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<SEC-DOCUMENT>0000950123-04-005008.txt : 20040423
<SEC-HEADER>0000950123-04-005008.hdr.sgml : 20040423
<ACCEPTANCE-DATETIME>20040423090421
ACCESSION NUMBER:		0000950123-04-005008
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20040423
ITEM INFORMATION:		
ITEM INFORMATION:		Regulation FD Disclosure
FILED AS OF DATE:		20040423

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AMERICAN REAL ESTATE PARTNERS L P
		CENTRAL INDEX KEY:			0000813762
		STANDARD INDUSTRIAL CLASSIFICATION:	OPERATORS OF NONRESIDENTIAL BUILDINGS [6512]
		IRS NUMBER:				133398766
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-09516
		FILM NUMBER:		04749433

	BUSINESS ADDRESS:	
		STREET 1:		100 SOUTH BEDFORD ROAD
		CITY:			MT KISCO
		STATE:			NY
		ZIP:			10549
		BUSINESS PHONE:		9142427700
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>y96553e8vk.txt
<DESCRIPTION>FORM 8-K
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                             ----------------------

                                    FORM 8-K

                                 CURRENT REPORT
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

        Date of Report (Date of Earliest Event Reported): APRIL 23, 2004

                       AMERICAN REAL ESTATE PARTNERS, L.P.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

      DELAWARE                          1-9516                   13-3398766
- -----------------------        ------------------------      -------------------
(State of Organization)        (Commission File Number)        (IRS Employer
                                                             Identification No.)

          100 South Bedford Road, Mt. Kisco, NY                         10549
- --------------------------------------------------------------------------------
         (Address of Principal Executive Offices)                     (Zip Code)

Registrant's telephone number, including area code: (914) 242-7700

                                       N/A
          -------------------------------------------------------------
          (Former Name or Former Address, if Changed Since Last Report)

<PAGE>

ITEM 9. REGULATION FD DISCLOSURE.

ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

         The following information is furnished pursuant to Item 9, "Regulation
FD Disclosure" and Item 12, "Results of Operations and Financial Condition."

         On April 23, 2004, American Real Estate Partners, L.P. ("AREP") issued
a press release setting forth the full year 2003 earnings and an estimate of the
2004 first quarter earnings of its indirect wholly-owned subsidiary, American
Casino & Entertainment Properties LLC ("ACEP"). A copy of AREP's press release
is attached hereto as Exhibit 99.1 and is incorporated by reference herein.

         AREP has also attached hereto as Exhibit 99.2 and Exhibit 99.3 and
incorporated by reference hereto ACEP's 2003 audited combined financial
statements and ACEP's 2003 Management's Discussion and Analysis of Results of
Operations and Financial Condition, respectively.

         EXHIBIT INDEX

         99.1     Press Release, dated April 23, 2004, issued by AREP.

         99.2     ACEP's 2003 audited combined financial statements.

         99.3     ACEP's 2003 Management's Discussion and Analysis of Results of
Operations and Financial Condition.

      [remainder of page intentionally left blank; signature page follows]

                                        2

<PAGE>

                                   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 hereunto duly authorized.

                                      AMERICAN REAL ESTATE PARTNERS, L.P.
                                      (Registrant)

                                      By: American Property Investors, Inc.
                                          General Partner

                                          By: /s/ John P. Saldarelli
                                              ----------------------------------
                                              John P. Saldarelli
                                              Chief Financial Officer,
                                              Secretary and Treasurer

Dated: April 23, 2004

                                        3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>y96553exv99w1.txt
<DESCRIPTION>PRESS RELEASE
<TEXT>
<PAGE>

                                                                    Exhibit 99.1

CONTACT: John P. Saldarelli
         Secretary and Treasurer
         (914) 242-7700

                             FOR IMMEDIATE RELEASE

    AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC REPORTS 2003 FULL YEAR AND
                 ESTIMATED 2004 FIRST QUARTER FINANCIAL RESULTS

         MOUNT KISCO, N.Y., April 23, 2004--American Real Estate Partners, L.P.
(NYSE:ACP) ("AREP") announced today the 2003 full year and estimated 2004 first
quarter financial results for American Casino & Entertainment Properties LLC
("ACEP"), an indirect wholly-owned subsidiary.

         As previously announced, on January 5, 2004, ACEP entered into an
agreement to acquire two Las Vegas casino/hotels, Arizona Charlie's Decatur
and Arizona Charlie's Boulder from Carl C. Icahn and an entity affiliated
with Mr. Icahn, for aggregate consideration of $125.9 million. The closing of
the acquisition is subject to certain conditions, including among other things,
obtaining all approvals necessary under the Nevada gaming laws. The terms of the
transaction were approved by AREP's audit committee. Upon receiving all
approvals necessary under gaming laws and upon closing of the acquisition,
AREP's subsidiary, American Real Estate Holdings Limited Partnership, will
transfer 100% of the common stock of Stratosphere Corporation to ACEP. As a
result, following the acquisition and contribution, ACEP will own and operate
three casino/hotels in the Las Vegas metropolitan area.

         Also, as previously announced, in January 2004, ACEP closed on its
offering of senior secured notes due 2012. The notes, in the aggregate principal
amount of $215 million, bear interest at the rate of 7.85% per annum. The
proceeds are being held in escrow pending receipt of all approvals necessary
under gaming laws and certain other conditions in connection with the
acquisition of Arizona Charlie's Decatur and Arizona Charlie's Boulder
and the contribution of the Stratosphere. ACEP intends to use the proceeds of
the notes offering to finance the acquisitions and to repay intercompany
indebtedness and for a distribution to AREP.

         The following financial results reflect the combined operating results
of the Stratosphere, Arizona Charlie's Decatur and Arizona Charlie's Boulder
properties. Combined net revenues for the year ended December 31, 2003 amounted
to $262.8 million, an increase of $12.8 million, or 5.1%, over the year ended
December 31, 2002. Combined EBITDA for the year ended December 31, 2003 was
$45.5 million as compared to combined EBITDA of $31.7 million for the year ended
December 31, 2002.

         "Our year end results exceeded our expectations. We attribute this to
enhanced customer flow at all three of the casino/hotels. Strong local and
improved national economies, diligent expense controls, expanded and improved
facilities and enhanced targeting of our respective markets were the key drivers
of our results," said Richard Brown, ACEP's President and Chief Executive
Officer. AREP has furnished ACEP's 2003 audited financial

                                        1

<PAGE>

statements and Management's Discussion and Analysis of Results of Operations and
Financial Condition to the SEC on a Form 8-K filed on the date hereof.

         AREP estimates that, for the three months ended March 31, 2004, ACEP's
combined net revenues will be approximately $75.0 million compared to combined
net revenues of $66.0 million for the three months ended March 31, 2003. For the
three months ended March 31, 2004, ACEP's combined EBITDA is estimated to be
approximately $20.8 million compared to combined EBITDA of $12.3 million for the
three months ended March 31, 2003. AREP estimates that, for the twelve months
ended March 31, 2004, ACEP's combined net revenues will be approximately $271.8
million compared to combined net revenues of $255.7 million for the twelve
months ended March 31, 2003. For the twelve months ended March 31, 2004, ACEP's
combined EBITDA is estimated to be approximately $54.0 million compared to
combined EBITDA of $34.6 million for the twelve months ended March 31, 2003.
"Our first quarter results easily surpassed our budgeted numbers and we are
pleased with our performance to date, especially since all three casino/hotels
are EBITDA positive," remarked Mr. Brown. "Our first quarter results easily
surpassed our budgeted numbers and we are pleased with our performance to date,
especially since all three casino/hotels are EBITDA positive," remarked Mr.
Brown.

         The following table reconciles for the periods indicated actual and
estimated EBITDA to actual and estimated net income (computed in accordance with
GAAP) for ACEP. These amounts do not include interest expense incurred to date
on the senior secured notes or other expenses incurred with respect to their
issuance.




<TABLE>
<CAPTION>
                                      ACTUAL            ACTUAL           ACTUAL          ESTIMATED        ACTUAL         ESTIMATED
                                  TWELVE MONTHS     TWELVE MONTHS     THREE MONTHS     THREE MONTHS    TWELVE MONTHS   TWELVE MONTHS
                                      ENDED             ENDED             ENDED            ENDED           ENDED           ENDED
                                   DECEMBER 31,      DECEMBER 31,       MARCH 31,        MARCH 31,       MARCH 31,       MARCH 31,
                                       2002              2003             2003             2004            2003            2004
                                  -------------     -------------     -------------    -------------   -------------   -------------
                                                                            (IN THOUSANDS)
<S>                               <C>               <C>               <C>              <C>             <C>             <C>
Net income.....................   $        863      $    20,682       $      3,392     $     9,019     $     2,457     $    26,309
Other expenses, primarily
  interest.....................          5,677            6,364              1,224           1,310           5,321           6,450
Provision for income tax.......          4,907           (1,798)             2,400           4,554           6,179             356
Depreciation and amortization..         20,209           20,222              5,267           5,883          20,686          20,838
                                  ------------      -----------       ------------     -----------     -----------     -----------
    EBITDA(1)..................   $     31,656      $    45,470       $     12,283     $    20,766     $    34,643     $    53,953
                                  ============      ===========       ============     ===========     ===========     ===========
</TABLE>


(1)  EBITDA consists of net income plus (i) other income (expense) which
     includes interest expense, interest income and gain (loss) on disposal of
     property and equipment, (ii) income tax provision and (iii) depreciation
     and amortization. EBITDA is presented as a measure of operating performance
     because we believe analysts, investors and others frequently use it in the
     evaluation of companies in the gaming industry, in particular as an
     indicator of the ability of a company to meet its debt service
     requirements. Other companies in the gaming industry may calculate EBITDA
     differently, particularly as it relates to non-recurring, unusual items.
     EBITDA is not a measurement of financial performance under generally
     accepted accounting principles and should not be considered as an
     alternative to cash flow from operating activities or as a measure of
     liquidity, or as an alternative to net income or as an indication of
     operating performance or any other measure of performance derived in
     accordance with generally accepted accounting principles.

         The amounts above for each of the three and twelve months ended March
31, 2004 are based upon many estimates which may be subject to adjustment in
connection with a review of the results of ACEP for this period. The inclusion
of these estimates should not be regarded as an indication that AREP considers
these estimates to be a reliable prediction of actual results. Actual results
may differ materially from those expressed or implied. AREP does not intend to
update or otherwise revise these estimates to reflect circumstances existing
after the date when

                                        2

<PAGE>

made or to reflect the occurrence of future events even if any or all of the
assumptions underlying these estimates are shown to be in error.

