FORM 10-K

x           Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2010

Or

¨            Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For The Transition Period From ______ To ______

Commission File Number 000-50635

COLONY RESORTS LVH ACQUISITIONS, LLC

(Exact name of registration as specified in its charter)

Registrant’s telephone number, including Area Code (702) 732-5111

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Membership Units

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
¨  Yes   x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
¨ Yes   x No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ( 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No

The aggregate market value of voting and non-voting stock held by non-affiliates of Colony Resorts LVH Acquisitions, LLC as of March 25, 2011 was $0.  As of March 25, 2011, there were 1.5 Class A Membership Units outstanding and there were1,500,000 Class B Membership Units outstanding.

Colony Resorts LVH Acquisitions, LLC

Table of Contents

Special Note Regarding Forward-Looking Statements

Certain statements in this section, and elsewhere in this Annual Report on Form 10-K (as well as information included in oral statements or other written statements made or to be made by the Company) constitute “forward-looking statements.” Such forward-looking statements include the discussions of the business strategies of the Company and expectations concerning future operations, margins, profitability, liquidity and capital resources.  In addition, in certain portions of this Annual Report on Form 10-K, the words: “anticipates”, “believes”, “estimates”, “seeks”, “expects”, “plans”, “intends” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.  Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, decreased tourism and business travel as a result of current domestic and international business conditions, increased competition and other planned construction in Las Vegas, and increases in meeting and convention space, the completion of infrastructure projects in Las Vegas, government regulation of the casino industry, including gaming license approvals and regulation in foreign jurisdictions, the legalization of gaming in certain United States jurisdictions, and gaming on the Internet, leverage and debt service (including sensitivity to fluctuations in interest rates and other capital markets trends), uncertainty of casino spending and vacationing at casino resorts in Las Vegas, disruptions or reductions in travel to Las Vegas due to terrorist acts, the situation in Iraq and any future terrorist incidents, outbreaks of contagious illnesses in the Company’s market areas, new taxes or changes to existing tax rates, fluctuations in occupancy rates and average daily room rates in Las Vegas, demand for all-suite rooms, the popularity of Las Vegas as a convention and trade show destination, insurance risks, including the risk that the Company has not obtained sufficient coverage against acts of terrorism or will only be able to obtain additional coverage at significantly increased rates, litigation risks, and general economic and business conditions which may impact levels of disposable income, consumer spending and pricing of hotel rooms.

PART I

ITEM 1.—BUSINESS  

General

Colony Resorts LVH Acquisitions, LLC, a Nevada limited liability company (the “Company”), was formed, under the laws of the State of Nevada on December 18, 2003.  The Company owns and operates the Las Vegas Hilton, a casino resort located in Las Vegas, Nevada (the “Hotel”).  The Company licenses from HLT Existing Franchise Holding LLC (“Hilton”) the right to use the name “Hilton” and is part of Hilton’s reservation system and Hilton’s “HHonors Programs ^™.”

The Company does not have any subsidiaries.

The Company’s principal executive offices are located at 3000 Paradise Road, Las Vegas, Nevada 89109 and its telephone number is 702-732-5111.  The Company’s website is www.lvhilton.com.  The Company is a voluntary filer and files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the Securities and Exchange Commission (“SEC”).  The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The public can obtain copies of these materials by contacting the SEC at 1-800-SEC-0330, or by accessing the SEC’s website at www.sec.gov.

Las Vegas Hilton

The Hotel is located one block east of the Las Vegas Strip (the “Strip”) on approximately fifty-nine acres of land between Paradise Road and Joe W. Brown Drive adjacent to the Las Vegas Convention Center.  Originally developed in 1969, the Hotel was purchased by Hilton in 1971 and has been operated as a Hilton-branded hotel ever since. 

The Hotel

Since its opening, the Hotel has undergone numerous substantial expansions and renovations to its hotel and casino space.  The original Hotel consisted of a central or “core” hotel tower with a North and East tower attached to it.  Over the years, the East tower was expanded to its current size and the North tower was expanded twice to its current size.  Expansions have also been made to the casino floor.  

The Hotel consists of approximately 2,650 standard rooms and 300 suites with the standard rooms ranging from 300 square feet to 500 square feet and suites beginning at 600 square feet.  Other services offered to the guests include a business center, a spa and health club, 24-hour room service and in-room high-speed data ports.

The Casino

The Casino features an approximately 74,000 square feet gaming area with approximately 937 slot machines and approximately 49 table games.  The Casino offers customers the latest slot machine games available and a wide selection of video poker, video reel slot machines and traditional 3, 4 and 5 reel spinning slot machines.  The Casino’s approximately 49 table games include the traditional games of blackjack, craps, poker, roulette, pai gow poker and mini-baccarat.

The Casino is marketed to attract a broad base of patrons, using database-marketing techniques, slot clubs and traditional incentives such as reduced room rates and complimentary meals and suites.  The Company offers premium gaming customers luxury suites and special hotel and casino services.

Race and Sports Book

The 30,000 square-foot SuperBook^® has the capability to broadcast more than 50 different sporting events from around the world at any given time.  The SuperBook^® features approximately 60 projection screens and monitors and has a seating capacity for more than 400 guests.

