776  |       
|                          
|                          
|                          
|                          
|                           | Food and beverage                   |                          |        | 12,292 |        |   |        | 11,016 |       
|                          
|                          
|                          
|                          
|                           | Other operating expenses            |                          |        | 3,890  |        |   |        | 3,486  |       
|                          
|                          
|                          
|                          
|                           | Selling, general and administrative |                          |        | 20,926 |        |   |        | 18,876 |       
|                          
|                          
|                          
|                          
|                           | Depreciation and amortization       |                          |        | 5,594  |        |   |        | 4,855  |       
|                           |                                     |                          |        |        |        |   |        |       
|                           |                                     | Total Costs and Expenses |        |        | 64,597 |   |        |        | 59,693 |  
|                           |                                     |                          |        |        |        |   |        |       
|Income From Operations     |                                     |                          | 10,542 |        |        |   | 7,264  |       
|                           |                                     |                          |        |        |        |   |        |       
|Other income (expense):    |                                     |                          |        |        |        |   |        |       
|                          
|                          
|                          
|                          
|                           | Interest income                     |                          |        | 37     |        |   |        | 94     |       
|                          
|                          
|                          
|                          
|                           | Interest expense                    |                          |        | (4,592 | )      |   |        | (1,331 | )     
|                          
|                          
|                          
|                          
|                           | Gain (Loss) on sale of assets       |                          |        | (125   | )      |   |        | (294   | )     
|                           |                                     |                          |        |        |        |   |        |       
|                           |                                     | Total Other Expense, net |        |        | (4,680 | ) |        |        | (1,531 | )
|                           |                                     |                          |        |        |        |   |        |       
|Income Before Income Taxes |                                     |                          | 5,862  |        |        |   | 5,733  |       
|                          
|                          
|                          
|                          
|Provision for Income Taxes |                                     |                          | 1,661  |        |        |   | 2,187  |       
|                           |                                     |                          |        |        |        |   |        |       
|Net Income                 |                                     | $                        | 4,201  |        |        | $ | 3,546  |       
|                           |                                     |                          |        |        |        |   |        |       

See notes to consolidated financial statements.

3



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC



CONSOLIDATED STATEMENTS OF INCOME


Nine Months Ended September 30, 2004 and 2003


|                           |                                     |                          |         |         |         |   |         |         |         |  
|-------------------------- | ----------------------------------- | ------------------------ | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                           |                                     |                         
|                           |                                     | Nine Months Ended       
|                           |                                     | September 30,           
|                           |                                     |                         
|                           |                                     | 2004                     |         | 2003   
|                           |                                     |                          |         |        
|                           |                                     |                         
|                           |                                     | (Unaudited)             
|                           |                                     | (In $000s)             
|                          
|                          
|                          
|                          
|Revenues:                  |                                     |                          |         |         |         |   |         |        
|                          
|                          
|                          
|                          
|                           | Casino                              |                          | $       | 124,579 |         |   | $       | 111,380 |        
|                          
|                          
|                          
|                          
|                           | Hotel                               |                          |         | 40,616  |         |   |         | 35,482  |        
|                          
|                          
|                          
|                          
|                           | Food and beverage                   |                          |         | 50,125  |         |   |         | 44,303  |        
|                          
|                          
|                          
|                          
|                           | Tower, retail and other income      |                          |         | 25,749  |         |   |         | 22,902  |        
|                           |                                     |                          |         |         |         |   |         |        
|                           |                                     | Gross Revenues           |         |         | 241,069 |   |         |         | 214,067 |  
|                          
|                          
|                          
|                          
|                           | Less promotional allowances         |                          |         | 17,561  |         |   |         | 16,557  |        
|                           |                                     |                          |         |         |         |   |         |        
|Net Revenues               |                                     |                          | 223,508 |         |         |   | 197,510 |        
|                           |                                     |                          |         |         |         |   |         |        
|Costs and Expenses:        |                                     |                          |         |         |         |   |         |        
|                          
|                          
|                          
|                          
|                           | Casino                              |                          |         | 46,568  |         |   |         | 46,304  |        
|                          
|                          
|                          
|                          
|                           | Hotel                               |                          |         | 18,045  |         |   |         | 16,341  |        
|                          
|                          
|                          
|                          
|                           | Food and beverage                   |                          |         | 35,956  |         |   |         | 33,149  |        
|                          
|                          
|                          
|                          
|                           | Other operating expenses            |                          |         | 10,456  |         |   |         | 10,777  |        
|                          
|                          
|                          
|                          
|                           | Selling, general and administrative |                          |         | 58,253  |         |   |         | 56,663  |        
|                          
|                          
|                          
|                          
|                           | Depreciation and amortization       |                          |         | 17,908  |         |   |         | 15,127  |        
|                           |                                     |                          |         |         |         |   |         |        
|                           |                                     | Total Costs and Expenses |         |         | 187,186 |   |         |         | 178,361 |  
|                           |                                     |                          |         |         |         |   |         |        
|Income From Operations     |                                     |                          | 36,322  |         |         |   | 19,149  |        
|                           |                                     |                          |         |         |         |   |         |        
|Other income (expense):    |                                     |                          |         |         |         |   |         |        
|                          
|                          
|                          
|                          
|                           | Interest income                     |                          |         | 992     |         |   |         | 364     |        
|                          
|                          
|                          
|                          
|                           | Interest expense                    |                          |         | (14,339 | )       |   |         | (4,086  | )      
|                          
|                          
|                          
|                          
|                           | Gain (Loss) on sale of assets       |                          |         | 19      |         |   |         | (209    | )      
|                           |                                     |                          |         |         |         |   |         |        
|                           |                                     | Total Other Expense, net |         |         | (13,328 | ) |         |         | (3,931  | )
|                           |                                     |                          |         |         |         |   |         |        
|Income Before Income Taxes |                                     |                          | 22,994  |         |         |   | 15,218  |        
|                          
|                          
|                          
|                          
|Provision for Income Taxes |                                     |                          | 7,605   |         |         |   | 6,581   |        
|                           |                                     |                          |         |         |         |   |         |        
|Net Income                 |                                     | $                        | 15,389  |         |         | $ | 8,637   |        
|                           |                                     |                          |         |         |         |   |         |        

See notes to consolidated financial statements.