         These estimates were not prepared with a view to compliance with
published guidelines of the SEC or the guidelines established by the American
Institute of Certified Public Accountants regarding projections or forecasts.
These forward-looking statements (as that term is defined in the Private
Securities Litigation Reform Act of 1995) are subject to significant
contingencies and uncertainties that could cause actual results to differ
materially from these estimates. There can be no assurance that the assumptions
made in preparing these estimates will prove accurate, and actual results may be
materially different from those contained in these estimates.

         American Real Estate Partners, L.P. is a master limited partnership.

         This release contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, many of which
are beyond our ability to control or predict. Among these risks and
uncertainties are changes in general economic conditions, the extent, duration
and strength of any economic recovery, the extent of any tenant bankruptcies and
insolvencies, our ability to maintain tenant occupancy at current levels, our
ability to obtain, at reasonable costs, adequate insurance coverage, competition
for investment properties and other risks and uncertainties detailed from time
to time in our filings with the SEC, including our 2003 Form 10-K, Form 10-Qs
and Form 8-Ks.

                                        3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>4
<FILENAME>y96553exv99w2.txt
<DESCRIPTION>ACEP'S 2003 AUDITED COMBINED FINANCIAL STATEMENTS
<TEXT>
<PAGE>

                                                                    Exhibit 99.2

[KPMG LOGO]

                          INDEPENDENT AUDITORS' REPORT

The Members
American Casino & Entertainment Properties LLC:

We have audited the accompanying combined balance sheets of America Casino &
Entertainment Properties LLC (the "Company") as of December 31, 2002 and 2003,
and the related combined statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 2003.
These combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of American
Casino & Entertainment Properties LLC as of December 31, 2002 and 2003, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2003 in conformity with accounting
principles generally accepted in the United States of America.

                                    KPMG LLP

Los Angeles, California
March 5, 2004

<PAGE>

                 AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC
                             COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
(In thousands)                                                      2002            2003
                                                                  --------        --------
<S>                                                               <C>             <C>
ASSETS
Current Assets:
     Cash and cash equivalents                                    $ 59,343        $ 77,258
     Cash and cash equivalents-restricted                            1,926               -
     Marketable securities                                           4,200           4,200
     Investments-restricted                                          2,683           2,973
     Accounts receivable, net (note 2)                               4,298           4,051
     Related party receivables                                          32             233
     Deferred income taxes (note 8)                                    372           2,982
     Other current assets (note 3)                                   7,993           9,213
                                                                  --------        --------
Total Current Assets                                                80,847         100,910
                                                                  --------        --------
Property and Equipment, Net (note 4)                               313,210         324,548
                                                                  --------        --------
Other Assets:
     Debt issuance and deferred financing costs, net                   610             272
     Lessee incentive                                                  767             567
     Other receivable                                                2,401              84
     Deferred income taxes (note 8)                                      -          54,357
                                                                  --------        --------
Total Other Assets                                                   3,778          55,280
                                                                  --------        --------
TOTAL ASSETS                                                      $397,835        $480,738
                                                                  ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
     Accounts payable-trade                                       $  3,674        $  5,048
     Accounts payable-construction                                     805             805
     Accrued expenses (note 5)                                      17,338          17,801
     Accrued payroll and related expenses                           10,267          12,395
     Current portion of capital lease obligation (note 6)               55             436
     Current portion of notes payable to related party (note 9)     15,421          14,796
                                                                  --------        --------
Total Current Liabilities                                           47,560          51,281
                                                                  --------        --------
Long-Term Liabilities:
     Notes payable to related party (note 9)                        85,230          86,456
     Accrued lessee incentive                                          818             568
     Capital lease obligations, less current portion (note 6)          949           3,555
     Deferred income taxes (note 8)                                  3,325           5,134
     Other                                                               -           3,399
                                                                  --------        --------
Total Long-Term Liabilities                                         90,322          99,112
                                                                  --------        --------
TOTAL LIABILITIES                                                  137,882         150,393
                                                                  --------        --------

Commitments and Contingencies (notes 11 and 12)

Stockholders' Equity (note 7):
     Common stock                                                       10              10
     Additional paid-in-capital                                    243,750         293,460
     Retained earnings                                              16,193          36,875
                                                                  --------        --------
Total Stockholders' Equity                                         259,953         330,345
                                                                  --------        --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $397,835        $480,738
                                                                  ========        ========
</TABLE>

                   See Notes to Combined financial Statements.

                                      -2-

<PAGE>

                 AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC
                          COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31,
(In thousands)                                                2001               2002                 2003
                                                           ---------          ---------            ---------
<S>                                                        <C>                <C>                  <C>
REVENUES:
     Casino                                                $ 142,919          $ 143,057            $ 147,888
     Hotel                                                    38,326             44,263               47,259
     Food and beverage                                        55,453             56,349               59,583
     Tower, retail and other income                           29,512             28,247               30,336
                                                           ---------          ---------            ---------
              Gross Revenues                                 266,210            271,916              285,066
     Less promotional allowances                              23,737             21,893               22,255
                                                           ---------          ---------            ---------
NET REVENUES                                                 242,473            250,023              262,811
                                                           ---------          ---------            ---------
COSTS AND EXPENSES:
     Casino                                                   60,026             59,879               61,284
     Hotel                                                    17,190             20,142               22,074
     Food and beverage                                        42,806             43,393               44,990
     Other operating expenses                                 15,640             14,934               14,008
     Selling, general and administrative                      78,692             80,019               74,985
     Depreciation and amortization                            17,209             20,209               20,222
                                                           ---------          ---------            ---------
              Total Costs and Expenses                       231,563            238,576              237,563
                                                           ---------          ---------            ---------

INCOME FROM OPERATIONS                                        10,910             11,447               25,248
                                                           ---------          ---------            ---------
OTHER INCOME (EXPENSE):
     Interest income                                           1,640                667                  426
     Interest expense                                         (5,971)            (5,990)              (5,389)
     Gain (Loss) on sale of assets                                23               (354)              (1,401)
                                                           ---------          ---------            ---------
              Total Other Expense, net                        (4,308)            (5,677)              (6,364)
                                                           ---------          ---------            ---------

INCOME BEFORE INCOME TAXES                                     6,602              5,770               18,884

Provision for Income Taxes (note 8)                            4,908              4,907               (1,798)
                                                           ---------          ---------            ---------
NET INCOME                                                 $   1,694          $     863            $  20,682
                                                           =========          =========            =========
</TABLE>

                   See Notes to Combined financial Statements.

                                      -3-

<PAGE>

                 AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC
                        COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
(In thousands)                                                                       2001          2002          2003
                                                                                   --------      --------      --------
<S>                                                                                <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
          Net income                                                               $  1,694      $    863      $ 20,682
          Adjustments to reconcile net income to net cash
            provided by operating activities:
                Depreciation and amortization                                        17,209        20,209        20,222
                (Gain) Loss on sale or disposal of assets                               (23)          354         1,401
                Provision for deferred income taxes                                   1,237         1,804        (5,448)
                Changes in operating assets and liabilities:
                     Restricted Cash                                                      -             -         1,926
                     Accounts receivable, net                                        (1,119)         (108)          247
                     Other current assets                                             1,613         1,750         1,653
                     Accounts payable - trade                                          (277)         (403)        1,374
                     Accrued expenses                                                   783         5,766         2,341
                     Other                                                                -             -         3,399
                                                                                   --------      --------      --------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                            21,117        30,235        47,797
                                                                                   --------      --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES:
          Increase in investments - restricted                                          161        (1,623)         (290)
          Purchase of marketable securities                                             259             -             -
          Acquisition of property and equipment                                     (50,631)      (22,085)      (30,423)
          Payments for CIP                                                           (5,345)         (793)            -
          Related party receivables                                                    (411)          373          (201)
          Cash proceeds from sale of property and equipment                               -             1           521
                                                                                   --------      --------      --------
NET CASH USED IN INVESTING ACTIVITIES                                               (55,967)      (24,127)      (30,393)
                                                                                   --------      --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES:
          Debt issuance and deferred financing costs                                      -          (855)          (90)
          Proceeds from related part note payable                                    45,750        17,220         7,780
          Member contribution                                                         5,150           598             -
          Proceeds from capital lease obligations                                     1,004             -             -
          Payments of related party notes payable                                   (10,696)       (9,277)       (7,179)
          Payments of long term debt                                                 (3,369)          (38)            -
          Payments on capital lease obligation                                       (2,759)       (3,280)            -
          Cash acquired from subsidiary contributed by parent                             -           280             -
                                                                                   --------      --------      --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                                            35,080         4,648           511
                                                                                   --------      --------      --------

Net increase in cash and cash equivalents                                               230        10,756        17,915
Cash and cash equivalents - beginning of period                                      48,357        48,587        59,343
                                                                                   --------      --------      --------
CASH AND CASH EQUIVALENTS - END OF PERIOD                                          $ 48,587      $ 59,343      $ 77,258
                                                                                   ========      ========      ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for interest                                           $  5,058      $  5,790      $  5,422
                                                                                   ========      ========      ========

NON-CASH INVESTING AND FINANCING ACTIVITIES:
          Capitalized lease obligation incurred in the acquisition of property
                and equipment                                                      $      -      $      -      $  3,042
          Net assets contributed by parent                                         $      -      $    233      $      -
          Change in deferred tax asset valuation allowance related
               to book-tax differences existing at time of bankruptcy              $    628      $  2,412      $ 49,710
          Cancellation of common stock shares pursuant to the plan of merger       $      -      $     20      $      -
                                                                                   ========      ========      ========
</TABLE>

                   See Notes to Combined financial Statements.