Restaurants

The Hotel features eleven dining options with seating for approximately 1,700 customers, including the Benihana Village.  The Hotel has six fine dining options with approximately 676 seats and eight casual dining restaurants with approximately 1,026 seats.  All the restaurants are owned or franchised by the Hotel.

Entertainment

Show venues at the Hotel include the 1,600-seat Hilton Theater and the 300-seat Shimmer Cabaret.  The Hilton Theater has great historical relevance and has hosted performances by Elvis Presley, who performed at the Hotel from 1969 to 1976, and featured 19 performance weeks by Barry Manilow in 2009.  In addition, the Hilton Theater hosted 29 different headliner acts in 2010. 

The Hotel is located adjacent to the Las Vegas Convention Center, which has approximately 3.2 million square feet of total space.  The facility which is operated by the Las Vegas Convention and Visitors Authority (“LVCVA”), has more than two million square feet of exhibit space and 144 meeting rooms which can handle seating capacities ranging from 20 to 2,500. 

Additionally, the Hotel itself has approximately 200,000 square feet of total meeting space including the Hilton Center, the Hilton Pavilion and the Hilton Ballroom.  The Hilton Center is comprised of the Conrad Room and the Barron Room – each a pillar-free area with a total of 70,000 square feet.  Using a partition, two smaller rooms can be created seating up to a total of 8,900 people depending on the seating arrangement.  The Hilton Ballroom and Hilton Pavilion, located adjacent to the Hilton Center, offer a combined 78,130 square feet of space for meetings and conferences.  Additionally, there are fourteen conference rooms available for meetings, each with moveable partitions and two large Board Rooms.  Based upon demand for meeting space, some hotel rooms can also be converted to hospitality suites.

Las Vegas Monorail Station

The Hotel has one of only seven existing stations linking the four-mile monorail running from MGM Grand to the Sahara Hotel and Casino.  The Hotel is currently the only property with a monorail station located directly at the front entrance to the property providing more convenient access to the monorail for its customers. 

Other Amenities

Other amenities offered by the Hotel include an outdoor pool and recreation area with individual cabanas, an indoor/outdoor spa, fitness room, six tennis courts, three temperature spas, dry and wet sauna, the Cabana Bar and the Cabana Shop.  Additionally, the Hotel has a video arcade, a wedding chapel, a retail area, a car rental concession and a full-service business center.

Business Strategy

The Company’s business strategy includes:

Focus on Customer Service.  The Company continues to emphasize the importance of creating a culture focused on customer service.  Each employee is extensively trained in their respective functional area to respond immediately to customer needs.  Customer satisfaction is a key basis of employee evaluation.  The Company believes this promotes an environment in which all employees feel a sense of commitment to customer service and customers feel welcome and happy in the Hotel.

Increase in Convention Business.  The Company will leverage its position as the world’s largest Hilton hotel with an outstanding convention facility, an experienced staff, and a convenient drive-in location adjacent to the Las Vegas Convention Center.  The Company plans to highlight its highly experienced sales/service staff as it competes against all other convention properties.  Emphasis will be on size, amenities, and an improved room product.  Differentiation from competition will occur through providing competitive amenities, quality and superior service at a better price point.

Targeted Customer Base.  The Company targets high margin repeat gaming customers, and uses player tracking systems to award cash rebates or promotional allowances, such as complimentary rooms, food, beverage and entertainment to guests based on their level of profitability to the Company.

The Las Vegas Market

Las Vegas is the largest gaming market in the United States.  Prior to the downturn in the economy, visitor volume increased at a steady and significant rate for 11 years.  Visitor travel decreased in 2008, the first year of a decline since 1996.  The decline continued in 2009.  Although there was some improvement in 2010, any rebound was anemic at best.  Las Vegas hotel occupancy rates have historically been among the highest of many major markets in the United States.  During the fourth quarter of 2008 and throughout 2009, those occupancy rates and the average daily rates charged, decreased as demand fell.  There was a slight increase in 2010.  Convention bookings have fallen behind 2008 levels throughout 2009 and 2010.  With major Las Vegas Strip openings such as City Center in December 2009 and Cosmopolitan in 2010, occupancy rates and paying rates will continue to be highly competitive.

Las Vegas as a Trade Show, Convention and Meeting Destination

In 2010, according to the LVCVA, Las Vegas hosted approximately 18,004 conventions and meetings.  In 2010, the number of convention attendees was approximately 4.5 million.

Trade shows are held for the purpose of getting sellers and buyers of products or services together in order to conduct business.  Trade shows differ from conventions in that trade shows typically require substantial amounts of space for exhibition purposes and participant circulation.  Conventions generally are gatherings of companies or groups that require space for breakout meetings and general meetings of the overall group.  Las Vegas offers trade shows and conventions a unique infrastructure for handling the world’s largest shows, including the concentration of approximately 149,000  hotel rooms, three convention centers (the Sands Expo Center, Mandalay Bay Convention Center, and the Las Vegas Convention Center) with a total of approximately 9.8 million square feet of convention and exhibition space, convenient air service from major cities throughout the United States and other countries, and significant entertainment attractions.  In addition to the three convention centers described above, the MGM Grand Hotel and Casino has a conference and meeting facility of approximately 300,000 gross square feet, the Mirage has 100,000 gross square feet of meeting space and City Center has approximately 322,000 gross square feet of meeting space. 