4



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC



CONSOLIDATED STATEMENTS OF CASH FLOWS


Nine Months Ended September 30, 2004 and 2003


|                                                         |                                                                                       |                                              |                          |          |        |        |         |         |        |        |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------ | -------- | ------ | ------ | ------- | ------- | ------ | ------ | -
|                                                         |                                                                                       |                                             
|                                                         |                                                                                       | Nine Months Ended                           
|                                                         |                                                                                       | September 30,                               
|                                                         |                                                                                       |                                             
|                                                         |                                                                                       | 2004                                         |                          | 2003    
|                                                         |                                                                                       |                                              |                          |         
|                                                         |                                                                                       |                                             
|                                                         |                                                                                       | (Unaudited)                                 
|                                                         |                                                                                       | (In $000s)                                 
|                                                        
|                                                        
|                                                        
|                                                        
|Cash Flows From Operating
    Activities:                |                                                                                       |                                              |                          |          |        |        |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Net income                                                                            |                                              | $                        | 15,389   |        |        | $       | 8,637   |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                              |                          |          |        |        |         |         |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Depreciation and amortization                |                          |          | 17,908 |        |         |         | 15,127 |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | (Gain) Loss on sale or disposal of assets    |                          |          | (19    | )      |         |         | 209    |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Provision for deferred income taxes          |                          |          | 2,830  |        |         |         | 3,193  |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       | Changes in operating assets and liabilities: |                          |          |        |        |         |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                              | Restricted Cash          |          |        | (447   | )       |         |        | (482   | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                              | Accounts receivable, net |          |        | 86     |         |         |        | 93     |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                              | Other current assets     |          |        | 458    |         |         |        | 2,862  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                              | Accounts payable  trade |          |        | (2,104 | )       |         |        | (1,468 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         |                                                                                       |                                              | Accrued expenses         |          |        | 1,890  |         |         |        | 7,344  |  
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Net Cash Provided by Operating
    Activities            |                                                                                       |                                              | 35,991                   |          |        |        | 35,515  |        
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Cash Flows From Investing
    Activities:                |                                                                                       |                                              |                          |          |        |        |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Increase (decrease) in investments restricted                                         |                                              |                          | 427      |        |        |         | (200    | )     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Proceeds from sale of marketable securities                                           |                                              |                          | 4,200    |        |        |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Acquisition of property and equipment                                                 |                                              |                          | (12,320  | )      |        |         | (16,660 | )     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Related party receivables                                                             |                                              |                          | (121     | )      |        |         | (150    | )     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Cash proceeds from sale of property and equipment                                     |                                              |                          | 399      |        |        |         | 287     |       
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Net Cash Used in Investing
    Activities                |                                                                                       |                                              | (7,415                   | )        |        |        | (16,723 | )      
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Cash Flows From Financing
    Activities:                |                                                                                       |                                              |                          |          |        |        |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Debt issuance and deferred financing costs                                            |                                              |                          | (1,363   | )      |        |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Proceeds from notes payable                                                           |                                              |                          | 215,000  |        |        |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Member contribution                                                                   |                                              |                          | 28,219   |        |        |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Capital distribution                                                                  |                                              |                          | (187,816 | )      |        |         |        |       
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Payments of related party notes payable                                               |                                              |                          | (101,252 | )      |        |         | (3,206  | )     
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Payments on capital lease obligation                                                  |                                              |                          | (134     | )      |        |         |        |       
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Net Cash Used in Financing
    Activities                |                                                                                       |                                              | (47,346                  | )        |        |        | (3,206  | )      
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Net (decrease) increase in cash and cash
    equivalents |                                                                                       |                                              | (18,770                  | )        |        |        | 15,586  |        
|                                                        
|                                                        
|                                                        
|                                                        
|Cash and cash equivalents  beginning
    of period      |                                                                                       |                                              | 77,258                   |          |        |        | 59,343  |        
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Cash and cash equivalents  end of
    period            |                                                                                       | $                                            | 58,488                   |          |        | $      | 74,929  |        
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Supplemental Disclosures of Cash Flow
    Information:   |                                                                                       |                                              |                          |          |        |        |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|Cash paid during the period for interest                 |                                                                                       | $                                            | 10,966                   |          |        | $      | 4,223   |        
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|Non-Cash Investing and Financing
    Activities:         |                                                                                       |                                              |                          |          |        |        |         |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Net assets contributed by parent                                                      |                                              | $                        | 6,886    |        |        | $       |        |       
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        
|                                                         | Change in tax asset related to acquisition                                            |                                              | $                        | 12,721   |        |        | $       | 3,549   |       
|                                                         |                                                                                       |                                              |                          |          |        |        |         |        

See notes to consolidated financial statements.

5



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC



CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


|                                                                                                                        |  |             |     |            |  |          |          |        |  |   |         |   |  |   |          |  
|----------------------------------------------------------------------------------------------------------------------- |  | ----------- | --- | ---------- |  | -------- | -------- | ------ |  | - | ------- | - |  | - | -------- | -
|                                                                                                                        |  |             |     | Additional |  |          |          |       
|                                                                                                                        |  | Common      |     | Paid-in-   |  | Retained |          | Total 
|                                                                                                                        |  | Stock       |     | capital    |  | Earnings |          | Equity
|                                                                                                                        |  |             |     |            |  |          |          |       
|                                                                                                                        |  |            
|                                                                                                                        |  | (Unaudited)
|                                                                                                                        |  | (In $000s)
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Balances at December 31, 2002                                                                                           |  | $           | 10  |            |  | $        | 243,750  |        |  | $ | 16,193  |   |  | $ | 259,953  |  
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Change in deferred tax asset valuation
    allowance related to book-tax differences existing at time of
    bankruptcy |  |             |    |            |  |          | 49,710   |        |  |   |        |   |  |   | 49,710   |  
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Net income                                                                                                              |  |             |    |            |  |          |         |        |  |   | 20,682  |   |  |   | 20,682   |  
|                                                                                                                        |  |             |     |            |  |          |          |        |  |   |         |   |  |   |          |  
|Balances at December 31, 2003                                                                                           |  | $           | 10  |            |  | $        | 293,460  |        |  | $ | 36,875  |   |  | $ | 330,345  |  
|                                                                                                                        |  |             |     |            |  |          |          |        |  |   |         |   |  |   |          |  
|Cancellation of common shares                                                                                           |  |             | (10 | )          |  |          | 10       |        |  |   |        |   |  |   |         |  
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Change in deferred tax asset related to
    acquisition                                                                 |  |             |    |            |  |          | 12,721   |        |  |   |        |   |  |   | 12,721   |  
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Contributions                                                                                                           |  |             |    |            |  |          | 35,105   |        |  |   |        |   |  |   | 35,105   |  
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Distributions                                                                                                           |  |             |    |            |  |          | (169,900 | )      |  |   | (17,916 | ) |  |   | (187,816 | )
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|                                                                                                                       
|Net income                                                                                                              |  |             |    |            |  |          |         |        |  |   | 15,389  |   |  |   | 15,389   |  
|                                                                                                                        |  |             |     |            |  |          |          |        |  |   |         |   |  |   |          |  
|Balances at September 30, 2004                                                                                          |  | $           |    |            |  | $        | 171,396  |        |  | $ | 34,348  |   |  | $ | 205,744  |  
|                                                                                                                        |  |             |     |            |  |          |          |        |  |   |         |   |  |   |          |  

See notes to consolidated financial statements.

6



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

FORM 10-Q SEPTEMBER 30, 2004



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|   |            
|-- | -----------
|1. | The Company

American Casino & Entertainment Properties LLC
(ACEP) was formed in Delaware on December 29,
2003. ACEP is comprised of American Casino &
Entertainment Properties LLC, American Casino &
Entertainment Properties Finance Corp., Stratosphere Corporation
and its wholly-owned subsidiaries, Stratosphere Gaming
Corporation, Stratosphere Land Corporation, Stratosphere
Advertising Agency, Stratosphere Leasing, LLC, and Stratosphere
Development, LLC, an entity controlled by Stratosphere
Corporation; Charlies Holding LLC and its wholly-owned
subsidiaries Arizona Charlies, LLC, and its wholly owned
subsidiary, Jetset Tours, LLC, and Fresca, LLC (collectively the
Company). The Company operates integrated casinos,
hotels, a retail and entertainment facility and a 1,149 foot,
free-standing observation tower located in Las Vegas, Nevada.
All significant intercompany balances and transactions have been
eliminated in consolidation.

