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155 East Tropicana reports results

Operating highlights of 155 East Tropicana, LLC for the second quarter ended June 30, 2007 compared to the second quarter of 2006, are as follows:

Net revenues were $17.3 million during the second quarter of 2007 compared to net revenues of $18.0 million in the second quarter of 2006.

Adjusted EBITDA(1) was $1.3 million in the second quarter of 2007, which compares to $0.7 million in the same quarter last year.

"The second quarter represented our first quarter for many new marketing initiatives. We opened the Bobby Slayton showroom in late April, our food specials continue to bring in traffic, and we doubled our monthly slot club sign ups," stated Mr. Neil Kiefer, Chief Executive Officer.

Operating Results for the Quarter Ended June 30, 2007 Compared to the Quarter Ended June 30, 2006

Net operating revenues for the quarter ended June 30, 2007 were $17.3 million, a decrease of $0.7 million or 4.2%, from $18.0 million generated during the same period in the previous year. The decline in net revenue for this time period was the result of revenue declines of $1.2 million in April 2007 as compared to April 2006, offset by increased revenues of $0.5 million in the other two months of the quarter. In April 2006 we benefited from the extra volume created by the publicity and excitement surrounding the grand opening in February 2006.

Expenses before interest, depreciation, related-party royalties, pre-opening expenses, and loss on disposal totaled $16.0 million for the quarter ended June 30, 2007, a decrease of $1.3 million or 7.5%, from $17.3 million during the same period in the previous year. In general, the cost reductions were the result of a $1.0 million savings in payroll and benefits and a reduction of $0.5 million in advertising, promotions and other casino marketing expenses.

During the first quarter of 2007, we began implementing several changes aimed at increasing visitor volume to the property for our 2007 fiscal period, including: (1) increasing our presence through television, radio, and interstate billboards to build awareness of Hooters Casino Hotel in Southern California, (2) converting 13 Martini Bar to the new Night Owl Showroom, which opened on April 20, 2007, featuring veteran comedy stand-up artist Bobby Slayton, "The Pitbull of Comedy," (3) featuring value-priced food offerings in our restaurants, and (4) introducing new marketing promotions and other gaming-oriented events and (5) offering our new Owl Rewards Club featuring cash back with programs such as HOOT Million Dollar Swipe and other giveaways. All of those programs were implemented before the end of the second quarter.

Casino revenues decreased by $0.4 million to $6.2 million for the quarter ended June 30, 2007, compared to $6.5 million for the quarter ended June 30, 2006. The $0.4 million decrease in casino revenues occurred as a result of the $0.6 million decrease in casino revenues during April 2007 as compared to April 2006. In April 2006, we benefited from the extra volume created by the publicity and excitement surrounding the grand opening in February 2006. Both table games revenue and slot revenue declined as compared to the same period in 2006.

Casino expenses of $3.7 million for the quarter ended June 30, 2007 were comparable to the expenses for the quarter ended June 30, 2006. The profit margin for casino operations decreased slightly from 43.3% during the quarter ended June 30, 2006 to 39.5% during the quarter ended June 30, 2007 due to the decrease in revenues.

Food, beverage and entertainment revenue remained consistent with $6.4 million generated for both quarters ended June 30, 2007 and June 30, 2006.

Food, beverage and entertainment expenses decreased from $5.4 million during the quarter ended June 30, 2006 to $4.8 million during the quarter ended June 30, 2007, a decrease of $0.6 million. The cost savings is due to decreases in payroll, cost of food, and other operational expenses. The profit margin for food, beverage, and entertainment operations increased to 24.9% for the quarter ended June 30, 2007 from 16.3% in the same quarter in 2006 due to operational efficiencies.

Hotel and other revenue (which includes hotel room revenue, retail, spa, and other miscellaneous revenue) remained consistent at $6.4 million for both the quarter ended June 30, 2007 and June 30, 2006.

Room revenue was $4.8 million for the quarter ended June 30, 2007 compared to $4.5 million in 2006. This increase was a result of an increase in occupancy rates, offset by a decrease in average daily room rates. Average daily room rates decreased by 18.8% from $96 for the quarter ended June 30, 2006 to $78 for the quarter ended June 30, 2007, while occupancy rates increased from 73.9% for the quarter ended June 30, 2006 to 95.7% for the quarter ended June 30, 2007. Occupancy rates increased largely because of successful targeted marketing efforts in southern California and increased sales through the wholesalers, internet providers and our group sales team.

Sales from our retail outlets selling Hooters logo merchandise decreased 5.5% from $1.4 million for the quarter ended June 2006 to $1.3 million for the quarter ended June 2007. Other miscellaneous revenue declined $0.2 million.

Hotel and other expenses decreased by 9.4% from $2.5 million during the quarter ended June 30, 2005 to $2.2 million during the quarter ended June 30, 2006 due to decreases in cost of sales, and payroll for retail operations. Retail sales generated a profit margin of 43.2% for the quarter ended June 30, 2007 compared to 29.4% for the quarter ended June 30, 2006 due to these increased operational efficiencies.

General and administrative expense includes costs associated with marketing, information technology, finance, accounting, and property operations. Included in general and administrative expense for the quarter ended June 30, 2007 is also $0.2 million in legal and accounting expense associated with the purchase agreement documentation and negotiation. General and administrative expense decreased $0.7 million to $5.1 million for the quarter ended June 30, 2007 compared to $5.8 million for the quarter ended June 30, 2006. This decrease was principally due to significant decreases in advertising and marketing expenses for the quarter ended June 30, 2007 as compared to the same quarter in 2006. During the second quarter of 2007, we rolled out our new direct mail program. We also advertised our new slot cash back program, food specials, Bobby Slayton comedy show, and our "Swipe for a Million" promotion using billboards, radio and TV. We launched a media campaign directed at southern California gamblers in an effort to boost consumer awareness of Hooters Casino Hotel. These additional marketing expenses impacted the second quarter marketing expenses, which were up $0.7 million over both of the previous quarters ended March 31, 2007 and December 31, 2006. We will not be incurring these additional marketing expenses in the third quarter of 2007.

For the six months ended June 30, 2007, we used $2.4 million of cash in operating activities, largely due to our net loss of $7.0 million, which was offset by $5.0 million of non-cash depreciation and amortization charges and payment-restricted related party royalty fees. For the six months ended June 30, 2007, $0.7 million of cash was used for capital expenditures. For the six months ended June 30, 2007, we were provided $1.9 million of cash from financing activities. We borrowed $1.9 million on our new line of credit, offset by $1.0 million in principal payments on debt. During the quarter, we also received $1.0 million deposit of earnest money relating to the pending purchase agreement.

Our four-year $15.0 million revolving credit facility, which matures on March 30, 2009, currently has outstanding draws of $2.8 million at June 30, 2007.

We believe that we have the flexibility to cover operational contingencies, working capital needs, capital expenditures, and debt service obligations expected as of June 30, 2007 and over the succeeding twelve months through the use of cash (which totaled $4.9 million at June 30, 2007), 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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