In July of 2005, the World Market Center opened a 2.5 million square foot permanent showcase for the home and hospitality furnishings industry near downtown Las Vegas.  In January 2007, a second building opened which added 1.6 million square feet to the Center.  The Center is three miles from the Hotel.

The Company’s Management believes that Las Vegas will continue to evolve as the country’s preferred trade show and convention destination.

Expanding Hotel Market

During 2010, Las Vegas was among the most popular vacation destinations in the United States.  Las Vegas has experienced a period of rapid hotel development with the number of hotel and motel rooms in Las Vegas increasing from approximately 86,000 in 1993 to approximately 151,000 in 2010, according to the LVCVA.  The LVCVA predicts Las Vegas will add approximately 1,500 hotel rooms in 2011.  The Company expects that the concentration of quality casino hotels and resorts will continue visitor interest in Las Vegas as a business event and vacation destination, and continue strong overall demand for hotel rooms, gaming and entertainment.

Growth of Las Vegas Retail Sector and Non-Gaming Revenue Expenditures

In order to draw additional visitors, an increasing number of destination resorts are developing non-gaming entertainment to complement their gaming activities.  According to the LVCVA, gaming revenues in Clark County were approximately $8.9 billion in 2010.  Room revenue as calculated by the LVCVA’s average daily rate multiplied by number of occupied rooms was approximately $4.1 billion in 2010.  The newer, large Las Vegas destination resorts have been designed to capitalize on non-gaming revenues by providing better quality hotel rooms at higher rates and by providing expanded shopping, dining and entertainment opportunities to their patrons in addition to gaming.

McCarran International Airport Expansion

During the past six years, McCarran International Airport has been expanded to accommodate an increased number of airlines and passengers.  The number of passengers traveling through McCarran International Airport has increased from approximately 36.3 million in 2003 to 44.1 million in 2008.  In 2009, airline passengers decreased to 40.5 million and in 2010 airline passenger travel was approximately 39.8 million.  Long-term expansion plans for McCarran International Airport continue and provide for an additional runway, terminal concourse expansions, a new control tower and other facilities and are expected to be completed by early 2012.

Customer Segmentation

The Company focuses its marketing efforts primarily on the convention segment, the mid-level casino segment and the leisure and tour and travel segment.

The convention business is a significant market segment for the Hotel, contributing approximately 30% of the total room nights in 2010.  The Hotel’s prominent location next to the Las Vegas Convention Center allows it to effectively target large convention groups, thereby increasing mid-week demand for available room nights.

The casino customers accounted for approximately 22% of total room nights in 2010.  The Hotel uses a reward program to track casino customers’ play and provides comps or reduced hotel rates based on historical levels of play.

The leisure customers accounted for the remainder or approximately 48% of the Hotel’s total room nights in 2010.  Leisure customers are attracted to the Hotel due to the property’s Strip-like environment and extensive amenities offered at a more affordable and attractive cost relative to Strip properties.  Within the leisure segment, the Hotel caters to the free and independent traveler leisure segment, tour and travel segment and package customers.  The Hotel targets the leisure segment through added value packages, promotional discounts, and tour and travel operators.  The tour and travel segment is primarily used to increase occupancy during off-peak and low seasons.

The Hotel also attracts casino play from local residents due to its race and sports book, the ease of access through the east end of the Hotel and direct mail marketing efforts.  With over 1.9 million people living in Clark County, the locals market represents an attractive customer base for the Hotel.  The Hotel recently began targeting this segment through new advertising and marketing programs, such as a rewards program which provides discounts for shows and restaurants.

Advertising Strategy

Our advertising plan supports our overall positioning objectives, which are focused primarily on entertainment, the SuperBook and our meetings and conventions business.  We will support all major entertainment initiatives, using print, broadcast and outdoor as necessary.  We will advertise our SuperBook and its promotions throughout the year, by including budget allocations for radio and newspaper buys to support Hoops Central (our promotion of the NCAA basketball tournament), the SuperContest (a pro football handicapping contest), as well as Football Central to maintain the perception of the SuperBook as the leader in race and sports in Las Vegas.  2011 will mark the sixth year of Football Central, our successful property-wide football promotion that benefits slots and table games, as well as the SuperBook.  After many years in the meetings and conventions business, we have honed our approach to travel trade advertising.  We have a good mix of advertising in both travel and meeting planner publications that supports our convention and meetings sales efforts each year.  In addition, we will continue to utilize the internet to promote the Hotel through advertising on major internet sites and search engine optimization to ensure customer traffic is directed to our website.  Social media methods will continue to be expanded as this method of communication becomes more popular. 