ACEP is a subsidiary, and its ultimate parent is American Real
Estate Partners, L.P., a New York-based Delaware master limited
partnership whose units are traded on the New York Stock
Exchange. As of November 1, 2004, affiliates of Carl
C. Icahn owned 8,900,995 Preferred Units and 39,896,836
Depositary Units which represent 86.5% of the outstanding
Preferred Units and Depositary Units of AREP. Mr. Icahn is
the Chairman of the Board of Directors of American Property
Investors, Inc., AREPs general partner.

On January 29, 2004, ACEP and its subsidiary, American
Casino & Entertainment Properties Finance Corp.
(ACEF) issued $215,000,000 in aggregate principal
amount of 7.85% Senior Secured Notes due 2012. ACEF was
formed solely for the purpose of serving as co-issuer on the
notes. ACEF does not have any operations or assets and does not
have any revenues. The net proceeds from the sale of the notes
have been used in connection with the acquisition of the two
Arizona Charlie properties from affiliated parties described
above ($125.9 million), to repay intercompany debt
($43.8 million) and for distributions ($44.0 million).
The notes have a fixed annual interest rate of 7.85%, which will
be paid every six months on February 1 and August 1,
commencing August 1, 2004. Pending consummation of the
acquisitions, the perfection of security interests in the assets
of the properties acquired, the receipt of all necessary
approvals of the Nevada Gaming Commission upon the
recommendation of the Nevada State Gaming Control Board and
certain other events, the net proceeds of the offering, together
with an additional amount sufficient to fund a special
redemption obligation, were held in escrow in a note proceeds
account. On May 26, 2004, upon closing of the acquisitions,
perfection of such security interests, receipt of necessary
approvals of the Nevada Gaming Commission upon the
recommendation of the Nevada State Gaming Control Board and
certain other events, the funds held in escrow in the note
proceeds account and additional cash on hand were used in
connection with the acquisitions to repay intercompany
indebtedness, to fund distributions to ACEPs parent
company and to pay related fees and expenses.

ACEP owns and operates three gaming and entertainment properties
in Las Vegas, Stratosphere Casino Hotel & Tower
(Stratosphere), Arizona Charlies Decatur and
Arizona Charlies Boulder. ACEP entered into a membership
interest purchase agreement with Starfire Holding Corporation,
which is wholly-owned by Carl C. Icahn, in which ACEP agreed to
purchase all of the membership interests in Charlies
Holding LLC, a newly-formed entity that owns Arizona
Charlies Decatur and Arizona Charlies Boulder. The
closing of this acquisition was approved by the Nevada Gaming
Commission upon the recommendation of the Nevada State Gaming
Control Board and was completed on May 26, 2004. The
purchase price was $125.9 million. Additionally, ACEP
entered into a contribution agreement with its direct parent,
American Entertainment Properties Corp., and its direct parent,
American Real Estate Holdings Limited Partnership, or AREH, in
which AREH agreed to contribute 100% of the outstanding capital
stock of Stratosphere Corporation, which was approved by the
Nevada Gaming Commission upon the recommendation of the Nevada
State Gaming

7



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC


FORM 10-Q SEPTEMBER 30, 2004

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Control Board. These transactions represent a merger of entities
under the common control of Carl C. Icahn. Therefore, the
historical cost basis of the underlying net assets was retained
in the combination for all dates prior to May 26, 2004.
These statements were presented on a combined basis. As a result
of obtaining the formal approval from the gaming commission, the
legal presentation now requires consolidation. Accordingly, the
financial statements are referred to as consolidated.



|   |                      
|-- | ---------------------
|2. | Basis of Presentation

The condensed consolidated financial statements have been
prepared in accordance with the accounting policies described in
the Companys 2003 audited consolidated financial
statements. Although the Company believes that the disclosures
are adequate to make the information presented not misleading,
the Company suggests these condensed consolidated financial
statements be read in conjunction with the notes to the 2003
consolidated audited financial statements presented in the
Registration Statement on Form S-4 relating to our 7.85%
Senior Secured Notes due 2012, filed with the SEC on
August 12, 2004, as amended
(SEC File No. 333-118149).

In the opinion of management, the accompanying condensed
consolidated financial statements include all adjustments
(consisting only of a normal recurring nature) which are
necessary for a fair presentation of the results for the interim
periods presented. Certain information and footnote disclosures
normally included in financial statements have been condensed or
omitted pursuant to such rules and regulations of the Securities
and Exchange Commission. Interim results are not necessarily
indicative of results to be expected for any future interim
period or for the entire fiscal year. All significant
intercompany accounts and transactions have been eliminated in
consolidation.



|   |                  
|-- | -----------------
|3. | Reclassifications

Certain reclassifications have been made to the prior years
consolidated financial statements to conform to the current
fiscal presentation.



|   |             
|-- | ------------
|4. | Income Taxes

The tax effect of significant temporary differences representing
deferred tax assets for the Company principally consist of the
excess of tax over book basis of assets due to the write down of
assets for book purposes.



|   |                           
|-- | --------------------------
|5. | Related Party Transactions

Certain employees of the Company provide management and other
administrative services to Atlantic Coast Entertainment
Holdings, Inc., the company which owns and operates the Sands
Hotel and Casino in Atlantic City, New Jersey (the
Sands). For the three and nine months ended
September 30, 2004, the Company received $135,000 and
$251,000, respectively, from the Sands for these services. For
the three and nine months ended September 30, 2003, the
Company received $47,000 and $144,000 for similar services
provided in that period.

In the three and nine months ended September 30, 2004, the
Company paid approximately $44,000 and $125,000 to an affiliate
for telecommunications services and paid approximately $39,000
and $122,000 to the affiliate for such services in the three and
nine months ended September 30, 2003, respectively.



|   |              
|-- | -------------
|6. | Contingencies

Tiffiny Decorating Company (Tiffiny), a
subcontractor to Great Western Drywall (Great
Western), filed a legal action against Stratosphere
Corporation, Stratosphere Development, LLC, American Real Estate
Holdings Limited Partnership (Stratosphere Corporation,
Stratosphere Development, LLC and American Real Estate Holdings
Limited Partnership are herein collectively referred to as the
Stratosphere Parties),

8



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##### Table of Contents



AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC


FORM 10-Q SEPTEMBER 30, 2004

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Great Western, Nevada Title and Safeco Insurance, Case
No. A443926 in the Eighth Judicial District Court of the
State of Nevada. The legal action asserts claims that include
breach of contract, unjust enrichment and foreclosure of lien.
The Stratosphere Parties have filed a cross-claim against Great
Western in that action. Additionally, Great Western has filed a
separate legal action against the Stratosphere Parties setting
forth the same disputed issues. That separate action, Case
No. A448299 in the Eighth Judicial Court of the State of
Nevada has been consolidated with the case brought by Tiffiny.

The initial complaint brought by Tiffiny asserts that Tiffiny
performed certain services on construction at the Stratosphere
and was not fully paid for those services. Tiffiny claims the
sum of $521,562 against Great Western, the Stratosphere Parties,
and the other defendants, which the Stratosphere Parties contend
have been paid to Great Western for payment to Tiffiny.

Great Western is alleging that it is owed payment from the
Stratosphere Parties for work performed and for delay and
disruption damages. Great Western is claiming damages in the sum
of $3,935,438 plus interest, costs and legal fees from the
Stratosphere Parties. This amount apparently includes the
Tiffiny claim.