                                      -4-

<PAGE>

                 AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC
                   COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        COMMON         ADDITIONAL       RETAINED         TOTAL
                                                        STOCK        PAID-IN-CAPITAL    EARNINGS         EQUITY
                                                       --------      ---------------    --------        --------
<S>                                                    <C>           <C>                <C>             <C>
BALANCES AT DECEMBER 31, 2000                          $     30         $234,709        $ 13,636        $248,375

CHANGE IN DEFERRED TAX ASSET VALUATION ALLOWANCE
  RELATED TO BOOK-TAX DIFFERENCES EXISTING AT TIME
  BANKRUPTCY                                                  -              628               -             628
MEMBER CONTRIBUTIONS                                          -            5,150               -           5,150

NET INCOME                                                    -                -           1,694           1,694

                                                       --------         --------        --------        --------
BALANCES AT DECEMBER 31, 2001                          $     30         $240,487        $ 15,330        $255,847

CHANGE IN DEFERRED TAX ASSET VALUATION ALLOWANCE
  RELATED TO BOOK-TAX DIFFERENCES EXISTING AT TIME
  BANKRUPTCY                                                  -            2,412               -           2,412

NET ASSETS CONTRIBUTED BY PARENT                              -              233               -             233

MEMBER CONTRIBUTIONS                                          -              598               -             598

CANCELLATION OF COMMON SHARES                               (20)              20               -               -

NET INCOME                                                    -                -             863             863

                                                       --------         --------        --------        --------
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
  BANKRUPTCY                                                  -           49,710               -          49,710

NET INCOME                                                    -                -          20,682          20,682
                                                       --------         --------        --------        --------
BALANCES AT DECEMBER 31, 2003                          $     10         $293,460        $ 36,875        $330,345
                                                       ========         ========        ========        ========
</TABLE>

                   See Notes to Combined financial Statements

                                       -5-

<PAGE>

                 AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

                     NOTES TO COMBINED FINANCIAL STATEMENTS

                        DECEMBER 31, 2001, 2002 AND 2003

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

The accompanying combined financial statements present the financial position,
results of operations and cash flows of American Casino & Entertainment
Properties LLC which is comprised of American Casino & Entertainment Properties
LLC, Stratosphere Corporation and its wholly-owned subsidiaries, Stratosphere
Gaming Corporation., Stratosphere Land Corporation, Stratosphere Advertising
Agency, Stratosphere Leasing, LLC, 2000 Las Vegas Boulevard Retail Corporation
and Stratosphere Development, LLC, an entity controlled by Stratosphere
Corporation; Arizona Charlie's, Inc., and its wholly owned subsidiary Jetset
Tours, LLC; and Fresca, LLC (collectively the "Company"). Stratosphere
Corporation, Arizona Charlie's, Inc. and Fresca, LLC are under the common
control of Carl C. Icahn. As discussed in note 13, American Casino &
Entertainment Properties LLC is awaiting approval of the Nevada State Gaming
Control Board to complete the acquisition of the casinos. The Company operates
integrated casinos, hotels, 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 combination.

CASINO REVENUES AND PROMOTIONAL ALLOWANCES

During the first quarter, 2001, the Emerging Issues Task Force reached a
consensus on the portion of Issue 00-22, "Accounting for `Points' and Certain
Other Time-Based or Volume-Based Sales Incentive Offers, and Offers for Free
Products or Services to be Delivered in the Future," which addressed the income
statement classification of the value of the points redeemable for cash awarded
under point programs similar to the Company's Player's Club and Guaranteed
Refund programs. The consensus states the cost of these programs should be
reported as a contra-revenue, rather than an expense and is retroactive to
January 1, 2001, with prior year restatement required. The Company has adopted
the current consensus recommendations on Issue 00-22. Prior to the release of
the new consensus, the Company historically reported the costs of such points as
an expense. In accordance with the consensus, the Company recorded these costs
of $6.7 million, $5.0 million and $12.8 million for the fiscal years ended
December 31, 2001, 2002 and 2003 respectively as a reduction of casino revenues
in the combined Statements of Income.

The Company recognizes revenues in accordance with industry practice. Casino
revenue is the net win from gaming activities (the difference between gaming
wins and losses). Casino revenues are net of accruals for anticipated payouts of
progressive and certain other slot machine jackpots. Revenues include the retail
value of rooms, food and beverage and other items that are provided to customers
on a complimentary basis. A corresponding amount is deducted as promotional
allowances. The cost of such complimentaries included as casino expenses is as
follows (in thousands):

<TABLE>
<CAPTION>
                                     December 31,
                          --------------------------------
                           2001          2002         2003
                           ----          ----         ----
<S>                      <C>           <C>          <C>
Food and Beverage        $7,367        $6,858       $7,035
Rooms                       229           104           84
Other                        66            53           31
                         ------        ------       ------
                         $7,662        $7,015       $7,150
                         ======        ======       ======
</TABLE>

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand and in banks, interest bearing
deposits, money market funds and debt instruments purchased with an original
maturity of 90 days or less. Cash and cash equivalents-restricted at December
31, 2002 consist primarily of funds reserved for final settlement of unsecured
claims pursuant to the Restated Second Amended Plan of Bankruptcy. In 2003, the
unsecured claims were settled and the funds were disbursed.

MARKETABLE SECURITIES

The Company's marketable securities represent investments in Moody's AA2 rated
Portland, Oregon and Moody's and Standard and Poor's AAA rated New York City
bonds. These securities are currently reported at cost, which approximates fair
market value, and are considered available-for-sale. The changes in fair values
of these securities have historically been immaterial to the combined financial
statements.

INVESTMENTS RESTRICTED

Investments-restricted consist primarily of funds pledged for Nevada sales and
use tax, unpaid sports book tickets and workers' compensation benefits.

                                      -6-
<PAGE>

INVENTORIES

Inventories, consisting primarily of food and beverage, retail merchandise and
operating supplies, are stated at the lower of cost or market and included in
other current assets. Cost is determined using the first-in, first-out method.

PROPERTY AND EQUIPMENT

Property and equipment purchased are stated at cost. Capitalized lease assets
are stated at the lower of the present value of the future minimum lease
payments or fair value at the inception of the lease (see Notes 4 and 6).
Expenditures for additions, renewals and improvements are capitalized and
depreciated over their useful lives. Costs of repairs and maintenance are
expensed when incurred. Leasehold acquisition costs are amortized over the
shorter of their estimated useful lives or the term of the respective leases
once the assets are placed in service.

Depreciation and amortization of property and equipment are computed using the
straight-line method over the following useful lives:

<TABLE>
<S>                                                           <C>
Buildings and improvements.................................   36-39 years
Furniture, fixtures and equipment..........................    3-15 years
Land improvements..........................................      15 years
</TABLE>

The Company's policy is to capitalize interest incurred on debt during the
course of qualifying construction projects. Such costs are added to the asset
base and amortized over the related assets' estimated useful lives. The Company
capitalized interest of $1,857,200 for 2001. There was no capitalized interest
during fiscal year 2002 and 2003.

RECOVERABILITY OF LONG-LIVED ASSETS TO BE HELD AND USED IN THE BUSINESS

The Company adopted SFAS No. 144 on January 1, 2002. SFAS No. 144 requires the
Company to review its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset or a
group of assets may not be recoverable. Assets are grouped and evaluated for
impairment at the lowest level for which there are identifiable cash flows that
are largely independent of the cash flows of other groups of assets. The Company
deems an asset to be impaired if a forecast of undiscounted future operating
cash flows directly related to the asset, including disposal value if any, is
less than its carrying amount. If an asset is determined to be impaired, the
loss is measured as the amount by which the carrying amount of the asset exceeds
fair value. The Company generally estimates fair value by discounting estimated
cash flows. Considerable management judgment is necessary to estimate discounted
future cash flows. Accordingly, actual results could vary significantly from
such estimates. Prior to January 1, 2002, the Company utilized SFAS No. 121 to
assess impairment of long-lived assets.

SALES, ADVERTISING AND PROMOTION

Sales, advertising and promotion costs are expensed as incurred and totaled
$20.4 million, $18.1 million and $22.9 million for the years ended December 31,
2001, 2002 and 2003, respectively, and are included in selling, general and
administrative expenses in the accompanying combined statements of income.

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make a number of estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Such estimates and assumptions affect the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis,
management evaluates its estimates and assumptions based upon historical
experience and various other factors and circumstances. Management believes its
estimates and assumptions are reasonable in the circumstances; however, actual
results may differ from these estimates under different future conditions.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, Accounting for Asset Retirement Obligations. SFAS No. 143 requires the
Company to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets that result from the acquisition,
construction, development, and/or normal use of the assets. The Company also
records a corresponding asset that is depreciated over the life of the asset.
Subsequent to the initial measurement of the asset retirement obligation, the
obligation is to be adjusted at the end of each period to reflect the passage of
time and changes in the estimated future cash flows underlying the obligation.
The Company was required to adopt SFAS No. 143 on January 21, 2003. The adoption
of SFAS No. 143 did not have a material effect on the Company's financial
statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 amends existing guidance on reporting gains and losses on the
extinguishment of debt to prohibit classification of the gain or loss as
extraordinary, as the use of such extinguishments have become part of the risk
management strategy of many companies. SFAS No. 145 also amends SFAS No. 13 to
require sale-leaseback accounting for certain least modifications that have
economic effects similar to sale-leaseback transactions. The provision of the
Statement related to the rescission of Statement No. 4 is applied in fiscal
years beginning after May 15, 2002. Earlier application of these provisions is
encouraged. The provisions of the Statement related to Statement No. 13

                                      -7-

<PAGE>

were effective for transactions occurring after May 15, 2002, with early
application encouraged. The adoption of SFAS No. 145 did not have a material
effect on the Company's financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity. The
provisions of this Statement were effective for exit or disposal activities that
are initiated after December 31, 2002, with early application encouraged. The
adoption of SFAS No. 146 did not have a material effect on the Company's
financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others, an interpretation of FASB Statements No. 5, 57 and 107
and a rescission of FASB Interpretation No. 34. This Interpretation elaborates
on the disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees issued. The Interpretation
also clarifies that a guarantor is required to recognize, at inception of a
guarantee, a liability for the fair value of the obligation undertaken. The
initial recognition and measurement provisions of the Interpretation were
applicable to guarantees issued or modified after December 31, 2002 and did not
have a material effect on the Company's financial statements. The disclosure
requirements were effective for financial statements of interim and annual
periods ending after December 31, 2002.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation to provide alternative methods of transition for a voluntary change
to the fair value method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of Statement No. 123
to require prominent disclosures of the effect of the fair value method in both
annual and interim financial statements. The Company adopted the disclosure
provisions of this Statement on January 1, 2003 and included the disclosure
modifications in these combined financial statements.