Competition

The Hotel is located less than one mile east of the Strip and competes with other high-quality Las Vegas resorts and other Las Vegas hotel casinos, including those located on the Strip, on the basis of overall atmosphere, range of amenities, price, location, entertainment offered, theme and size.  Currently, there are approximately 30 major gaming properties located on or near the Strip, thirteen additional major gaming properties in the downtown area and additional gaming properties located in other areas of Las Vegas.  Many of the competing properties, such as the Rio, Wynn Resorts, Mandalay Bay, Paris, The Venetian, The Mirage, Treasure Island, Caesar’s Palace, Luxor, New York-New York, Bellagio, Planet Hollywood, the Palms and the MGM Grand have themes and attractions which draw a significant number of visitors and directly compete with the Hotel’s operations.  Some of these facilities are operated by companies that have more than one operating facility and may have greater name recognition and financial and marketing resources than the Hotel and market to the same target demographic group as the Hotel does.  Furthermore, new hotel casinos, with a significant number of hotel rooms, have opened in Las Vegas within the last two years.  There can be no assurance that the Las Vegas market will grow or that hotel casino resorts will continue to be popular.  A decline or leveling off of the growth or popularity of such facilities could result in reduced casino and hotel revenues.

To a lesser extent, the Hotel competes with hotel casinos in the Mesquite, Laughlin, Reno and Lake Tahoe areas of Nevada, and in a growing number of states across the country that have legalized gaming.  The Hotel also competes with state-sponsored lotteries, on and off-track wagering, card parlors, riverboat and Native American gaming ventures, and other forms of legalized gaming in the United States, as well as with gaming on cruise ships, internet gaming ventures and international gaming operations. 

Employees

As of December 31, 2010, the Company had approximately 1,900 full time employees.

The Company recognizes that the Hotel’s employees are critical to its success and has fostered a productive work culture.  Employees are offered competitive salaries and a benefits package that includes medical and dental coverage.

The Company believes that it has a good working relationship with both its union and non-union work force.  Labor unions represent approximately 70% of the work force at the Hotel with labor agreement terms ranging from one year to five years.  Approximately 3% of the labor workforce is covered by a collective bargaining agreement that will expire within one year.  The Company anticipates that these agreements will be renewed.

Zoning

The Hotel is located on approximately fifty-nine acres of land designated with H-1 Limited Resort and Apartment District zoning.  This H-1 Limited Resort and Apartment District was established to provide for the development of gaming enterprises, compatible commercial, and mixed commercial and residential uses, and to prohibit the development of incompatible uses that are detrimental to gaming enterprises.  Subject to obtaining necessary special use permits and other land use approvals, permitted uses under H-1 Limited Resort and Apartment District zoning include, but are not limited to, hotels, casinos, condominiums and timeshares.  The existing facility sits on approximately thirty-five acres.  The remaining acreage could be suitable for future development projects by the Company, third parties or some combination thereof. 

The Hilton Grand Vacations property, located adjacent to the Hotel, has an easement for use of approximately 260 parking spaces (out of approximately 4,800 parking spaces).  There is also an easement for the use of the monorail that runs through the Hotel property.

Regulation and Licensing

The ownership and operation of casino gaming facilities in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, the “Nevada Act”) and various local regulations.  The Company’s gaming operations are also subject to the licensing and regulatory control of the Nevada Gaming Commission, the Nevada Gaming Control Board (the NGCB) and the Clark County Liquor and Gaming Licensing Board (the “CCLGLB”).  The CCLGLB, the Nevada Gaming Commission and the NGCB are collectively referred to as the “Nevada Gaming Authorities.”

The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy that are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record-keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) the establishment of a source of state and local revenues through taxation and licensing fees.  Any change in such laws, regulations and procedures could have an adverse effect on the Company’s gaming operations or on the operation of the Hotel.

The Company is licensed by the Nevada Gaming Authorities to operate a casino.  The gaming license requires the periodic payment of fees and taxes and is not transferable.  The Company was registered by the Nevada Gaming Commission as a publicly traded corporation (“Registered Corporation”) and as such, must periodically submit detailed financial and operating reports to the Nevada Gaming Authorities and furnish any other information that the Nevada Gaming Authorities may require.  No person may become a stockholder of, or receive any percentage of profits from, the Company without first obtaining licenses and approvals from the Nevada Gaming Authorities.  The Company possesses all state and local government registrations, approvals, permits and licenses required in order for the Company to engage in gaming activities at the Hotel.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to or material involvement with the Company to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee.  Officers, directors and certain key employees of the Company must file applications and be licensed by the Nevada Gaming Authorities.

The Nevada Gaming Authorities may deny an application for licensing or a finding of suitability for any cause they deem reasonable.  A finding of suitability is comparable to licensing; both require submission of detailed personal and financial information followed by a thorough investigation.  The applicant for licensing or a finding of suitability, or the gaming licensee by whom the applicant is employed or for whom the applicant serves, must pay all the costs of the investigation.  Changes in licensed positions must be reported to the Nevada Gaming Authorities.  In addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or to have an inappropriate relationship with the Company, the Company would have to sever all relationships with such person.  In addition, the Nevada Gaming Commission may require the Company to terminate the employment of any person who refuses to file appropriate applications.  Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

The Company is required to submit periodic detailed financial and operating reports to the Nevada Gaming Commission.  Substantially all material loans, leases, sales of securities and similar financing transactions by the Company must be reported to or approved by the Nevada Gaming Commission.

If it were determined that the Nevada Act was violated by the Company, the registration and gaming licenses it then holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures.  In addition, the Company and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Gaming Commission.  Further, a supervisor could be appointed by the Nevada Gaming Commission to operate the Hotel and, under certain circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the Hotel) could be forfeited to the State of Nevada.  Limitation, conditioning or suspension of any gaming registration or license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the gaming operations of the Company.