The Stratosphere Parties have evaluated the project and have
determined that the amount of $1,004,059, of which $195,953 and
$371,973 were disbursed on October 29, 2002 to Tiffiny and
Great Western, respectively, is properly due and payable to
satisfy all claims for the work performed, including the claim
by Tiffiny. The remaining amount has been segregated in a
separate interest bearing account and is classified in Accounts
Payable  Construction on the Consolidated Balance
Sheet. As a result, the Great Western base claim has been
reduced to $3,213,579, the Tiffiny base claim has been reduced
to $327,434 and the escrow balance has been reduced to $447,403
at September 30, 2004.

The Early Case Conference in the Tiffiny case has already been
concluded and initial documents and witnesses have been
exchanged which has been the discovery to date, however, it is
not possible to give an opinion as to probable outcome of the
action. The case will proceed with discovery from this point
forward until such time as a resolution is reached or the matter
is brought to trial. The matter was preliminarily set for trial
on April 14, 2003 but has been continued to
February 22, 2005. The Stratosphere Parties intend to
vigorously defend the action for claims in excess of $1,004,059.



|   |                  
|-- | -----------------
|7. | Subsequent Events

On October 26, 2004, the SEC declared effective ACEPs
Registration Statement related to the exchange offer of its
7.85% Senior Secured Notes due 2012. The exchange offer
expires on December 1, 2004, unless extended by ACEP.

9



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Overview

We own and operate three gaming and entertainment properties in
the Las Vegas metropolitan area. The three properties are the
Stratosphere Casino Hotel & Tower, which is located on
the Las Vegas Strip and caters to visitors to Las Vegas, and two
off-Strip casinos, Arizona Charlies Decatur and Arizona
Charlies Boulder, which cater primarily to residents of
Las Vegas and the surrounding communities. The Stratosphere is
one of the most recognized landmarks in Las Vegas and our two
Arizona Charlies branded properties are well-recognized
casinos in their respective marketplaces. Each of our properties
offers customers a value-oriented experience by providing
competitive odds in our casinos, high-quality rooms in our
hotels, award-winning dining facilities and, at the
Stratosphere, 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 customer traffic to our
properties.

Results of Operations



| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2004 Compared to
    Three Months Ended September 30, 2003

Gross revenues for the quarter ended September 30, 2004
were $81.0 million, an increase of $8.8 million, or
12.3%, over the quarter ended September 30, 2003. Gross
revenues at the Stratosphere for the quarter ended
September 30, 2004 were $48.4 million, or 59.8% of
ACEPs gross revenues, an increase of $3.1 million as
compared to gross revenues for the quarter ended
September 30, 2003. Gross revenues at Arizona
Charlies Decatur for the quarter ended September 30,
2004 were $21.1 million, or 26.1% of ACEPs gross
revenues, an increase of $3.1 million, or 17.0%, as
compared to the prior year. This increase was primarily due to
an increase in casino revenues for the quarter ended
September 30, 2004 compared to the quarter ended
September 30, 2003. Gross revenues at Arizona
Charlies Boulder for the quarter ended September 30,
2004 were $11.4 million, or 14.1% of ACEPs gross
revenues, an increase of $2.7 million, or 30.5%, over the
prior year. This increase was primarily due to an increase in
slot revenues.



| |                
| | ---------------
| | Casino Revenues

Casino revenues during the quarter ended September 30, 2004
totaled $42.2 million, or 52.1% of ACEPs total
revenues. This is an increase of $4.8 million, or 12.9%, as
compared to the quarter ended September 30, 2003. Slot
machine revenues were $34.9 million, or 82.8% of total
casino revenues, and table game revenues were $6.2 million,
or 14.8% of casino revenues, for the quarter ended
September 30, 2004 as compared to slot machine revenues of
$30.1 million and table game revenues of $6.0 million
for the quarter ended September 30, 2003.

Casino revenues at the Stratosphere for the quarter ended
September 30, 2004 were $17.5 million, an increase of
$0.4 million, or 2.2%, over the quarter ended
September 30, 2003, of which slot machine revenues were
$12.4 million, or 71.0% of its casino revenues, and table
game revenues were $4.9 million, or 28.1% of its casino
revenues. For the quarter ended September 30, 2003,
Stratosphere had slot machine revenues of $12.0 million and
table game revenues of $4.8 million. Average win per slot
machine per day at Stratosphere for the quarter ended
September 30, 2004 was $102.85 as compared to $93.35 for
the quarter ended September 30, 2003. This was due to a
4.5% decrease in slot units and an increase in slot hold.

Casino revenues at Arizona Charlies Decatur were
$16.5 million for the quarter ended September 30, 2004
as compared to $14.2 million for the quarter ended
September 30, 2003. For the quarter ended
September 30, 2004, slot machine revenues were
$15.2 million, or 91.9% of its casino revenues, and table
game revenues were $0.8 million, or 4.8% of casino
revenues. For the quarter ended September 30, 2003, at
Arizona Charlies Decatur, slot machine revenues were 91.8%
of casino revenues and table game revenues were 4.8% of casino
revenues. Average win per slot machine per day at Arizona
Charlies Decatur increased from $103.10 for the quarter
ended September 30, 2003 to $129.45 for the quarter ended
September 30, 2004 due to a decrease in slot units and an
increase in floor traffic.

10



---



##### Table of Contents



Casino revenues at Arizona Charlies Boulder for the
quarter ended September 30, 2004 were $8.2 million, an
increase of $2.1 million as compared to $6.1 million
for the quarter ended September 30, 2003. Slot revenues
were $7.3 million, or 89.8% of its casino revenues, and
table game revenues were $0.5 million, or 6.4% of its
casino revenues, for the quarter ended September 30, 2004
as compared to $5.1 million and $0.5 million,
respectively, for the quarter ended September 30, 2003.
Average win per slot machine per day for the quarter ended
September 30, 2004 was $117.39 as compared to $77.26 in the
prior year. This increase was due to more aggressive marketing
programs.



| |                    
| | -------------------
| | Non-Casino Revenues

Hotel revenues for the quarter ended September 30, 2004
were $12.9 million, or 15.9% of ACEPs total revenues.
This represented an increase of $1.0 million, or 8.3%, from
hotel revenues for the quarter ended September 30, 2003.
Hotel revenues at the Stratosphere totaled $10.9 million
for the quarter ended September 30, 2004 as compared to
$10.3 million for the quarter ended September 30,
2003, an increase of 6.2%. Stratosphere hotel occupancy during
the period was 92.7% as compared to 91.8% for the quarter ended
September 30, 2003. Average daily room rate, or ADR,
increased from $49.85 for the quarter ended September 30,
2003 to $52.40 for the quarter ended September 30, 2004 due
to an increase in room demand. Hotel revenues at Arizona
Charlies Decatur totaled $1.0 million for the quarter
ended September 30, 2004, an increase of $0.1 million,
or 17.3%, from hotel revenues for the quarter ended
September 30, 2003. Occupancy increased from 83.0% for the
quarter ended September 30, 2003 to 88.4% for the quarter
ended September 30, 2004. Average daily rate increased for
the quarter ended September 30, 2004 by 10.2% to $46.89.
Hotel revenues at Arizona Charlies Boulder increased
$0.2 million, or 25.6%, to $1.0 million for the
quarter ended September 30, 2004. Occupancy increased from
49.3% for the quarter ended September 30, 2003 to 59.6% for
the quarter ended September 30, 2004. Average daily rate
increased for the quarter ended September 30, 2004 by 6.7%
to $47.82.