In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51, which was then
revised in December 2003. This Interpretation addresses the consolidation by
business enterprises of variable interest entities as defined in the
Interpretation. The Interpretation applies immediately to variable interests in
variable interest entities created after January 31, 2003, and to variable
interests in variable interest entities obtained after January 31, 2003. For
nonpublic enterprises, such as the Company, with a variable interest in a
variable interest entity created before February 1, 2003, the Interpretation is
applied to the enterprise no later than the end of the first annual reporting
period beginning after June 15, 2003. The application of this Interpretation is
not expected to have a material effect on the Company's financial statements.
The Interpretation requires certain disclosures in financial statements issued
after January 31, 2003 if it is reasonably possible that the Company will
consolidate or disclose information about variable interest entities when the
Interpretation becomes effective. The Company does not believe it has any
variable interest entities.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity. SFAS No. 150
establishes standards for how a company classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that companies classify a financial instrument that is within its scope
as a liability (or an asset in some circumstance). Many of those instruments
were previously classified as equity. The provisions of this Statement are
effective for financial instruments entered into or modified after May 31, 2003,
and otherwise are effective at the beginning of the first interim period
beginning after June 15, 2003. The impact of this Statement did not have a
significant effect on the Company's financial statements.

RECLASSIFICATIONS

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

(2) ACCOUNTS RECEIVABLE

Accounts receivable consists of the following (in thousands):

<TABLE>
<CAPTION>
                                           December 31,
                                       -------------------
                                        2002         2003
                                        ----         ----
<S>                                    <C>          <C>
Hotel and related                      $2,535       $3,030
Gaming                                    575          523
Income taxes                                0            0
Other                                   2,018          971
                                       ------       ------
                                        5,128        4,524
Less allowance for doubtful accounts      830          473
                                       ------       ------
                                       $4,298       $4,051
                                       ======       ======
</TABLE>

The Company recorded bad debt expense of $134, $524 and $395 for the years ended
December 31, 2001, 2002 and 2003 respectively.

                                      -8-

<PAGE>


(3) OTHER CURRENT ASSETS

Other current assets consist of the following as of December 31, 2002 and 2003
(in thousands):

<TABLE>
<CAPTION>
                                December 31,
                         -----------------------
                           2002            2003
                           ----            ----
<S>                      <C>              <C>
Inventories              $2,397           $2,683
Prepaid expenses          4,989            4,435
Other                       607            2,095
                         ------           ------
                         $7,993           $9,213
                         ======           ======
</TABLE>

(4) PROPERTY AND EQUIPMENT - NET

Property and equipment consist of the following as of December 31, 2002 and 2003
(in thousands):

<TABLE>
<CAPTION>
                                                                 December 31,
                                                         --------------------------
                                                           2002              2003
                                                           ----              ----
<S>                                                      <C>               <C>
Land and improvements, including land held
 for development                                         $ 50,239          $ 50,299
Building and improvements                                 230,459           235,538
Furniture, fixtures and equipment                          93,846           105,415
Construction in progress                                      361             7,724
                                                         --------          --------
                                                          374,905           398,976
Less accumulated deprecation and amortization              61,695            74,428
                                                         --------          --------
                                                         $313,210          $324,548
                                                         ========          ========
</TABLE>

At December 31, 2002 and 2003, assets recorded under capital leases were $1.0
million and $4.0 million, respectively. Accumulated depreciation and
amortization at December 31, 2002 and 2003 includes amounts recorded for capital
leases of $0.1 million.

In mid-1996, Stratosphere Corporation suspended construction of the 1,000-room
hotel tower (the "Hotel Expansion"), which had reached a height of approximately
14 stories. In April 2000, construction was resumed to complete the unfinished
hotel tower with a total construction budget of $65.0 million. In June 2001, the
Company completed construction of the new hotel tower that includes 1,000 new
guestrooms and amenities including a 67,000-square foot pool and recreation area
with a new snack and cocktail bar, private cabanas and a large spa. "Lucky's
Cafe" a 350-seat coffee shop, a new porte-cochere and valet parking entrance,
gift shop and new tour bus entrance and lobby have also been completed. The
Company refurbished and expanded the "Stratosphere Courtyard Buffet" as well as
remodeled "Montana's Steak House" and converted it into the "Crazy Armadillo"
featuring Tex-Mex cuisine and an oysterbar.

(5) OTHER ACCRUED EXPENSES

Other accrued expenses consist of the following as of December 31, 2002 and 2003
(in thousands):

<TABLE>
<CAPTION>
                                                     December 31,
                                             ------------------------
                                               2002             2003
                                               ----             ----
<S>                                          <C>              <C>
Vacation packages                            $ 2,634          $ 2,478
Accrued liabilities                            6,743            9,137
Accrued restructuring costs                      341                -
Cash reserve for unpaid bankruptcy claims      1,926                -
Accrued taxes                                  1,411            1,885
Accrued/unclaimed sports tickets/prizes          820              981
Other                                          3,463            3,320
                                             -------          -------
                                             $17,338          $17,801
                                             =======          =======
</TABLE>

                                      -9-

<PAGE>

(6) LEASES, INCOME AND CAPITAL LEASE OBLIGATIONS

In connection with the purchase of the Master Lease from Strato-Retail, the
Company assumed lessor responsibilities for various non-cancelable operating
leases for certain retail space. The future minimum lease payments to be
received under these leases for years subsequent to December 31, 2003 are as
follows (in thousands):

<TABLE>
<CAPTION>
 Years ending December 31,
 -------------------------
<S>                            <C>
         2004                  $  3,138
         2005                     2,644
         2006                     1,853
         2007                     1,488
         2008                       708
      Thereafter                  1,616
                               --------
      Total Payments           $ 11,447
                               ========
</TABLE>

The Company is reimbursed by lessees for certain operating expenses.

Future minimum lease payments under capital leases with initial or remaining
terms of one year or more consist of the following at December 31, 2003 (in
thousands):

<TABLE>
<CAPTION>
     Years ending December 31,
     -------------------------
<S>                                         <C>
            2004                            $   665
            2005                                665
            2006                                665
            2007                                665
            2008                              1,288
         Thereafter                           7,488
                                            -------
Total minimum lease payments                 11,436
Less: amount representing interest
  ranging from 5% to 10%                      7,445
                                            -------
Present value of net minimum lease payments   3,991
Less: current portion                           436
                                            -------
Long-term capital lease obligation          $ 3,555
                                            =======
</TABLE>

The Company had no operating leases as of December 31, 2001, 2002 and 2003,
respectively.

(7) STOCKHOLDERS' EQUITY

Common stock includes the capital stock issued and outstanding for Stratosphere
Corporation and Arizona Charlie's, Inc. and is summarized as follows:

<TABLE>
<CAPTION>
                                         Amount      Amount Issued and
                            Par Value  Authorized      Outstanding
                            ---------  ----------      -----------
<S>                         <C>        <C>           <C>
Stratosphere Corporation
  December 31, 2002          $0.01           100             100
  December 31, 2003           0.01           100             100
Arizona Charlie's, Inc
  December 31, 2002          $0.01     5,000,000       1,000,000
  December 31, 2003           0.01     5,000,000       1,000,000
</TABLE>

Included in additional paid-in capital at December 31, 2002 and 2003 is $64,677
in members' equity related to Fresca, LLC.

Fresca, LLC is a Nevada limited liability company that was formed on January 26,
2000. It was formed for the purpose of acquiring and operating certain property
in Las Vegas, Nevada, including a casino, hotel, and recreational vehicle rental
park, referred to as Arizona Charlie's Boulder. Hotel operations commenced on
February 5, 2000 (date of inception) and gaming operations commenced on May 23,
2000. The members of Fresca, LLC are Mr. lcahn and Starfire Holding Corporation
(a company controlled by Mr. Icahn). Earnings and losses are distributed based
on the original capital contribution amounts. Members of an LLC are not
personally liable for debts, obligations or liabilities of the Company beyond
the amount of the member's capital contributions. The latest date on which
Fresca, LLC is to dissolve is December 31, 2099.

On October 4, 1999, American Real Estate Holdings Limited Partnership, or
("AREH"), a common-ownership related party purchased 985,286 shares of the
Stratosphere's common stock from entities owned or controlled by Mr. Icahn. On
March 24, 2000, AREH purchased 50,000 shares of the Stratosphere's common stock
from NYBOR, a company owned by Mr. Icahn. Upon completion of the transaction,
Mr.

                                      -10-

<PAGE>

Icahn controlled approximately 89.6% of the Company's Common Stock. AREH is the
subsidiary limited partnership of American Real Estate Partners, L.P. ("AREP") a
master limited partnership whose units are traded on the New York Stock
Exchange. Mr. Icahn currently owns over 86% of AREP's outstanding depository
units and preferred units.

On February 1, 2002, the Stratosphere announced that it entered into a merger
agreement under which AREP, through an affiliate, will acquire the remaining
shares of Stratosphere that AREP does not currently own. AREP owned
approximately 51% of Stratosphere and Mr. Icahn owned approximately 38.6%. The
initial determination to engage in the transaction at the prices set forth below
was previously announced by AREP in September 2000.

On December 19, 2002, the stockholders of Stratosphere Corporation approved the
plan of merger dated February 1, 2002. Under the Merger Plan, AREP acquired the
remaining 49% interest in the Company. Under the agreement, the stockholders who
were unaffiliated with AREP and Mr. Icahn received a cash price of $45.32 per
share, and the Icahn-related stockholders (other than AREP) received a cash
price of $44.33 per share. AREP paid an aggregate of approximately $44.3 million
for the 49% of the shares of Stratosphere that it did not already own.
Subsequent to the merger, all but 100 shares of Stratosphere were cancelled, and
the par value of the cancelled shares transferred to additional paid in capital.

The Company has not implemented a stock option plan.