Any beneficial holder of the Company’s voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have their suitability as a beneficial holder of the Company’s voting securities determined if the Nevada Gaming Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada.  The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of the Company’s voting securities to report the acquisition to the Nevada Gaming Commission.  The Nevada Act requires that beneficial owners of more than 10% of the Company’s voting securities apply to the Nevada Gaming Commission for a finding of suitability within thirty days after the Chairman of the NGCB mails the written notice requiring such filing.

On June 17, 2004, the Nevada Gaming Commission issued an order of registration of the Company (the “Order”).  The Order was amended on June 22, 2006 in conjunction with the transfer of certain Class A Membership Units to WH/LVH Managers Voteco, LLC, and was amended on November 16, 2006 in conjunction with the transfer of certain Class A and Class B Membership Units to Nicholas L. Ribis, and was again amended on August 20, 2009 to reflect the finding of suitability of a beneficial owner.  The Order (1) prohibits the current holders of the Company’s Membership Units or their respective affiliates from selling, assigning, transferring, pledging or otherwise disposing of Membership Units or any other security convertible into or exchangeable for Class A Units or Class B Units, without the prior approval of the Nevada Gaming Commission and (2) prohibits the Company from declaring cash dividends or distributions on any class of membership unit of the Company beneficially owned in whole or in part by Holdings, Co-Investment Partners, Voteco, Coinvestment Voteco, WH/LVH Managers Voteco, LLC, Nicholas L. Ribis, or their respective affiliates, without the prior approval of the Nevada Gaming Commission.  The Order sets forth a description of the Company and its affiliates and intermediary companies and the various gaming licenses and approvals obtained by those entities together with certain conditions and limitations pertaining to the licenses and approvals.

Under certain circumstances, an “institutional investor” as defined in the Nevada Act, which acquires more than 10% but not more than 25% of the Company’s voting securities, may apply to the Nevada Gaming Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities only for investment purposes.  An institutional investor shall not be deemed to hold voting securities only for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investment and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Company, any change in the Company’s corporate charter, bylaws, management, policies or operations of the Company or any of its gaming affiliates, or any other action which the Nevada Gaming Commission finds to be inconsistent with holding the Company’s voting securities only for investment purposes.  Activities that are not deemed to be inconsistent with holding voting securities only for investment purposes include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Gaming Commission may determine to be consistent with such investment intent.  If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners.

Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Gaming Commission or the Chairman of the NGCB may be found to be unsuitable.  The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner.  Any stockholder found to be unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a criminal offense.  The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, it: (i) pays that person any dividend or interest upon voting securities of the Company; (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person; (iii) pays remuneration in any form to that person for services rendered or otherwise; or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities for cash at fair market value.  Additionally, the CCLGLB has taken the position that it has the authority to approve all persons owning or controlling the stock of any corporation holding a gaming license.

The Nevada Gaming Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file an application, be investigated and be found suitable to own the debt security of such Registered Corporation.  If the Nevada Gaming Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Gaming Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

The Company is required to maintain a current stock ledger in Nevada that may be examined by the Nevada Gaming Authorities at any time.  If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities.  A failure to make such disclosure may be grounds for finding the record holder unsuitable.  The Company is also required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities.  A failure to make such disclosure may be grounds for finding the record holder unsuitable.  The Company is also required to render maximum assistance in determining the identity of the beneficial owner.

The Company may not make a public offering of any securities without the prior approval of the Nevada Gaming Commission if the securities or the proceeds therefore are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes.  The hypothecation of the Company’s assets and restrictions on stock in connection with any public offering also require the prior approval of the Nevada Gaming Commission.  In addition, the hypothecation of the Company’s assets and restrictions on stock in respect of any public offering require the approval of the Nevada Gaming Commission to remain effective.

Changes in control of the Company through a merger, consolidation, stock or asset acquisition, management or consulting agreement, or any act or conduct by any person whereby he or she obtains control, shall not occur without the prior approval of the Nevada Gaming Commission.  Entities seeking to acquire control of a Registered Corporation must satisfy the NGCB and the Nevada Gaming Commission concerning a variety of stringent standards prior to assuming control of such Registered Corporation.  The Nevada Gaming Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process of the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming.  The Nevada Gaming Commission has established a regulatory scheme to ameliorate the potentially-adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs.  Approvals are, in certain circumstances, required from the Nevada Gaming Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated.

The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company in response to a tender offer made directly to the Registered Corporation’s members for the purposes of acquiring control of the Registered Corporation.

License fees and taxes, computed in various ways depending upon the type of gaming or activity involved, are payable to the State of Nevada and to Clark County, Nevada.  Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated.

In addition, the Company pays live entertainment tax on admission fees for live entertainment provided at the property and on the sales of any food, refreshments and merchandise made in connection with taxable live entertainment.