Food and beverage revenues for the quarter ended
September 30, 2004 totaled $16.7 million, or 20.6% of
ACEPs total revenues, as compared to $14.5 million,
or 20.0% of total revenues, for the quarter ended
September 30, 2003. Food and beverage revenues at the
Stratosphere increased 9.7% from $10.6 million for the
quarter ended September 30, 2003 to $11.7 million for
the quarter ended September 30, 2004. This was due to a
1.6% increase in food covers and price increases at several
venues. Food and beverage revenues at Arizona Charlies
Decatur increased 39.0% to $3.1 million for the quarter
ended September 30, 2004. This increase was primarily due
to the buffet being shutdown for renovations for the entire
quarter last year. Food and beverage revenues at Arizona
Charlies Boulder increased $0.3 million, or 21.6%, to
$2.0 million for the quarter ended September 30, 2004.

Tower, retail and other revenues increased $0.8 million, or
9.6%, for the quarter ended September 30, 2004. Tower,
retail and other revenues at Stratosphere increased 14.3% from
$7.3 million in the quarter ended September 30, 2003
to $8.3 million for the quarter ended September 30,
2004. Tower revenues increased $0.8 million, primarily due
to the opening of our new thrill ride. Retail and other revenues
at Arizona Charlies Decatur decreased $0.3 million to
$0.5 million and retail and other revenues at Arizona
Charlies Boulder remained flat at $0.3 million for
the quarter ended September 30, 2004.



| |                       
| | ----------------------
| | Promotional Allowances

Promotional allowances represent the retail value of rooms, food
and beverage, and other items that are provided to customers on
a complimentary basis. Promotional allowances for the quarter
ended September 30, 2004 totaled $5.8 million, or 7.2%
of gross revenues, as compared to $5.2 million, or 7.1% of
gross revenues, for the quarter ended September 30, 2003.
Promotional allowances at the Stratosphere were
$2.9 million, or 6.0% of its gross revenues, for the
quarter ended September 30, 2004, a decrease of 3.6% from
$3.0 million, or 6.7% of its gross revenues, for the
quarter ended September 30, 2003. This decrease was due
primarily to less aggressive promotional policies. Promotional
policies at Arizona Charlies Decatur were more aggressive
for the quarter ended September 30, 2004 with an increase
in allowances of $0.5 million to $1.8 million, or 8.6%
of its gross revenues, as compared to 7.5% for the quarter ended
September 30, 2003. Promotional allowances for

11



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##### Table of Contents







| |                   
| | ------------------
| | Operating Expenses

Casino expenses for the quarter ended September 30, 2004
totaled $15.4 million, or 36.5% of total casino revenues,
as compared to $15.7 million, or 42.0% of revenues, for the
quarter ended September 30, 2003. Casino operating expenses
were primarily comprised of salaries, wages and benefits, and
operating expenses of the casinos. Casino operating expenses at
the Stratosphere were $7.0 million, or 40.2% of its casino
revenues, for the quarter ended September 30, 2004 as
compared to $7.7 million, or 45.1% of its casino revenues,
for the quarter ended September 30, 2003. This decrease of
$0.7 million, or 8.9%, in casino operating expenses was
primarily due to a reduction in payroll expense due to the
installation of ticket in/ticket out machines offset, in part,
by increased gaming taxes due to higher gaming volume. Casino
expenses at Arizona Charlies Decatur increased
$0.1 million, or 1.1%, but were only 30.4% of its casino
revenues for the quarter ended September 30, 2004 as
compared to 35.1% for the quarter ended September 30, 2003.
Casino expenses at Arizona Charlies Boulder increased
$0.3 million, or 11.3%, but were only 40.6% of its casino
revenues for the quarter ended September 30, 2004 as
compared to 49.2% for the quarter ended September 30, 2003.
This was primarily due to a reduction in the cost of employee
benefits at the Arizona Charlies casinos.

Selling, general and administrative expenses increased
$2.0 million, or 10.8%, to $20.9 million for the
quarter ended September 30, 2004. Selling, general and
administrative expenses at the Stratosphere were
$12.8 million, or 26.5% of its gross revenues, for the
quarter ended September 30, 2004 as compared to
$11.6 million, or 25.5% of its gross revenues, for the
quarter ended September 30, 2003. This increase of
$1.3 million, or 11.1%, in operating expenses was due to
increased payroll expense and for costs related to Sarbanes
Oxley implementation. Selling, general and administrative
expenses at Arizona Charlies Decatur were
$5.0 million, or 23.5% of its gross revenues, for the
quarter ended September 30, 2004 as compared to
$4.4 million, or 24.3% of its gross revenues, for the
quarter ended September 30, 2003. Selling, general and
administrative expenses at Arizona Charlies Boulder
totaled $3.1 million, or 27.4% of its gross revenues, for
the quarter ended September 30, 2004 as compared to
$2.9 million, or 33.5% of its gross revenues, for the
quarter ended September 30, 2003.



| |                       
| | ----------------------
| | Income from Operations

Income from operations for the quarter ended September 30,
2004 was $10.5 million, an increase of $3.3 million,
or 45.1%, from the quarter ended September 30, 2003. Income
from operations at the Stratosphere for the quarter ended
September 30, 2004 was $4.8 million as compared to
$4.4 million for the quarter ended September 30, 2003.
This increase of $0.4 million, or 8.0%, was due to
increased revenues and cost containment programs. Income from
operations at Arizona Charlies Decatur for the quarter
ended September 30, 2004 was $4.9 million as compared
to $3.7 million for the quarter ended September 30,
2003. This increase of $1.2 million, or 32.2%, was due to
increased slot revenues. Income from operations at Arizona
Charlies Boulder for the quarter ended September 30,
2004 was $0.8 million as compared to a loss of
$0.9 million for the quarter ended September 30, 2003.
This increase was primarily due to increased slot revenues.



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2004 Compared to Nine
    Months Ended September 30, 2003

Gross revenues for the nine months ended September 30, 2004
were $241.1 million, an increase of $27.0 million, or
12.6%, over the nine months ended September 30, 2003. Gross
revenues at the Stratosphere for the nine months ended
September 30, 2004 were $146.1 million, or 60.6% of
ACEPs gross revenues, an increase of $12.6 million,
or 9.4%, over the nine months ended September 30, 2003.
Gross revenues at Arizona Charlies Decatur for the nine
months ended September 30, 2004 were $62.0 million, or
25.7% of ACEPs gross revenues, an increase of
$7.1 million, or 12.9%, as compared to the prior year. This
increase was primarily due to an increase in casino revenues for
the nine months ended September 30, 2004 compared to the
nine months ended September 30, 2003. Gross revenues at
Arizona Charlies Boulder for the nine months

12



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##### Table of Contents







| |                
| | ---------------
| | Casino Revenues

Casino revenues during the nine months ended September 30,
2004 totaled $124.6 million, or 51.7% of ACEPs total
revenues. This is an increase of $13.2 million, or 11.9%,
as compared to the nine months ended September 30, 2003.
Slot machine revenues were $101.3 million, or 81.3% of
total casino revenues, and table game revenues were
$19.0 million, or 15.3% of casino revenues, for the nine
months ended September 30, 2004 as compared to slot machine
revenues of $90.1 million and table game revenues of
$17.8 million for the nine months ended September 30,
2003.

