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155 East Tropicana reports results

15 August 2008

LAS VEGAS, Nevada -- (PRESS RELEASE) -- 155 East Tropicana, LLC (the "Company") today announced the operating results for the second quarter ended June 30, 2008. The Company owns the Hooters Casino Hotel in Las Vegas, Nevada

Operating highlights of 155 East Tropicana, LLC for the second quarter ended June 30, 2008 compared to the second quarter of 2007, are as follows:

Net income of $2.4 million was generated in the second quarter of 2008, compared to a loss of $4.2 million in 2007.

Adjusted EBITDA(1) was $2.3 million in the second quarter of 2008, which compares to $1.3 million in the same quarter last year, an increase of 68%.

Adjusted EBITDA was $5.2 million for the first six months of 2008 compared to $3.8 million for the same period in 2007, an increase of 38%.

"During the second quarter of 2008 we were pleased with our performance, particularly our ability to reduce operating expenses," stated Mr. Gary Gregg, Chief Operating Officer. "The current Las Vegas market environment is very challenging and we continue to work diligently on promotions that will drive customer counts and revenue growth while we manage costs."

Operating Results for the Quarter Ended June 30, 2008 Compared to the Quarter Ended June 30, 2007

Operating income of $0.3 million for the quarter ended June 30, 2008 improved by $1.2 million from a loss of $0.9 million in the same quarter last year. The increased operating profit was primarily attributable to cost savings.

Net operating revenues for the quarter ended June 30, 2008 were $16.4 million, a decrease of $1.1 million or 6.3%, from $17.5 million generated during the same period in the previous year. The decline in net revenue was largely a result of the decline of $0.5 million in room revenue caused by falling room rates. Other Las Vegas casino/hotel market leaders announced they discounted room rates during the second quarter of 2008 to attract visitation in the current soft economy and expect the trend to continue.

Promotional allowances (which are subtracted from revenues) increased from $1.8 million to $2.0 million, largely due to the promotional give away of show tickets and rooms to casino customers.

Operating expenses were $16.2 million for the quarter ended June 30, 2008, a decrease of $2.2 million or 12.1%, from $18.4 million during the same period in the previous year. This decrease in operating expenses was the result of an intense cost reduction program. Property-wide payroll was analyzed in the last quarter of 2007 and payroll was reduced in several areas where there was excess capacity in restaurants, with an overall goal of reduced payroll in areas that would not impact our excellent customer service. Additionally, other operating expenses were evaluated and trimmed where appropriate. This trend of reduced expenses, which began in the fourth quarter of 2007, is expected to continue into future quarters.

Casino revenues increased by $0.4 million to $6.9 million for the quarter ended June 30, 2008, compared to $6.5 million for the quarter ended June 30, 2007. The increase is due to our successful casino promotions that have brought in more customers to play on the casino floor. We were successful in increasing casino revenues in the second quarter in spite of a decline of 7.5% in gaming revenue for all casinos on the Las Vegas Strip as reported by the Nevada Gaming Control Board.

Table games revenue was $2.2 million for the quarter ended June 30, 2008, a decrease of $0.5 million, or 17.2%, compared to the table games revenue of $2.7 million from the prior year's quarter. Table game drop decreased by $1.3 million or by 9.1%, to $13.7 million for the quarter ended June 30, 2008 compared to $15.0 million for the quarter ended June 30, 2007. The table games generated an average win per table of $788 per day for the quarter ended June 30, 2008 as compared to $983 per day for the quarter ended June 30, 2007. Slot revenue of $4.5 million for the quarter ended June 30, 2008 was an increase of 25.1% compared to $3.6 million in the same period in 2007. The average win per machine per day was $72 for the quarter ended June 30, 2008 as compared to $61 for the quarter ended June 30, 2007. We continued targeting our marketing efforts to increase slot play through targeted slot marketing programs aimed at attracting a flow of customers to the casino floor.

Casino expenses, which included casino operational expenses and casino marketing, increased by 12.4% to $4.5 million for the quarter ended June 30, 2008 compared to $4.0 million for the quarter ended June 30, 2007 largely due to slot marketing costs. The profit margin for casino operations decreased to 35.1% during the quarter ended June 30, 2008 from 38.7% during the quarter ended June 30, 2007.