Any person who is a “Licensee” pursuant to the Foreign Gaming Provisions of the Nevada Act, and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the NGCB, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of any investigation by the NGCB into their participation in such foreign gaming.  The revolving fund is subject to increase or decrease at the discretion of the Nevada Gaming Commission.  Thereafter, Licensees are also required to comply with certain reporting requirements imposed by the Nevada Act.  Licensees are also subject to disciplinary action by the Nevada Gaming Commission if they knowingly violate any laws of any foreign jurisdiction pertaining to such foreign gaming operation, fail to conduct such foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ a person in such foreign operation who has been denied a license or a finding of suitability in Nevada on the ground of personal unsuitability.

The sale of alcoholic beverages by the Company on the premises of the Property is subject to licensing, control, and regulation by the applicable local authorities.  The Company has obtained Clark County gaming and liquor licenses.  All licenses are revocable and are not transferable.  The agencies involved have full power to limit, condition, suspend or revoke any such licenses, and any such disciplinary action could (and revocation of such licenses would) have a material adverse effect upon the operations of the Company.

ITEM 1A(T).—     RISK FACTORS

The risk factors set forth below as well as the other information contained in this Annual Report on Form 10-K should be carefully considered in connection with evaluating the Company.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, or results of operations.  Certain statements in “Risk Factors” are forward-looking statements.

The Company’s business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.

Consumer demand for hotel casino resorts, trade shows and conventions and for the type of amenities that the Company offers is particularly sensitive to downturns in the economy.  Changes in consumer preferences or discretionary consumer spending brought about by factors such as fear of war, future acts of terrorism, general economic conditions, disposable consumer income, fear of recession and changes in consumer confidence in the economy could reduce customer demand for the products and leisure services that the Company offers, thus imposing practical limits on pricing and harming the Company’s operations.

Current and future economic conditions could adversely affect our ability to service or refinance our indebtedness and to make planned operating or capital expenditures.

The Company’s ability to meet debt requirements including interest payments, fund operations and make capital improvements depends on our ability to generate cash flow in the future and/or renegotiate the terms of our debt.  If adverse economic conditions persist, worsen or fail to improve significantly, the Company could experience further decreases in revenues due to reduced consumer spending levels, which would cause us to not generate sufficient cash to fund our liquidity needs or fail to satisfy the terms of our debt.  The Company cannot be assured that our business will generate sufficient cash flow from operations in an amount necessary to enable us to pay our indebtedness or to fund our other liquidity needs.

The Company has incurred recurring net losses, has a working capital deficiency and an accumulated deficit.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The Company is evaluating a range of financial and strategic alternatives in addressing the Company’s operating results and financial position.  These alternatives include refinancing, restructuring the Company’s financial obligations or the infusion of capital by ownership.  However, the Company cannot provide any assurance that these measures will be sufficient to enable the Company to continue as a going concern.

The Company’s adverse financial condition may also negatively affect its relationship with suppliers and make it more difficult to maintain existing financing or secure new sources of funding in the event the Company is not successful in generating sufficient operating cash flow.

The Company’s business is sensitive to the willingness of its customers to travel.  Acts of terrorism and deteriorating economic conditions worldwide could cause severe disruptions in air travel that reduce the number of visitors to our facilities, resulting in a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company is dependent on the willingness of its customers to travel.  A substantial number of our customers use air travel to come to Las Vegas.  As a result of terrorist acts, domestic and international travel could be severely disrupted, which would result in a decrease in customer visits to Las Vegas, including to the Hotel.  In addition, developments in the conflicts in the Middle East could have a similar effect on domestic and international travel.  Most of the Hotel’s customers travel to reach the Hotel.  Only a small amount of the Company’s business is generated by local residents.  Management cannot predict the extent to which disruptions in air or other forms of travel as a result of any further terrorist act, outbreak of hostilities or escalation of war would adversely affect the Company’s financial condition, results of operations or cash flows.

Continued weakness and further weakening in global economic conditions may adversely affect consumer and corporate spending and tourism trends, resulting in additional deterioration in our business.

Discretionary consumer spending has been adversely affected by the current economic crisis.  Worldwide, consumers are traveling less and spending less when they do travel.  Likewise, corporate spending on conventions and business development is being significantly curtailed as businesses cut their budgets.  Since the Company’s business model relies on significant expenditures on luxury and discretionary items, continuation or deepening of the crisis will adversely affect the Company’s operations.

The current conditions in the world’s financial and credit markets adversely affects prospects of debt refinancing, availability of credit to us and to our customers and the profitability of our business. 

There was unprecedented deterioration in financial and credit markets worldwide in 2008 which continued throughout 2009 and 2010.  There can be no assurance that the decline is over and there can be no assurance that government response to these conditions will successfully address the fundamental weakness, restore consumer confidence or lead to improvement or increase liquidity in the markets.  Customer demand for leisure activities that the Company offers may be depressed or continue to decline.

There has been  large additions to the room supply in Las Vegas. 

There has been large additions to the supply of hotel rooms in Las Vegas.  Even after the global economy begins to recover, there may be excess supply which affects the Company’s ability to maximize the occupancy of the Hotel.

Because the Company is dependent upon one property in one market for all of its cash flow, the Company will be subject to greater risks than a gaming company with more operating properties or that operates in more markets.

The Company does not have material assets or operations other than the Hotel.  As a result, the Company is entirely dependent upon the Hotel for all of its cash flow.