Casino revenues at the Stratosphere for the nine months ended
September 30, 2004 were $53.6 million, an increase of
$2.7 million, or 5.3%, over the nine months ended
September 30, 2003, of which slot machine revenues were
$37.4 million, or 69.8% of its casino revenues, and table
game revenues were $15.0 million, or 28.0% of its casino
revenues. For the nine months ended September 30, 2003,
Stratosphere had slot machine revenues of $35.7 million and
table game revenues of $14.1 million. Average win per slot
machine per day at Stratosphere for the nine months ended
September 30, 2004 was $102.49 as compared to $91.56 for
the nine months ended September 30, 2003. This was due to a
4.5% decrease in the number of units compared to the prior year
combined with an increase in floor traffic.

Casino revenues at Arizona Charlies Decatur were
$48.0 million for the nine months ended September 30,
2004 as compared to $43.2 million for the nine months ended
September 30, 2003. For the nine months ended
September 30, 2004, slot machine revenues were
$43.4 million, or 90.4% of its casino revenues, and table
game revenues were $2.4 million, or 5.0% of casino
revenues. For the nine months ended September 30, 2003, at
Arizona Charlies Decatur, slot machine revenues were 91.0%
of casino revenues and table game revenues were 5.0% of casino
revenues. Average win per slot machine per day at Arizona
Charlies Decatur increased from $104.05 for the nine
months ended September 30, 2003 to $125.66 for the nine
months ended September 30, 2004 due to a 2.7% decrease in
the number of units compared to the prior year combined with an
increase in floor traffic.

Casino revenues at Arizona Charlies Boulder for the nine
months ended September 30, 2004 were $23.0 million, an
increase of $5.7 million as compared to $17.3 million
for the nine months ended September 30, 2003. Slot revenues
were $20.5 million, or 89.0% of its casino revenues, and
table game revenues were $1.6 million, or 7.1% of its
casino revenues, for the nine months ended September 30,
2004 as compared to $15.1 million and $1.6 million,
respectively, for the nine months ended September 30, 2003.
Average win per slot machine per day for the nine months ended
September 30, 2004 was $109.99 as compared to $77.05 the
prior year due to an increase in floor traffic.



| |                    
| | -------------------
| | Non-Casino Revenues

Hotel revenues for the nine months ended September 30, 2004
were $40.6 million, or 16.8% of ACEPs total revenues.
This represented an increase of $5.1 million, or 14.5%,
from hotel revenues for the nine months ended September 30,
2003. Hotel revenues at the Stratosphere totaled
$34.4 million for the nine months ended September 30,
2004 as compared to $30.5 million for the nine months ended
September 30, 2003, an increase of 12.8%. Stratosphere
hotel occupancy during the period was 92.5% as compared to 89.3%
for the nine months ended September 30, 2003. Average daily
room rate, or ADR, increased from $51.11 for the nine months
ended September 30, 2003 to $55.47 for the nine months
ended September 30, 2004 due to an increase in room demand.
Hotel revenues at Arizona Charlies Decatur totaled
$3.1 million for the nine months ended September 30,
2004, an increase of $0.5 million, or 21.5%, from hotel
revenues for the nine months ended September 30, 2003.
Occupancy increased from 83.5% for the nine months ended
September 30, 2003 to 89.0% for the nine months ended
September 30, 2004. Average daily rate increased for the
nine months ended September 30, 2004 by 13.6% to $48.66.
Hotel revenues at Arizona Charlies Boulder increased
$0.7 million, or 28.1%, to $3.2 million for the nine
months ended September 30, 2004. Occupancy increased from
51.0% for the nine months ended September 30, 2003 to 61.7%
for the nine months ended

13



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##### Table of Contents





Food and beverage revenues for the nine months ended
September 30, 2004 totaled $50.1 million, or 20.8% of
ACEPs total revenues, as compared to $44.3 million,
or 20.7% of total revenues, for the nine months ended
September 30, 2003. Food and beverage revenues at the
Stratosphere increased 10.2% from $31.8 million for the
nine months ended September 30, 2003 to $35.0 million
for the nine months ended September 30, 2004. This was due
to a 4.0% increase in food covers and price increases at several
venues. Food and beverage revenues at Arizona Charlies
Decatur increased 24.3% to $9.2 million for the nine months
ended September 30, 2004. This increase was primarily due
to the buffet being shutdown for renovations for four months
last year. Food and beverage revenues at Arizona Charlies
Boulder increased $0.8 million, or 15.4%, to
$5.9 million for the nine months ended September 30,
2004.

Tower, retail and other revenues increased $2.8 million, or
12.4%, for the nine months ended September 30, 2004. Tower,
retail and other revenues at Stratosphere increased 13.5%, from
$20.4 million in the nine months ended September 30,
2003 to $23.2 million for the nine months ended
September 30, 2004. Tower revenues increased
$2.6 million, primarily due to the opening of our new
thrill ride. Retail and other revenues at Arizona Charlies
Decatur decreased $0.1 million to $1.7 million and
retail and other revenues at Arizona Charlies Boulder
increased $0.1 million to $0.8 million for the nine
months ended September 30, 2004.



| |                       
| | ----------------------
| | Promotional Allowances

Promotional allowances represent the retail value of rooms, food
and beverage, and other items that are provided to customers on
a complimentary basis. Promotional allowances for the nine
months ended September 30, 2004 totaled $17.6 million,
or 7.3% of gross revenues, as compared to $16.6 million, or
7.7% of gross revenues, for the nine months ended
September 30, 2003. Promotional allowances at the
Stratosphere were $8.9 million, or 6.1% of its gross
revenues, for the nine months ended September 30, 2004, a
decrease of 7.0% from $9.6 million, or 7.2% of its gross
revenues for the nine months ended September 30, 2003. This
decrease was due primarily to less aggressive promotional
policies. Promotional policies at Arizona Charlies Decatur
were more aggressive for the nine months ended
September 30, 2004 with an increase of $1.0 million to
$5.4 million, or 8.7% of its gross revenues, as compared to
8.0% for the nine months ended September 30, 2003.
Promotional allowances for the nine months ended
September 30, 2004 at Arizona Charlies Boulder were
$3.2 million, or 9.8% of gross revenues, as compared to
10.0% for the nine months ended September 30, 2003.



| |                   
| | ------------------
| | Operating Expenses

Casino expenses for the nine months ended September 30,
2004 totaled $46.6 million, or 37.4% of total casino
revenues, as compared to $46.3 million, or 41.6% of
revenues, for the nine months ended September 30, 2003.
Casino operating expenses were primarily comprised of salaries,
wages and benefits, and operating expenses of the casinos.
Casino operating expenses at the Stratosphere were
$22.0 million, or 41.1% of its casino revenues, for the
nine months ended September 30, 2004 as compared to
$22.5 million, or 44.2% of its casino revenues, for the
nine months ended September 30, 2003. This decrease of
$0.5 million, or 2.1%, in casino operating expenses was
primarily due to a reduction in payroll expense due to the
installation of ticket in/ticket out machines offset, in part,
by increased gaming taxes due to higher gaming volume. Casino
expenses at Arizona Charlies Decatur decreased
$0.1 million, or 0.3%, but were only 31.3% of its casino
revenues for the nine months ended September 30, 2004 as
compared to 34.9% of its casino revenues for the nine months
ended September 30, 2003. Casino expenses at Arizona
Charlies Boulder increased $0.8 million, or 9.1%, but
were only 41.5% of its casino revenues for the nine months ended
September 30, 2004 as compared to 50.5% of its casino
revenues for the nine months ended September 30, 2003. This
was primarily due to a reduction in the cost of employee
benefits at the Arizona Charlies casinos.