(8) INCOME TAXES

The income tax provision attributable to income from operations for the fiscal
years ended December 31, 2002 and 2003 (in thousands):

<TABLE>
<CAPTION>
                            December 31,
               -------------------------------------
                2001         2002             2003
                ----         ----             ----
<S>            <C>          <C>            <C>
Current        $3,176       $  311          $ 3,650
Deferred        1,732        4,596           (5,448)
               ------       ------         --------
               $4,908       $4,907         ($ 1,798)
               ======       ======         ========
</TABLE>

DEFERRED TAX ASSETS AND LIABILITIES

The tax effect of significant temporary differences and carryforwards
representing deferred tax assets and liabilities (the difference between
financial statement carrying values and the tax basis of assets and liabilities)
for the Company is as follows at December 31, 2001, 2002 and 2003 (in
thousands):

<TABLE>
<CAPTION>
                                                       December 31,
                                                 ----------------------
                                                   2002          2003
                                                   ----          ----
<S>                                              <C>           <C>
TEMPORARY DIFFERENCES
Current:
   Allowance for doubtful accounts               $    270      $    126
   Gaming related                                     567           661
   Accrued vacation and employee related            2,326         2,005
   Outstanding chip and token liability               112           112
   Deferred income                                     55            46
   Other                                              228            10
                                                 --------      --------
                                                    3,558         2,960

Long-term:
Excess of tax over book basis of assets
due primarily to write down of assets              62,834        39,859
                                                 --------      --------
TOTAL TEMPORARY DIFFERENCES                        66,392        42,819
                                                 --------      --------
Carryforwards:
      Net Operating Loss (including
       Section 382 limitation)                     12,942         9,984
      Alternative minimum tax credit                  450           521
      Other credits                                 1,048           739
                                                 --------      --------
Total Carryforwards                                14,440        11,244
                                                 --------      --------
Total temporary differences and
carryforwards                                      80,832        54,063
Valuation allowance                               (83,785)       (1,858)
                                                 --------      --------
Total deferred tax assets (liabilities)         ($  2,953)     $ 52,205
                                                 ========      ========
</TABLE>

                                      -11-

<PAGE>


At December 31, 2003, the company had net operating loss carryforwards available
for federal income tax purposes of approximately $28.5 million which begin
expiring in 2019.

SFAS 109 requires a "more likely than not" criterion be applied when evaluating
the realizability of a deferred tax asset. As of December 31, 2002, given the
Company's history of losses for income tax purposes, the volatility of the
industry within which the Company operates, and certain other factors, the
Company has established a valuation allowance principally for the deductible
temporary differences, including the excess of the tax basis of the Company's
assets over the basis of such assets for financial purposes. However, at
December 31, 2003, based on various factors including the current earnings trend
and future taxable income projections, the Company determined that it was more
likely than not that some of the deferred tax assets will be realized.
Accordingly, the valuation allowance for these assets was reversed.

In accordance with SFAS 109, the tax benefit of any deferred tax asset that
existed on the effective date of a reorganization should be reported as a direct
addition to contributed capital. The Company has deferred tax assets relating to
both before and after the Company emerged from bankruptcy in September of 1998.
The net decrease in the valuation allowance was $81,927,000, of which $49,710,
000 was credited directly to additional paid-in-capital in accordance with SFAS
109 and the requirements for recording tax benefits associated with emergence
from bankruptcy.

The provision for income taxes differs from the amount computed at the federal
statutory rate as a result of the following:

<TABLE>
<CAPTION>
                                                 December 31,
                                          -------------------------
                                          2001      2002      2003
                                          ----      ----      ----
<S>                                       <C>       <C>      <C>
Federal statutory rate                    35.0%     35.0%     35.0%
Other                                     -0.4%      5.4%      1.8%
Permanent differences                      1.6%      0.7%      0.5%
Federal income tax credits                -3.9%     -3.5%     -1.4%
Tax deduction not given book benefit       0.0%      0.0%     18.0%
Valuation allowance                        2.1%     -7.4%    -74.3%
Income (loss) not subject to taxation     40.0%     54.8%     10.9%
                                          ----      ----     -----
                                          74.4%     85.0%     -9.5%
                                          ====      ====     =====
</TABLE>

SECTION 382 LIMITATION

As of December 31, 2003 and 2002, the Company had a tax basis in its assets in
excess of its basis for financial reporting purposes that will generate
substantial tax deductions in future periods. As a result of a "change in
ownership" under Internal Revenue Code Section 382, the Company's ability to
utilize depreciation and other tax attributes was limited to approximately
$6,400,000 per year commencing fiscal year 1998 and for the five subsequent
years. This limitation is applied to all built-in losses which exist on the
"change of ownership" date, including all items giving rise to a deferred tax
asset.

For the year ended December 31, 2001, a portion of the Company's depreciation
and other tax attributes in the amounts of $1.6 million that existed on the
"change of ownership" date was limited under Section 382. Pursuant to Section
382, the limited depreciation and other tax attributes are treated as a net
operating loss, which the Company may utilize in subsequent years.

(9) RELATED PARTY TRANSACTIONS

Long term debt consists of the following as of December 31, 2002 and 2003 (in
thousands):

<TABLE>
<CAPTION>
                                              December 31,
                                        ---------------------
                                          2002         2003
                                          ----         ----
<S>                                     <C>          <C>
Construction loan note payable (A)      $ 68,757     $ 65,106
Lease purchase note payable (B)           11,770       11,146
Arnos loan note payable (C )               2,904            0
Starfire loan note payable (D)            17,220       25,000
                                        --------     --------
                                         100,651      101,252
Less current portion                      15,421       14,796
                                        --------     --------
Long-term debt-less current portion     $ 85,230     $ 86,456
                                        ========     ========
</TABLE>

                                      -12-
<PAGE>

(A)      On May 1, 2001, the Company delivered a $73.0 million promissory note
         for a construction loan to American Real Estate Holdings ("AREH"), a
         common-ownership related party, in order to finance the construction of
         the 1,000-room hotel tower, Lucky's Cafe and new pool area (the "Hotel
         Expansion"). The promissory note is secured by a deed of trust on
         certain real property. Demand notes bearing interest at 9.5% and
         totaling $48.0 million, as of April 18, 2001, were replaced by this
         note. During 2001 AREH provided additional advances of $25.0 million
         against the $73.0 million note. In November 2001 the Company began
         making principal payments on the loan in equal monthly installments
         based on a twenty (20) year amortization schedule, with the remaining
         balance due and payable June 2002. Interest accrues at a variable rate
         per annum equal to the sum of (i) three hundred (300) basis points plus
         (ii) the 90 day London Interbank Offered Rate ("LIBOR"). This interest
         rate at December 31, 2002 was 4.66%. On July 3, 2002, the Company paid
         AREH one point or $730,000 to obtain a twenty-four (24) month extension
         of the loan term. The extension fee is being amortized over the
         remaining term of the loan. On September 1, 2003 the term was extended
         to September 6, 2005.

(B)      On May 1, 2001, the Company delivered a $12.5 million promissory note
         to AREH to replace the $12.5 million demand note used to acquire the
         property under the Master Lease from Strato-Retail, LLC. The promissory
         note is secured by a deed of trust on certain real property. In
         November 2001 the Company began making principal payments on the loan
         in equal installments based on a twenty (20) year amortization schedule
         with the remaining balance due and payable July 2002. Interest accrues
         at a variable rate per annum equal to the sum of (i) three hundred
         fifty (350) basis points plus (ii) the 90 day LIBOR. This interest rate
         at December 31, 2002 was 5.16%. On July 4, 2002 the Company paid AREH
         one point or $125,000 to obtain a twelve (12) month extension of the
         loan term. The loan extension fee is being amortized over the remaining
         term of the loan. The term was extended to August 31, 2004.

(C)      On September 24. 2001., Arizona Charlie's, Inc., refinanced the
         remaining principal balance of $7,904,000 on a prior note payable to
         Amos Corp., a company related through common ownership. The note bears
         interest at the prime rate plus 1.50% (5.75% at December 31, 2002),
         with a maturity of June 2004, and was collateralized by all assets of
         the Arizona Charlie's, Inc. The note was repaid during November 2003.

(D)      During fiscal year 2002, Fresca, LLC, entered into an unsecured line of
         credit in the amount of $25,000,000 with Starfire Holding Corporation
         (Starfire), a common-ownership related party. The outstanding balance,
         including accrued interest, shall be due and payable on January 2,
         2007. At December 31, 2003, Fresca, LLC, had $25,000,000 outstanding.
         The note bears interest on the unpaid principal balance from January 2,
         2002 until maturity at the rate per annum equal to the prime rate, as
         established by Fleet Bank, from time to time, plus 2.75%. Interest is
         payable semi-annually in arrears on the first day of January and July,
         and at maturity. The note is guaranteed by Mr. Icahn.

The future aggregate annual maturities of notes payable to related party at
December 31, 2003 are as follows (in thousands):

<TABLE>
<CAPTION>
    Years ending
    ------------
    December 31,
    ------------
<S>                <C>
  2004             $ 14,796
  2005               61,456
  2006                    -
  2007               25,000
                   --------
Total              $101,252
                   ========
</TABLE>

(10) EMPLOYEE BENEFIT PLAN

Employees of the Company who are members of various unions are covered by
union-sponsored, collectively bargained, multi-employer health and welfare and
defined benefit pension plans. The Company recorded expenses for such plans of
$4,921,851 and $6,517,487 and $7,619,495 for the years ended December 31, 2001,
2002 and 2003, respectively. Sufficient information is not available from the
plans' sponsors to permit the Company to determine the adequacy of the plans'
funding status.

The Company has a retirement savings plan under Section 401(k) of the Internal
Revenue Code covering its non-union employees. The plan allows employees to
defer, within prescribed limits, up to 15% of their income on a pre-tax basis
through contributions to the plan. The Company currently matches, within
prescribed limits, 50% of eligible employees' contributions up to 4% of their
individual earnings. The Company recorded $813,000, $815,000 and $559,000 for
matching contributions for the years ended December 31, 2001, 2002 and 2003,
respectively.

(11) COMMITMENTS

The Company and Mr. Richard Brown, President and Chief Executive Officer of
Stratosphere Corporation entered into a two-year employment agreement effective
April 1, 2002 (the "Brown Agreement"). The Brown Agreement provides that Mr.
Brown will be paid a base annual compensation of $300,000. The agreement also
provides Mr. Brown receive an annual bonus of $20,000. The Brown Agreement
further provides that if Mr. Brown is terminated without "Cause" (as defined in
the Brown Agreement) or there is a "Change of

                                      -13-

<PAGE>

Control" (as defined in the Brown Agreement), then Mr. Brown will receive an
immediate severance payment in the amount equal to the then current Base Salary.
Mr. Brown was paid a $20,000 bonus in 2003 for the year ended December 31, 2002.

(12) CONTINGENCIES

The Company filed a complaint for the avoidance of preferential transfers made
to Grand Casinos, Inc. ("Grand"). Included in the complaint are approximately
$5.9 million of payments made to Grand prior to the Company beginning bankruptcy
proceedings. On December 31, 2002, the Bankruptcy Court entered its Memorandum
of Decision; Findings of Facts and Conclusions of Law; and Judgment awarding the
Stratosphere approximately $2.3 million. This amount was collected during May
2003.