Given that the Company’s operation is conducted at one property in Las Vegas, the Company is subject to greater degrees of risk than a gaming company with more operating properties in more markets.  The risks to which the Company will have a greater degree of exposure include the following:

·         local economic and competitive conditions;

·         decline in air passenger traffic due to higher ticket costs or fears concerning air travel;

·         changes in local and state governmental laws and regulations, including gaming law, taxes and regulations;

·         natural and other disasters, including outbreaks of infectious diseases;

·         an increase in the cost of electrical power for the Hotel as a result of, among other things, power shortages in California or other western states with which Nevada shares a single regional power grid; and

·         a decline in the number of visitors to Las Vegas.

The Company’s substantial debt could impair its financial condition, results of operations or cash flows.

The Company has substantial debt service obligations.  As of December 31, 2010, the Company has a long-term term loan of $252 million secured by substantially all the assets of the Hotel.

This substantial indebtedness could have important consequences to the Company.  For example, it could:

·         create significant demand for, or otherwise restrict, its available free cash flow;

·         increase the Company’s vulnerability to general adverse economic and industry conditions;

·         impair the Company’s ability to obtain additional financing in the future for working capital needs, capital expenditures, development projects, acquisitions or general corporate purposes;

·         require the Company to dedicate a significant portion of its cash flow from operations to the payment of principal and interest on its debt, which would reduce the funds available for the Company’s operations;

·         limit the Company’s flexibility in planning for, or reacting to, changes in the business and the industry in which the Company operates;

·         place the Company at a competitive disadvantage compared to its competitors that have less debt; and

·         subject the Company to higher interest expense in the event of increases in interest rates to the extent the Company’s debt is and will continue to be at variable rates of interest.

The terms of the Company’s debt instruments may restrict its current and future operations, particularly its ability to finance additional growth, respond to changes or take certain actions.

The Company’s current debt instruments contain a number of restrictive covenants that impose significant operating and financial restrictions on the Company.

The Company’s Term Loan includes covenants restricting, among other things, the ability of the Company to:

·         incur additional debt, including guarantees or credit support;

·         incur liens securing indebtedness;

·         dispose of assets;

·         make certain acquisitions;

·         pay dividends or make distributions and make other restricted payments, such as purchasing equity interests, repurchasing junior indebtedness or making investments in third parties;

·         enter into sale and leaseback transactions;

·         engage in any new businesses;

·         issue preferred stock; and

·         enter into certain transactions with our affiliates.

The terms of the Company’s debt instruments may hinder its ability or make it more costly to extend the loan agreement.

The Company’s current Term Loan contains provisions that may make it difficult or more expensive to extend the term of the Term Loan.  Should the Company choose to extend the Term Loan, the Company would be required, among other things, to meet certain debt yield benchmarks.  If the Company cannot meet those benchmarks, the Company would be required to 1) obtain a waiver from the lender, 2) pay down a portion of the indebtedness, 3) post a letter of credit or 4) refinance the entire indebtedness.  Each of these options would reduce the Company’s liquidity.

The Company’s insurance coverage may not be adequate to cover all possible losses that the Hotel could suffer.  In addition, the Company’s insurance costs may increase and the Company may not be able to obtain the same insurance coverage in the future.

Although the Company has all-risk property insurance covering damage caused by a casualty loss (such as fire and natural disasters), each such policy has certain exclusions.  The Company’s level of insurance coverage for the Hotel may not be adequate to cover all losses in the event of a major casualty.  In addition, certain casualty events, such as labor strikes, nuclear events, acts of war, loss of income due to cancellation of room reservations or conventions due to fear of terrorism, deterioration or corrosion, insect or animal damage and pollution, might not be covered at all under our policies.  Therefore, certain acts could expose the Company to heavy, uninsured losses.

In addition, although the Company has insurance coverage for occurrences of terrorist acts and for certain losses that could result from these acts, the Company’s terrorism coverage is subject to the same risks and deficiencies as those described above for the Company’s all-risk property coverage.  The lack of sufficient insurance for these types of acts could expose the Company to heavy losses in the event that any damages occur, directly or indirectly, as a result of terrorist attacks or otherwise, which could have a significant negative impact on the Company’s operations.

In addition to the damage caused to the Company’s property by a casualty loss (such as fire, natural disasters, acts of war or terrorism), the Company may suffer business disruption as a result of these events or be subject to claims by third parties injured or harmed.  While the Company carries business interruption insurance and general liability insurance, this insurance may not be adequate to cover all losses in such event.

The Company renews its insurance policies on an annual basis.  The cost of coverage may become so high that the Company may need to further reduce its policy limits or agree to certain exclusions from its coverage.  Among other factors, it is possible that the military conflicts abroad, homeland security concerns, other catastrophic events or any change in government legislation governing insurance coverage for acts of terrorism could materially adversely affect available insurance coverage and result in increased premiums on available coverage (which may cause the Company to elect to reduce its policy limits) and additional exclusions from coverage.  Among other potential future adverse changes, in the future the Company may elect to not, or may not be able to, obtain any coverage for losses due to acts of terrorism.

The Company’s Term Loan and other material agreements require the Company to maintain a certain minimum level of insurance.  Failure to satisfy these requirements could result in an event of default under these debt instruments or material agreements.