Selling, general and administrative expenses increased
$1.6 million, or 2.8%, to $58.3 million for the nine
months ended September 30, 2004. Selling, general and
administrative expenses at the Stratosphere were

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| |                       
| | ----------------------
| | Income from Operations

Income from operations for the nine months ended
September 30, 2004 was $36.3 million, an increase of
$17.2 million, or 89.7%, from the nine months ended
September 30, 2003. Income from operations at the
Stratosphere for the nine months ended September 30, 2004
was $20.4 million as compared to $12.4 million for the
nine months ended September 30, 2003. This increase of
$7.9 million, or 63.7%, was due to increased revenues and
cost containment programs. Income from operations at Arizona
Charlies Decatur for the nine months ended
September 30, 2004 was $13.4 million as compared to
$10.5 million for the nine months ended September 30,
2003. This increase of $2.9 million, or 27.4%, was due to
increased slot revenues. Income from operations at Arizona
Charlies Boulder for the nine months ended
September 30, 2004 was $2.5 million as compared to a
loss of $3.8 million for the nine months ended
September 30, 2003. This increase was primarily due to
increased slot revenues and reduced employee benefit costs.

Liquidity and Capital Resources

We completed the acquisitions of three Las Vegas, Nevada gaming
and entertainment properties from affiliated parties on
May 26, 2004. We applied the net proceeds from the offering
of our $215 million principal amount of notes to pay the
acquisition price for the two Arizona Charlie properties of
$125.9 million, repay indebtedness owed to our parent of
$43.8 million, make a distribution to our parent of
$44.0 million and pay fees and expenses of the offering.

Pending consummation of the acquisitions, the perfection of
security interests in the assets of the properties acquired, the
receipt of all necessary approvals of the Nevada Gaming
Commission upon the recommendation of the Nevada State Gaming
Control Board and certain other events, the net proceeds of the
offering, were held in escrow in a note proceeds account,
together with an additional amount sufficient to fund a special
redemption obligation if, among other things, the acquisitions
were not completed by August 31, 2004. Upon closing of the
acquisitions, perfection of such security interests, receipt of
necessary approvals of the Nevada Gaming Commission upon the
recommendation of the Nevada State Gaming Control Board and such
other events, the funds held in escrow in the note proceeds
account and additional cash on hand were used in connection with
the acquisitions, to repay intercompany indebtedness, to fund
distributions to our parent company and to pay related fees and
expenses.

At September 30, 2004, we had cash and cash equivalents of
$58.8 million. Upon the release of funds from the escrow
account, we retained an amount equal to accrued interest through
the date of release, May 26, 2004, plus an amount equal to
estimated unpaid fees and expenses related to the notes offering.

We expect to fund our operating and capital needs, as currently
contemplated, with operating cash flows and, if necessary,
borrowings under our senior secured revolving credit facility
entered into by us, as borrower, and certain of our
subsidiaries, as guarantors. The senior secured revolving credit
facility allows for borrowings of up to $20.0 million,
subject to us complying with financial and other covenants,
until January 29, 2008.

We met our capital requirements in 2003 through net cash from
operating activities. For the nine months ended
September 30, 2004, net cash provided by operating
activities totaled approximately $36.0 million and cash
used for investing activities totaled $7.4 million,
compared to approximately $35.5 million provided by
operating activities and $16.7 million used in investing
activities for the nine months ended September 30, 2003.

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Management believes borrowings available under the senior
secured revolving credit facility and operating cash flows will
be adequate to meet our anticipated future requirements for
working capital, capital expenditures and scheduled interest
payments on the notes and under the senior secured revolving
credit facility, lease payments and other permitted indebtedness
at least through the next twelve months. Although no additional
financing is currently contemplated, we will seek, if necessary
and to the extent permitted under the indenture governing the
notes and the terms of the senior secured revolving credit
facility, additional financing through bank borrowings or debt
or equity financings. However, additional financing, if needed,
may not be available to us, or if available, the financing may
not be on terms favorable to us. Our estimates of our reasonably
anticipated liquidity needs may not be accurate and new business
developments or other unforeseen events will not occur,
resulting in the need to raise additional funds.

Our 7.85% senior secured notes due 2012 restrict the
payment of cash dividends or distributions, the purchase of
equity interests, the purchase, redemption, defeasance or
acquisition of debt subordinated to the investments as
restricted payments. The notes also prohibit the
incurrence of debt, or the issuance of disqualified or preferred
stock, as defined, with certain exceptions, provided that we may
incur debt or issue disqualified stock if, immediately after
such incurrence or issuance, the ratio of consolidated cash flow
to fixed charges (each as defined) for the most recently ended
four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which
such additional indebtedness is incurred or disqualified stock
or preferred stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis giving effect to the debt
incurrence or issuance. As of September 30, 2004, such
ratio was 4.2 to 1.0. The notes also restrict the creation of
liens, the sale of assets, mergers, consolidations or sales of
substantially all of our assets, the lease or grant of a
license, concession, other agreement to occupy manage or use our
assets, the issuance of capital stock of restricted subsidiaries
and certain related party transactions. The notes allow us to
incur indebtedness, among other things, of up to
$50 million under credit facilities, non-recourse financing
of up to $15 million to finance the construction, purchase
or lease of personal or real property used in our business,
permitted affiliate subordinated indebtedness (as defined), the
issuance of additional 7.85% senior secured notes due 2012
in an aggregate principal amount not to exceed 2.0 times net
cash proceeds received from equity offerings and permitted
affiliate subordinated debt and additional indebtedness of up to
$10.0 million.

Additionally, our senior secured revolving credit facility
allows for borrowings of up to $20.0 million, including the
issuance of letters of credit of up to $10.0 million. Loans
made under the senior secured revolving facility will mature and
the commitments under them will terminate in January 2008. At
September 30, 2004, there were not any borrowings or
letters of credit outstanding under the facility. The facility
contains restrictive covenants similar to those contained in the
7.85% senior secured notes due 2012. In addition, the
facility requires that, as of the last date of each fiscal
quarter, our ratio of net property, plant and equipment for key
properties to consolidated first lien debt be not less than 5.0
to 1.0 and our ratio of consolidated first lien debt to
consolidated cash flow not be more than 1.0 to 1.0. At
September 30, 2004, these ratios were 82.6 to 1.0 and 0.1
to 1.0, respectively.

The following table summarizes contractual obligations and
commitments to make future payments under certain contracts,
including long-term debt obligations, and capital leases at
September 30, 2004.

|                                        |  |                        |         |           |  |           |        |           |  |         |        |  |  |   |        |  |  |   |         | 
|--------------------------------------- |  | ---------------------- | ------- | --------- |  | --------- | ------ | --------- |  | ------- | ------ |  |  | - | ------ |  |  | - | ------- | 
|                                        |  |                       
|                                        |  | Payments Due by Period
|                                        |  |                       
|                                        |  |                        |         | Less than |  |           |        | After    
|Contractual Obligations and Commitments |  | Total                  |         | 1 Year    |  | 1-3 Years |        | 4-5 Years |  | 5 Years
|                                        |  |                        |         |           |  |           |        |           |  |        
|                                        |  |                       
|                                        |  | (In thousands)        
|                                       
|                                       
|                                       
|                                       
|Long-term debt                          |  | $                      | 215,000 |           |  | $         |       |           |  | $       |       |  |  | $ |       |  |  | $ | 215,000 | 
|                                       
|                                       
|                                       
|                                       
|Interest on long-term debt              |  |                        | 126,651 |           |  |           | 16,878 |           |  |         | 50,632 |  |  |   | 33,755 |  |  |   | 25,386  | 
|                                       
|                                       
|                                       
|                                       
|Commitment fee on credit line           |  |                        | 334     |           |  |           | 100    |           |  |         | 234    |  |  |   |       |  |  |   |        | 
|                                       
|                                       
|                                       
|                                       
|Capital leases                          |  |                        | 11,211  |           |  |           | 660    |           |  |         | 1,980  |  |  |   | 1,235  |  |  |   | 7,336   | 
|                                        |  |                        |         |           |  |           |        |           |  |         |        |  |  |   |        |  |  |   |         | 
|Total cash obligations                  |  | $                      | 353,196 |           |  | $         | 17,638 |           |  | $       | 52,846 |  |  | $ | 34,990 |  |  | $ | 247,722 | 
|                                        |  |                        |         |           |  |           |        |           |  |         |        |  |  |   |        |  |  |   |         | 