On January 31, 2001, the Company was named in an action styled Disabled Rights
Action Committee v. Stratosphere Gaming Corp., Case No A430070, in the Eighth
Judicial District Court of the State of Nevada. The complaint alleges a number
of violations of the Americans with Disabilities Act ("ADA"), including
inadequate room selection, door widths and other similar items. Simultaneously
with the complaint, plaintiffs filed a Motion for Preliminary Injunction,
seeking to have construction halted on the new hotel tower until the property
fully complies with the ADA. The Company removed the action to the United States
District Court in Nevada, and it is now styled Disabled Rights Action Committee
v. Stratosphere Gaming Corp., Case No. CV-S-01-0162-RLH (PAL). The federal
district court held a hearing on plaintiffs' Motion for Preliminary Injunction
and denied the motion, focusing upon what the Court believed to be the
plaintiffs' lack of irreparable injury. The federal district court also granted
the Company's Motion to Dismiss the plaintiffs' state law claims, leaving in
place only the ADA claims. The Company and the Plaintiffs then filed Motions for
Summary Judgment. The District Court granted and denied in part each of the
parties' respective motions. The Court ordered that the Company must make
certain renovations to 532 rooms that were opened in 1996. The renovations were
completed by July, 2002 and cost $765,000.

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"), 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 $443,579.

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 probably 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 June 21, 2004. The Stratosphere Parties intend to vigorously defend
the action for claims in excess of $1,004,059.

On May 3, 2001, the Company was named in an action brought by Harrah's
Entertainment, Inc. and Harrah's Operating Company, Inc. (collectively
"Harrah's") alleging infringement of a purported patent covering a business
method allegedly developed by Harrah's. The use of an allegedly similar business
method by the Company in its advertising and promotions is said by plaintiff to
infringe upon its patent rights.

In January 2002, the parties entered into a sealed Consent Judgment resolving
the dispute, which was the subject matter of this action. In December 2001, the
Company paid Harrah's the settlement for this action.

In addition, in the ordinary course of business, the Company is party to various
legal actions. In management's opinion, the ultimate outcome of such legal
actions will not have a material effect on the results of operations or the
financial position of the Company.

                                      -14-

<PAGE>

(13) SUBSEQUENT EVENTS

On December 29, 2003, American Casino & Entertainment Properties LLC (ACEP) was
formed in Delaware. The holding company will own and operate three gaming and
entertainment properties in Las Vegas, 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 Mr. Icahn,
in which ACEP agreed to purchase all of the membership interests in Charlie's
Holding LLC, a newly-formed entity that will own Arizona Charlie's Decatur and
Arizona Charlie's Boulder. The closing of this acquisition is subject to
necessary approvals by the Nevada Gaming Commission upon the recommendation of
the Nevada State Gaming Control Board and the other terms and conditions of the
agreement. The purchase price is $125.9M, subject to reduction based on a
post-closing working capital adjustment. Additionally, ACEP has entered into a
contribution agreement with their direct parent, American Entertainment
Properties Corp., and our indirect parent, American Real Estate Holdings Limited
Partnership, or AREH, in which AREH agreed to contribute to us 100% of the
outstanding capital stock of Stratosphere Corporation, subject to necessary
approvals by the Nevada Gaming Commission upon the recommendation of the Nevada
State Gaming Control Board and the closing of the transaction contemplated by
the membership interest purchase agreement.

The Company has offered $215,000,000 in aggregate principal amount of 7.85%
Senior Secured Notes due 2012. The net proceeds from the sale of the notes will
be used in connection with the acquisition of three Las Vegas, Nevada gaming and
entertainment properties from affiliated parties. The notes will 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. The transaction closed on January 29,
2004 and the proceeds will remain in an escrow account until the Nevada Gaming
Authorities have approved the transaction.

                                      -15-


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>5
<FILENAME>y96553exv99w3.txt
<DESCRIPTION>MANAGEMENT'S DISCUSSION & ANALYSIS
<TEXT>
<PAGE>

                                                                    Exhibit 99.3

MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

         We will own and operate three gaming and entertainment properties in
the Las Vegas metropolitan area. The three properties are the Stratosphere,
Arizona Charlie's Decatur and Arizona Charlie's Boulder. 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 entertainment attractions found nowhere
else in Las Vegas.

         A majority of our revenues are generated by our casino operations. Two
of our key drivers of gaming revenues are average win per slot machine per day
and average win per table game per day. In order to increase these amounts and,
therefore, our casino revenues, we seek to increase customer traffic to our
properties.

         The following table sets forth information derived from our combined
statements of income expressed as a percentage of net revenues for the period
indicated.

<TABLE>
<CAPTION>
                                           For The Years Ended December 31,
                                             2001       2002       2003
                                           --------------------------------
<S>                                         <C>        <C>        <C>
Revenues
    Casino                                   58.9%      57.2%      56.3%
    Hotel                                    15.8%      17.7%      18.0%
    Food and beverage                        22.9%      22.6%      22.7%
    Tower, retail and other                  12.2%      11.3%      11.5%
                                            ---------------------------
        Gross revenues                      109.8%     108.8%     108.5%
    Less promotional allowances               9.8%       8.8%       8.5%
                                            ---------------------------
        Net revenues                        100.0%     100.0%     100.0%
                                            ---------------------------

Costs and expenses
    Casino                                   24.7%      23.9%      23.3%
    Hotel                                     7.1%       8.1%       8.4%
    Food and beverage                        17.7%      17.3%      17.1%
    Tower, retail and other                   6.5%       6.0%       5.3%
    Selling, general and administrative      32.4%      32.0%      28.6%
    Depreciation and amortization             7.1%       8.1%       7.7%
                                            ---------------------------

        Total costs and expenses             95.5%      95.4%      90.4%

                                            ---------------------------
        Income from operations                4.5%       4.6%       9.6%
                                            ---------------------------

Other income (expense)
    Interest income                           0.7%       0.2%       0.2%
    Interest expense                         -2.5%      -2.4%      -2.1%
    Gain (loss) on disposal of assets         0.0%      -0.1%      -0.5%
                                            ---------------------------
        Total other expense, net             -1.8%      -2.3%      -2.4%
                                            ---------------------------

        Income before income taxes            2.7%       2.3%       7.2%
Provision for income taxes                    2.0%       2.0%      -0.7%
                                            ---------------------------
        Net income                            0.7%       0.3%       7.9%
                                            ===========================
</TABLE>

                                       1

<PAGE>

<TABLE>
<CAPTION>
                                                     FOR THE YEAR ENDED DECEMBER 31,
                                                ---------------------------------------
                                                   2001          2002           2003
                                                ---------      ---------      ---------
<S>                                             <C>            <C>            <C>
OPERATING DATA:
Stratosphere
   Average number of slot machines .......          1,476          1,505          1,459
   Average win per slot machine per day ..      $   85.37      $   90.74      $   91.73
   Average number of table games .........             46             48             50
   Average win per table game per day.....      $  984.58      $1,022.50      $1,016.00
   Average number of hotel rooms .........          1,994          2,444          2,444
   Average daily room rate ...............      $   48.54      $   48.28      $   51.17
   Average occupancy rate ................           93.2%          89.6%          89.8%

Arizona Charlie's Decatur
   Average number of slot machines .......          1,620          1,590          1,539
   Average win per slot machine per day ..      $   97.85      $   92.93      $  105.61
   Average number of table games .........             19             18             14
   Average win per table game per day.....      $  595.32      $  486.30      $  547.78
   Average number of hotel rooms .........            258            258            258
   Average daily room rate ...............      $   45.29      $   43.91      $   43.17
   Average occupancy rate ................           77.3%          74.4%          85.3%

Arizona Charlie's Boulder
   Average number of slot machines .. ....            797            812            838
   Average win per slot machine per day ..      $   61.96      $   65.53      $   79.16
   Average number of table games .........             13             12             13
   Average win per table game per day.....      $  472.21      $  468.20      $  441.77
   Average number of hotel rooms .........            303            303            303
   Average daily room rate ...............      $   39.51      $   42.97      $   43.32
   Average occupancy rate.................           59.3%          55.2%          55.7%
</TABLE>

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

         Combined gross revenues for the year ended December 31, 2003 amounted
to $285.1 million, an increase of $13.1 million, or 4.8%, over the year ended
December 31, 2002. Gross revenues at the Stratosphere for the year ended
December 31, 2003 were $176.4 million, or 61.9% of combined gross revenues, an
increase of $5.7 million as compared to revenues for the year ended December 31,
2002. Gross revenues at Arizona Charlie's Decatur for the year ended December
31, 2003 were $73.9 million, or 25.9% of combined gross revenues, an increase of
$2.7 million as compared to the year ended December 31, 2002. This increase of
3.7% in gross revenues at Arizona Charlie's Decatur was primarily attributable
to an increase in casino revenues. Gross revenues at Arizona Charlie's Boulder
for the year ended December 31, 2003 were $34.8 million, or 12.2% of combined
gross revenues, an increase of $4.7 million as compared to the year ended
December 31, 2002. This increase of 15.8% was primarily due to the increased
slot coin in and increased hold percentage as compared to the year ended
December 31, 2002.

         Casino Revenues

         Combined casino revenues during the year ended December 31, 2003
totaled $147.9 million, an increase of $4.8 million over the year ended December
31, 2002. Slot machine revenues were $119.6 million, or 80.9% of combined casino
revenues, and table game revenues were $23.6 million, or 16.0% of the combined
casino

                                       2

<PAGE>

revenues, for the year ended December 31, 2003 as compared to $115.6 million and
$23.3 million, respectively, for the year ended December 31, 2002.

         Casino revenues at the Stratosphere for the year ended December 31,
2003 were $66.5 million, a decrease of $.7 million, or 1.1%, over the year ended
December 31, 2002, of which slot machine revenues were $46.6 million, or 70.0%
of its casino revenues, and table game revenues were $18.6 million, or 27.9% of
its casino revenues as compared to $48.7 million and $18.0 million,
respectively, for the year ended December 31, 2002. Average win per slot machine
per day at Stratosphere for the year ended December 31, 2003 was $91.73 which
was an increase over the prior year of $90.74 due to a 3% decrease in the number
of units compared to the prior year. Casino revenues at Arizona Charlie's
Decatur for the year ended December 31, 2003 were $57.7 million, an increase of
$1.6 million as compared to the year ended December 31, 2002, of which slot
machine revenues were $52.4 million, or 90.7% of its casino revenues, and table
game revenues were $2.9 million, or 5.0% of its casino revenues as compared to
$49.6 million and $3.2 million, respectively, for the year ended December 31,
2002. Average win per slot machine per day at Arizona Charlie's Decatur for the
year ended December 31, 2003 was $105.61, as compared to the average win per
slot machine per day of $92.93 for 2002. Casino revenues at Arizona Charlie's
Boulder for the year ended December 31, 2003 were $23.7 million, an increase of
$4.0 million as compared to the year ended December 31, 2002. For the year ended
December 31, 2003, slot machine revenues were $20.6 million, or 87.2% of its
casino revenues, and table game revenues were $2.2 million, or 9.2% of its
casino revenues as compared to $17.4 million and $2.1 million, respectively, for
the year ended December 31, 2002. Average win per slot machine per day at
Arizona Charlie's Boulder for the year ended December 31, 2003 was $79.16, as
compared to the average win per slot machine per day of $65.53 for 2002.