Food, beverage and entertainment revenue was $5.9 million for the quarter ended June 30, 2008 as compared to $6.4 million during the same period in 2007, a decrease of $0.5 million, or 8.2%. Food and beverage revenue declined due to a decline of 18,000 food covers or 7.5%, caused by the closure of the Dam Coffee Shop in October 2007, along with a 4.6 % decline in average check. This was partially offset by the opening of the Dixie Dam Country Bar on May 23, 2008, which generated $0.1 million in beverage revenue in the quarter ended June 30, 2008.

Food, beverage and entertainment expenses decreased to $3.3 million during the quarter ended June 30, 2008 from $4.8 million during the quarter ended June 30, 2007, a decrease of $1.5 million or 30.5%. The savings in food, beverage and entertainment expenses were facilitated by increased efficiencies in payroll and other operating expenses with the closing of our excess restaurant capacity.

Hotel and other revenue (which includes hotel room revenue, retail, spa, and other miscellaneous revenue) decreased by $0.7 million or 11.3% to $5.7 million for the quarter ended June 30, 2008 from $6.4 million for the quarter June 30, 2007. Room revenue was $4.3 million for the quarter ended June 30, 2008 compared to $4.8 million in 2007. Average daily room rates decreased to $69 for the quarter ended June 30, 2008 from $78 for the quarter ended June 30, 2007, while occupancy rates increased to 97.6% for the quarter ended June 30, 2008 from 94.7% for the quarter ended June 30, 2007. Occupancy rates increased largely because of improving sales through the wholesalers, internet providers and our group sales.

Sales from our retail outlets selling Hooters logo merchandise decreased 7.7% to $1.2 million for the quarter ended June 2008 from $1.3 million for the quarter ended June 2007. Other miscellaneous revenue declined $0.1 million.

Hotel and other expenses decreased by 8.5% or $0.1 million to $2.1 million during the quarter ended June 30, 2008 from $2.2 million during the quarter ended June 30, 2007, due to savings in payroll and other room department operating expenses. The profit margin for hotel and other revenue was 63.8% in the second quarter of 2008 compared to 64.9% for that same period in the prior year.

General and administrative expense includes costs associated with marketing, information technology, finance, accounting, and property operations. General and administrative expense decreased $0.8 million or 16.5% to $4.3 million for the quarter ended June 30, 2008 compared to $5.1 million for the quarter ended June 30, 2007. This decrease was principally due to significant decreases in advertising and marketing expenses, legal fees and various other administrative costs.

For the six months ended June 30, 2008, we generated $6.5 million of cash in operating activities, which was augmented by income of $5.5 million in forfeited deposits and extension fees related to the termination of the purchase agreement (the "Agreement") with Hedwigs Las Vegas Top Tier, LLC (the "Buyer") which we received from the Buyer in 2007 and 2008.

For the six months ended June 30, 2008, $0.5 million of cash was used for capital expenditures.

For the six months ended June 30, 2008, we used $4.3 million of cash from financing activities. We borrowed $0.2 million on our line of credit, offset by $1.0 million in principal payments on debt. Deposits of earnest money and extension fees of $3.5 million were received in 2007 and $2.0 million in 2008 and were taken to net income with the termination of the Agreement.

Our Credit Facility is a revolving Credit Facility of $15.0 million, which originally was scheduled to mature on March 30, 2009. On August 13, 2008, the term of the Credit Facility was extended to September 30, 2011 with the payment of a $150,000 extension fee. We currently have outstanding draws of $6.5 million at June 30, 2008. All outstanding principal and interest under the Credit Facility is due and payable on September 30, 2011.

The Agreement was terminated on June 6, 2008 when the buyer did not make an additional required payment of $0.5 million. The previously collected deposits and extension fees of $5.5 million were taken to income in June.

Based on maintaining our current level of cash flow from operations, we believe that we have the flexibility to cover operational contingencies, working capital needs, capital expenditures, and debt service obligations for the next twelve months through the use of cash (which totaled $7.6 million at June 30, 2008, including $3.8 million required in daily operations), our cash flow from operations, and our ability to draw against our $15.0 million Credit Facility, along with other available equipment financing.

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