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|        |                                                               
|------- | --------------------------------------------------------------
|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. All of our debt is
at a fixed rate of interest. We can borrow, from time to time,
up to $20.0 million under the senior secured revolving
credit facility for working capital purposes. At
September 30, 2004, there were no borrowings under the
facility.

The fair value of our long-term 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. Based on the borrowing rates currently available to
us for debt with similar terms and average maturities, the
estimated fair value of long-term debt outstanding is
approximately $226 million as of September 30, 2004.

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

Forward-Looking Statements

We are including the following cautionary statement in this
report to make applicable and to take advantage of the safe
harbor provisions of the Private Securities Litigation Reform
Act of 1995 for any forward-looking statements made by, or on
behalf of us. With the exception of historical matters, the
matters discussed in this report are forward looking statements.
Forward-looking statements may relate to, among other things,
future performance generally, business development activities,
future capital expenditures, 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.

We warn you that forward-looking statements are only
predictions. Actual events or results may differ as a result of
risks that we face, including those set forth in the section of
our and American Casino & Entertainment Properties
Finance Corp.s Form S-4 (SEC File
No. 333-118149), declared effective by the Securities and
Exchange Commission on October 26, 2004, and any
post-effective amendments filed, thereto. These risks,
uncertainties and contingencies include, but are not limited to,
the following:



| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We face substantial competition in the hotel and casino industry.                                                                                                                                                                      
|
| |  | We compete with the continued growth of gaming on Native
    American tribal lands, particularly in California.                                                                                                                        
|
| |  | The existence of legalized gambling in other jurisdictions may
    reduce the number of visitors to Las Vegas.                                                                                                                         
|
| |  | The gaming industry is highly regulated and the Nevada gaming
    authorities and state and municipal licensing authorities have
    significant control over our operations.                                                          
|
| |  | Potential changes in the tax or regulatory environment could
    increase our expenses and reduce our cash flow.                                                                                                                       
|
| |  | Economic downturns, terrorism and the uncertainty of war, as
    well as other factors affecting discretionary consumer spending,
    could reduce the number of our visitors or the amount of money
    visitors spend at our casinos.
|
| |  | Our properties rely exclusively on the Las Vegas economic
    market, and changes adversely impacting that market could reduce
    our revenues and cash flow.                                                                         
|
| |  | Our properties use significant amounts of electricity, natural
    gas and other forms of energy, and energy price increases may
    reduce our working capital.                                                                       
|
| |  | Our properties use significant amounts of water and a water
    shortage may adversely affect our operations.                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The loss of management and other key personnel could
    significantly harm our business, and the quality of individuals
    hired for positions in the hotel and gaming operations will be
    critical to the success of our business.                                                                                                                                                          
|
| |  | The opening of the Las Vegas Monorail may divert customers from
    our properties to other competitors whose properties are more
    conveniently accessed by the monorail system.                                                                                                                                                                                                               
|
| |  | An increase in the cost of health care benefits could have a
    negative impact on our profitability.                                                                                                                                                                                                                                                                                            
|
| |  | We may incur higher costs or work slow-downs or stoppages due to
    union activities in Las Vegas.                                                                                                                                                                                                                                                                                               
|
| |  | Our stockholder and its control person could exercise its
    influence to the detriment of the note holders.                                                                                                                                                                                                                                                                                     
|
| |  | We are heavily dependent on the Stratosphere for a large
    percentage of our operating cash flow and Arizona Charlies
    Boulder has a history of negative operating cash flow.                                                                                                                                                                                                               
|
| |  | Our reliance on slot machine revenues and the concentration of
    manufacturing of slot machines in certain companies could impose
    additional costs on us.                                                                                                                                                                                                                                   
|
| |  | We may be subject to the pension liabilities of our affiliates.                                                                                                                                                                                                                                                                                                                                   
|
| |  | Our insurance coverage may not be adequate to cover all possible
    losses that the Stratosphere, Arizona Charlies Decatur and
    Arizona Charlies Boulder could suffer. In addition, our
    insurance costs may increase and we may not be able to obtain
    the same insurance coverage in the future.                                                                                    
|
| |  | Our substantial indebtedness could reduce our cash flow and
    prevent us from fulfilling our obligations under the notes.                                                                                                                                                                                                                                                                       
|
| |  | Despite current indebtedness levels, we and our subsidiaries may
    still be able to incur substantially more debt. This could
    further exacerbate the risks associated with our substantial
    leverage.                                                                                                                                                                                    
|
| |  | The terms of the senior secured revolving credit facility and
    other agreements we may enter into may restrict our current and
    future operations, particularly our ability to respond to
    changes or to take some actions.                                                                                                                                                              
|
| |  | Our failure to comply with the covenants contained in the senior
    secured revolving credit facility, the indenture governing the
    notes or any other agreement governing our first-priority lien
    debt, including our failure as a result of events beyond our
    control, could result in an event of default, which would
    materially and adversely affect our financial condition.
|
| |  | To service our indebtedness, we will require a significant
    amount of cash. Our ability to generate cash depends on many
    factors beyond our control.                                                                                                                                                                                                                                       
|
| |  | We may not have the ability to raise the funds necessary to
    finance the change of control offer required by the indenture.                                                                                                                                                                                                                                                                    

Forward-looking statements speak only as of the date they were
made and we undertake no obligation to update them.






|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

a. As of September 30, 2004, our management, including
our Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design and operation of our
subsidiaries disclosure controls and procedures pursuant
to the Exchange Act Rule 13a-15(e) and 15d-15(e). Based
upon such evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and
procedures are currently effective to ensure that information
required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in Securities and
Exchange Commission rules and forms, and include controls and
procedures designed to ensure that information required to be
disclosed by us in such reports is accumulated and communicated
to our management, including our principal executive officer and
principal financial officer, as appropriate to allow timely
decisions regarding required disclosure.

b. During the quarter ended September 30, 2004, there
were no changes in our internal control over financial reporting
that materially affected, or are reasonably likely to affect,
our internal control over financial reporting.

18



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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 LLC



| |     |                  
| | --- | -----------------
| | By: | /s/ DENISE BARTON

| |                                                
| | -----------------------------------------------
| |                                                
| | Denise Barton                                  
| | Senior Vice President, Chief Financial Officer,
| | Treasurer and Secretary                        

Date: December 1, 2004

19



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##### Table of Contents






PART II. OTHER INFORMATION






|        |         
|------- | --------
|Item 6. | Exhibits

| |      |  |  |                                                                                                                   
| | ---- |  |  | ------------------------------------------------------------------------------------------------------------------
| | 31.1 |  |  | 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.       

II-1