         Non-Casino Revenues

         Combined hotel revenues totaled $47.3 million, or 16.6% of combined
gross revenues, for the year ended December 31, 2003 as compared to $44.3
million, or 16.3% of combined gross revenues for the year ended December 31,
2002. Hotel revenues at the Stratosphere totaled $40.6 million for the year
ended December 31, 2003 as compared to $38.1 million for the year ended December
31, 2002. Stratosphere hotel occupancy during the period was 89.8%, as compared
to 89.6% for the year ended December 31, 2002. As a result of the increased room
capacity, average daily room rate (ADR) increased from $48.28 for the year ended
December 31, 2002 to $51.17 for the year ended December 31, 2003. Hotel revenues
at Arizona Charlie's Decatur were $3.4 million for the year ended December 31,
2003, an increase of 15.6% from the previous year. This is a result of an
increase in average occupancy rate from 74.4% to 85.3%. Hotel revenues at
Arizona Charlie's Boulder were $3.3 million for the year ended December 31, 2003
as compared to $3.3 million for the year ended December 31, 2002. The occupancy
rate for Arizona Charlie's Boulder increased from 55.2% for the year ended
December 31, 2002 to 55.7% for the year ended December 31, 2003 and resulted in
an increase in the ADR from $42.97 to $43.32.

                                       3

<PAGE>

         Combined food and beverage revenues for the year ended December 31,
2003 totaled $59.6 million, or 20.9% of combined gross revenues, as compared to
$56.3 million, or 20.7% of combined gross revenues, for the year ended December
31, 2002. Food and beverage revenues at the Stratosphere increased 6.5% from
$39.7 million for the year ended December 31, 2002 to $42.3 million for the year
ended December 31, 2003, due to an increase in food covers of 0.6%, while the
average revenue per cover increased 5.9%. At Arizona Charlie's Decatur, food and
beverage revenues were $10.4 million for both years ended December 31, 2003 and
2002. At Arizona Charlie's Boulder, food and beverage revenues were $7.0 million
for the year ended December 31, 2003, an increase of $.7 million, or 10.7%, from
the year ended December 31, 2002.

         Combined tower, retail and other revenues increased $2.1 million to
$30.3 million for the year ended December 31, 2003. Tower, retail and other
revenues at Stratosphere increased 5.4%, from $25.7 million in the year ended
December 31, 2002 to $27.1 million for the year ended December 31, 2003. The
combined retail and other revenues increased at Arizona Charlie's Decatur to
$2.4 million, or 34.2% and Arizona Charlie's Boulder increased $.1 million, or
10.1% of revenues.

         Promotional Allowances

         Promotional allowances provided to gaming patrons on a combined basis
for the year ended December 31, 2003 and 2002, totaled $22.3 million and $21.9
million, respectively, and are recorded in our financial statements as a
reduction of combined gross revenues. 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 at the Stratosphere were $12.7 million, or 7.2%
of its gross revenues, for the year ended December 31, 2003, a decrease of 11.2%
from $14.3 million, or 8.4% of its gross revenues for the year ended December
31, 2002. This decrease was due primarily to less aggressive promotional
policies.

         Promotional allowances at Arizona Charlie's Decatur were $6.0 million
for the year ended December 31, 2003, or 8.2% of its gross revenues, compared to
$5.0 million, or 7.0% of its gross revenues for the year ended December 31,
2002. This increase is primarily due to an increase in play due to our "Action
Cash" program implemented in July, 2003.

         Promotional allowances at Arizona Charlie's Boulder were $3.5 million
for the year ended December 31, 2003, or 10.1% of its gross revenues, compared
to $2.6 million, or 8.7% of its gross revenues for the year ended December 31,
2002. This increase is primarily due to an increase in play due to our "Action
Cash" program implemented in July, 2003.

         Operating Expenses

         Combined casino operating expense for the year ended December 31, 2003
totaled $61.3 million, or 41.4% of combined casino revenues, as compared to
$59.9

                                       4

<PAGE>

million, or 41.9% of combined casino revenues, for the year ended December 31,
2002. Combined casino operating expenses were primarily comprised of salaries,
wages and benefits, and operating expenses of the casinos.

         Casino operating expenses at the Stratosphere were $29.6 million, or
44.6% of its casino revenues, for the year ended December 31, 2003 as compared
to $29.0 million, or 43.1% of its casino revenues, for the year ended December
31, 2002. This increase of $.6 million, or 2.2% in casino operating expenses is
due primarily to increases in complimentaries. Casino operating expenses at
Arizona Charlie's Decatur were $20.0 million, or 34.6% of its casino revenues,
for the year ended December 31, 2003 as compared to $21.3 million, or 37.9% of
its casino revenues, for the year ended December 31, 2002. This decrease was due
primarily to cost reductions. Casino operating expenses at Arizona Charlie's
Boulder were $11.7 million, or 49.3% of its casino revenues, for the year ended
December 31, 2003 as compared to $9.6 million, or 48.9% of its casino revenues,
for the year ended December 31, 2002.

         Combined selling, general and administrative expenses for the year
ended December 31, 2003 were $75.0 million, or 26.3% of combined gross revenues,
as compared to $80.0 million, or 29.4% of combined gross revenues, for the year
ended December 31, 2002. Selling, general and administrative expenses at the
Stratosphere were $44.9 million, or 25.4% of its gross revenues, for the year
ended December 31, 2003 as compared to $45.9 million, or 26.9% of its gross
revenues, for the year ended December 31, 2002. Selling, general and
administrative expenses at Arizona Charlie's Decatur were $18.4 million, or
24.9% of its gross revenues, for the year ended December 31, 2003, as compared
to $19.5 million, or 27.3% of its gross revenues, for the year ended December
31, 2002. General and administrative expenses at Arizona Charlie's Boulder were
$11.7 million, or 33.6% of its gross revenues, as compared to $14.6 million, or
48.7% of its gross revenues, for the prior year.

         Income from Operations

         Combined operating income for the year ended December 31, 2003 was
$25.2 million as compared to combined operating income of $11.4 million for the
year ended December 31, 2002. Operating income at the Stratosphere for the year
ended December 31, 2003 was $15.5 million as compared to $11.3 million for the
year ended December 31, 2002. This increase was primarily due to an increase in
hotel revenues, increased building rents, lower promotions and lower
depreciation. Operating income at Arizona Charlie's Decatur for the year ended
December 31, 2003 was $14.0 million as compared to $8.8 million for the year
ended December 31, 2002. This increase was due to an increase in casino revenues
and reduced food and beverage expenses. For the years ended December 31, 2003
and December 31, 2002, Arizona Charlie's Boulder incurred operating losses of
$4.3 million and $8.6 million, respectively. The reduced loss was due to
increased casino revenues and reduced selling, general, and administrative
expenses.

                                       5

<PAGE>

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

         The Las Vegas market experienced a significant drop in visitor volume
over the four months following the September 11, 2001 terrorist attacks as
compared to the same period in 2000, with smaller decreases through the
remaining months of 2002.

         Combined gross revenues for the year ended December 31, 2002 amounted
to $271.9 million, an increase of $5.7 million, or 2.1%, over the year ended
December 31, 2001. Gross revenues at the Stratosphere for the year ended
December 31, 2002 were $170.7 million, or 62.8% of combined gross revenues, an
increase of $14.5 million as compared to the year ended December 31, 2001. This
increase of 9.3% in gross revenues at the Stratosphere was primarily
attributable to the hotel expansion of 1,000 rooms, which opened in June 2001.
Gross revenues at Arizona Charlie's Decatur for the year ended December 31, 2002
were $71.2 million, or 26.2% of combined gross revenues, a decrease of $8.8
million as compared to the year ended December 31, 2001. This decrease of 11.0%
in gross revenues at Arizona Charlie's Decatur was primarily attributable to a
decrease in table game drop and slot coin in for the year ended December 31,
2002 as compared to the year ended December 31, 2001. These decreases resulted
from a tightening of the complimentary policy. Gross revenues at Arizona
Charlie's Boulder for the year ended December 31, 2002 were $30.0 million, or
11.0% of combined gross revenues, no change as compared to the year ended
December 31, 2001. There were no significant changes in the composition of their
revenues during these periods.

         Casino Revenues

         Combined casino revenues during the year ended December 31, 2002
totaled $143.1 million, an increase of $.1 million over the year ended December
31, 2001. Slot machine revenues were $118.2 million, or 82.6% of combined casino
revenues, and table game revenues were $23.3 million, or 16.3% of the combined
casino revenues, for the year ended December 31, 2002 as compared to $115.1
million and $22.9 million, respectively, for the year ended December 31, 2001.

         Casino revenues at the Stratosphere for the year ended December 31,
2002 were $67.2 million, an increase of $5.7 million, or 9.3%, over the year
ended December 31, 2001. For the year ended December 31, 2002, slot machine
revenues were $48.7 million, or 72.4% of its casino revenues, and table game
revenues were $18.0 million, or 26.8% of its casino revenues as compared to
$43.7 million and $16.5 million, respectively, for the year ended December 31,
2001. Average win per slot machine per day at Stratosphere for the year ended
December 31, 2002 was $90.74 which was an increase over the prior year of
$85.37. Casino revenues at Arizona Charlie's Decatur for the year ended December
31, 2002 were $56.1 million, a decrease of $5.6 million as compared to the year
ended December 31, 2001 due to reduced slot coin in and table games drop
resulting from a tightening of our complimentary policies. For the year ended
December 31, 2002, slot machine revenues were $51.2 million, or 91.3% of its
casino revenues, and table game revenues were $3.2 million, or 5.7% of its
casino revenues as compared to $54.3 million and $4.1 million, respectively, for
the year ended December 31, 2001.

                                       6

<PAGE>

Average win per slot machine per day at Arizona Charlie's Decatur for the year
ended December 31, 2002 was $92.93, as compared to the average win per slot
machine per day of $97.85 for 2001. Casino revenues at Arizona Charlie's Boulder
for the year ended December 31, 2002 were $19.7 million, which was flat as
compared to the year ended December 31, 2001. For the year ended December 31,
2002, slot machine revenues were $18.3 million, or 92.9% of its casino revenues,
and table game revenues were $2.1 million, or 10.4% of its casino revenues as
compared to $17.1 million and $2.2 million, respectively, for the year ended
December 31, 2001.

         Non-Casino Revenues

         Combined hotel revenues totaled $44.3 million, or 16.3% of combined
gross revenues, for the year ended December 31, 2002 as compared to $38.3
million, or 14.4% of combined gross revenues for the year ended December 31,
2001. This increase was primarily due to the hotel expansion of 1,000 rooms at
Stratosphere, which opened in June 2001. Hotel revenues at the Stratosphere
totaled $38.1 million for the year ended December 31, 2002 as compared to $32.0
million for the year ended December 31, 2001. Stratosphere Hotel occupancy
during the period was 89.6%, as compared to 93.2% for the year ended December
31, 2001. The decrease resulting from the increased room capacity overall, ADR
decreased from $48.54 for the year ended December 31, 2001 to $48.28 for the
year ended December 31, 2002. Hotel revenues at Arizona Charlie's Decatur were
$2.9 million for the year ended December 31, 2002, a decrease of 4.8% from the
previous year. Hotel revenues at Arizona Charlie's Boulder were $3.3 million for
the year ended December 31, 2002 as compared to $3.2 million for the year ended
December 31, 2001.

         Combined food and beverage revenues for the year ended December 31,
2002 totaled $56.3 million, or 20.7% of combined gross revenues, as compared to
$55.5 million, or 20.8% of combined gross revenues, for the year ended December
31, 2001. Food and beverage revenues at the Stratosphere increased 8.8% from
$36.5 million for the year ended December 31, 2001 to $39.7 million for the year
ended December 31, 2002, due to a decrease in food covers of 0.6%, while the
average revenue per cover increased 8.6%.

         At Arizona Charlie's Decatur, food and beverage revenues were $10.4
million for the year ended December 31, 2002, a decrease of $2.2 million, or
17.7%, from the year ended December 31, 2001 due to the tightening of our
complimentary policies. At Arizona Charlie's Boulder, food and beverage revenues
were $6.3 million for the year ended December 31, 2002, a decrease of $.1
million, or 1.4%, for the year ended December 31, 2001.

         Combined tower, retail and other revenues decreased $1.3 million to
$28.2 million for the year ended December 31, 2002. All other non-gaming
revenues at Stratosphere decreased 1.7%, from $26.2 million in the year ended
December 31, 2001 to $25.7 million for the year ended December 31, 2002.

                                       7

<PAGE>

         Promotional Allowances

         Promotional allowances provided to gaming patrons on a combined basis
for the year ended December 31, 2002 and 2001, totaled $21.9 million and $23.7
million, respectively, and are recorded in our financial statements as a
reduction of combined gross revenues.

         Promotional allowances at the Stratosphere were $14.3 million, or 8.4%
of its gross revenues, for the year ended December 31, 2002, a decrease of 1.5%
from $14.6 million, or 9.3% of its gross revenues, for the year ended December
31, 2001. This decrease was due primarily to less aggressive promotional
policies. The Las Vegas market experienced an approximate 9.2% drop in visitor
volume over the four months following the September 11, 2001 terrorist attacks
as compared to the same period in 2000, with smaller decreases through the
remaining months of 2002. This decrease in visitor volume also resulted in the
majority of the properties' competitors experiencing a decrease in occupancy and
ADR.

         Promotional allowances at Arizona Charlie's Decatur were $5.0 million
for the year ended December 31, 2002, or 7.0% of its gross revenues, compared to
$6.6 million, or 8.3% of its gross revenues, for the year ended December 31,
2001.

         Promotional allowances at Arizona Charlie's Boulder were $2.6 million
for the year ended December 31, 2002, or 8.7% of its gross revenues, compared to
$2.5 million, or 8.4% of its gross revenues, for the year ended December 31,
2001.

         Operating Expenses

         Combined casino operating expense for the year ended December 31, 2002
totaled $59.9 million, or 41.9% of combined casino revenues, as compared to
$60.0 million, or 42.0% of combined casino revenues, for the year ended December
31, 2001. Combined casino operating expenses were primarily comprised of
salaries, wages and benefits, and operating expenses of the casinos.

         Casino operating expenses at the Stratosphere were $29.0 million, or
43.1% of its casino revenues, for the year ended December 31, 2002 as compared
to $27.0 million, or 43.8% of its casino revenues, for the year ended December
31, 2001. This increase of $2.0 million, or 7.5% in casino operating expenses is
due primarily to increases in complimentary and promotional expenses related to
increased promotional events many of which undertaken to increase traffic lost
following September 11, 2001.

         Casino operating expenses at Arizona Charlie's Decatur were $21.3
million, or 37.9% of its casino revenues, for the year ended December 31, 2002
as compared to $23.1 million, or 37.4% of its casino revenues, for the year
ended December 31, 2001. This decrease was due primarily to cost reduction
efforts as a result of less slot and table play.

                                       8

<PAGE>

         Casino operating expenses at Arizona Charlie's Boulder were $9.6
million, or 48.9% of its casino revenues, for the year ended December 31, 2002
as compared to $10.0 million, or 50.7% of its casino revenues, for the year
ended December 31, 2001.

         Combined selling, general and administrative expenses for the year
ended December 31, 2002 were $80.0 million, or 29.4% of combined gross revenues,
as compared to $78.7 million, or 29.6% of combined gross revenues, for the year
ended December 31, 2001. Selling, general and administrative expenses at the
Stratosphere were $45.9 million, or 26.9% of its gross revenues, for the year
ended December 31, 2002 as compared to $46.1 million, or 29.5% of its gross
revenues, for the year ended December 31, 2001. Selling, general and
administrative expenses at Arizona Charlie's Decatur were $19.5 million, or
27.3% of its gross revenues, for the year ended December 31, 2002, as compared
to $19.5 million, or 24.3% of its gross revenues, for the year ended December
31, 2001. Selling, general and administrative expenses at Arizona Charlie's
Boulder were $14.6 million, or 48.7% of its gross revenues, as compared to $13.2
million, or 43.8% of its gross revenues, for the prior year. Selling, general
and administrative expenses at the Arizona Charlie's Boulder property increased
year over year primarily due to an increase in healthcare costs of $.9 million.
There were no other significant changes in general and administrative expenses
noted during 2002 as compared to 2001.

         Income from Operations

         Combined operating income for the year ended December 31, 2002 was
$11.4 million as compared to combined operating income of $10.9 million for the
year ended December 31, 2001. Operating income at the Stratosphere for the year
ended December 31, 2002 was $11.3 million as compared to $4.6 million for the
year ended December 31, 2001. The increase was primarily due to the hotel
expansion, which increased all revenue categories due to increased foot traffic.
Operating income at Arizona Charlie's Decatur for the year ended December 31,
2002 was $8.8 million as compared to $13.7 million for the year ended December
31, 2002. This decrease was due to a decrease in total net revenues of $7.1
million and cost reductions of only $2.2 million. For the years ended December
31, 2002 and December 31, 2001, Arizona Charlie's Boulder incurred operating
losses of $8.6 million and $7.3 million, respectively. The additional $1.3
million operating loss at Arizona Charlie's Boulder was primarily due to an
increase employee health care benefits of $1.1 million.

                                       9

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     The acquisitions of three Las Vegas, Nevada gaming and entertainment
properties from affiliated parties, repayment of intercompany indebtedness,
distribution to our parent and payment of related fees and expenses, will
require all of the gross proceeds from the $215 million offering of our senior
secured notes.

     Following the Acquisitions, 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
American Casino & Entertainment Properties LLC, as borrower, certain of its
subsidiaries, as guarantors, and the lenders signatories thereto. The senior
secured revolving credit facility consists of a $20.0 million senior secured
revolving credit facility. Borrowings under the senior secured revolving credit
facility will be available to us, subject to us complying with financial and
other covenants, during the period commencing on the closing date of the
Acquisitions and ending on the fourth anniversary of the closing date of the
notes offering and of the senior secured facility, January 29, 2004.

     At December 31, 2003, we had cash and cash equivalents of $77.3 million.
Pro forma for certain transactions to occur prior to the Acquisitions, the
Acquisitions and the notes offering, we would have had approximately $25 million
in cash and cash equivalents at that date. Our capital expenditures for 2003
were $33.8 million. We currently anticipate capital expenditures for 2004 and
2005 to be approximately $15.0 million for each year.

     We met our capital requirements in 2003 through net cash from operating
activities. For the year ended December 31, 2003, net cash provided by operating
activities totaled approximately $47.8 million and cash used for investing
activities totaled $30.4 million, compared to approximately $30.2 million
provided by operating activities and $24.1 million used in investing activities
for the year ended December 31, 2002.

     Management believes borrowings available under the senior secured revolving
credit facility at the closing of the Acquisitions 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. We cannot assure you that additional
financing, if needed, will be available to us, or that, if available, the
financing will be on terms favorable to us. We also cannot assure you that our
estimates of our reasonably anticipated liquidity needs are accurate or that new
business developments or other unforeseen events will not occur, resulting in
the need to raise additional funds.

     The following table summarizes contractual obligations and commitments to
make future payments under certain contracts, including long-term debt
obligations,

                                       10

<PAGE>

and operating leases at December 31, 2003. Following the closing of the
Acquisitions, we will have significant obligations under the notes and the
senior secured revolving credit facility.

<TABLE>
<CAPTION>
                                                                    PAYMENTS DUE BY PERIOD
                                               ------------------------------------------------------------
                                                           LESS THAN 1                             AFTER 5
CONTRACTUAL OBLIGATIONS AND COMMITMENTS          TOTAL       YEAR        1-3 YEARS    4-5 YEARS      YEARS
                                               ------------------------------------------------------------
                                                                      (in thousands)
<S>                                            <C>         <C>           <C>          <C>          <C>
Long-term debt                                  101,252       14,796       61,456           --       25,000
Capital Leases                                   11,436          665        1,995        1,288        7,488
                                               ------------------------------------------------------------
Total Cash Obligations                         $112,688     $ 15,461     $ 63,451     $  1,288     $ 32,488
                                               ============================================================
</TABLE>

                                       11

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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