The Company depends on the continued services of key managers and employees.  If the Company does not retain its key personnel or attract and retain other highly skilled employees, the Company’s business will suffer.

The Company’s ability to maintain its competitive position is dependent to a large degree on the services of its senior management team, including Mr. Monahan, Mr. Schaffhauser, and Mr. Ciancimino.  While Mr. Monahan, Mr. Schaffhauser and Mr. Ciancimino have each entered into employment agreements, the Company cannot be assured that any of these individuals will remain with the Company.  The Company currently does not have a life insurance policy on any of the members of the senior management team.  The death or loss of the services of any of the Company’s senior managers or the inability to attract and retain additional senior management personnel could have a material adverse effect on the Company’s business.

The Company faces significant competition in Las Vegas which could materially adversely affect the Company’s financial condition, results of operations or cash flows.  Some of the Company’s competitors have substantially greater resources and access to capital than the Company and several of them are expanding or renovating their facilities.  In addition, any significant downturn in the trade show and convention business would significantly and adversely affect the Company’s mid-week occupancy rates and business.

The hotel, resort and casino business in Las Vegas is highly competitive.  The Hotel competes with a large number of major hotel-casinos and a number of smaller casinos located on and near the Las Vegas Strip and in and near Las Vegas.  Competitors of the Hotel include all of the other hotel-casino facilities in Las Vegas.  The Company also competes, to some extent, with other hotel-casino facilities in Nevada and in Atlantic City, as well as hotel-casinos and other resort facilities and vacation destinations elsewhere in the United States.  Many of the Company’s competitors are subsidiaries or divisions of large public companies and may have greater financial and other resources than the Company. 

According to the LVCVA, there were approximately 151,000 hotel and motel rooms in Las Vegas as of December 31, 2010.  Various competitors on the Las Vegas Strip have expanded and/or renovated their existing facilities.  MGM Resorts International (formerly MGM MIRAGE) opened a multi-billion dollar urban complex known as City Center consisting of a 61-story, 4,004-room gaming resort; two combination non-gaming luxury hotels and condominium towers, dual 37-story towers with 335 condominiums each as well as retail, dining and entertainment venues.  In December 2010, the $3.9 billion Cosmopolitan of Las Vegas opened.  The hotel/casino is located on the Strip just south of Bellagio and has approximately 3,000 rooms (approximately 1,000 of the 3,000 rooms will be completed in 2011), a casino, retail and restaurant space, an 1,800 seat  theatre and approximately 150,000 sq ft of convention space.  If demand for hotel rooms does not keep up with the increase in the number of hotel rooms, competitive pressures may cause reductions in average room rates.

The Company also competes with legalized gaming from casinos located on Native American tribal lands.  Native American tribes in California are permitted to operate casinos with slot machines, table games and house-banked card games.  The governor of California has entered into compacts with numerous tribes in California and has announced the execution of a number of new compacts with no limits on the number of gaming machines (which had been limited under the prior compacts).  The federal government has approved numerous compacts in California and casino-style gaming is now legal on those tribal lands.  While the competitive impact on our operations in Las Vegas from the continued growth of Native American gaming establishments in California remains uncertain, the proliferation of gaming in California and other areas located near the Hotel could have an adverse effect on the Company’s results of operations.

In addition, certain states have legalized, and others may legalize, casino gaming in specific areas, including metropolitan areas from which the Company traditionally attracts customers, such as New York, Philadelphia, Los Angeles, San Francisco and Boston.  Pennsylvania currently has tens casinos – six classified as “racinos” and, in total, the state houses approximately 27,000 slot machines.  A number of states have permitted or are considering permitting gaming at “racinos,” on Native American reservations and through expansion of state lotteries.  The current global trend toward liberalization of gaming restrictions and resulting proliferation of gaming venues could result in a decrease in the number of visitors to the Hotel by attracting customers close to home and away from Las Vegas, which could adversely affect the Company’s financial condition, results of operations or cash flows.

The loss of the Company’s gaming license or the Company’s failure to comply with the extensive regulations that govern the Company’s operations could have an adverse effect on the Company’s financial condition, results of operations or cash flows.

The Company’s gaming operations and the ownership of the Company’s securities are subject to extensive regulation by the Nevada Gaming Authorities.  These gaming authorities have broad authority with respect to licensing and registration of our business entities and individuals investing in or otherwise involved with the Company.

Although the Company currently holds gaming licenses issued by the Nevada Gaming Authorities, these authorities may, among other things, revoke the gaming license of any entity or the registration of a registered corporation or any entity registered as a holding company of a licensee for violations of gaming regulations.

In addition, the Nevada Gaming Authorities may, under certain conditions, revoke the license or finding of suitability of any officer, director, controlling person, stockholder, noteholder or key employee of a licensed or registered entity.  If the Company’s gaming licenses were revoked for any reason, the Nevada Gaming Authorities could require the closing of the Casino, which would have a material adverse effect on the Company’s business.  In addition, compliance costs associated with gaming laws, regulations or licenses are significant.  Any change in the laws, regulations or licenses applicable to the Company’s business or gaming licenses could require the Company to make substantial expenditures or could otherwise have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

The Nevada State Gaming Control Board investigates or reviews the records of gaming companies for compliance with gaming regulations as part of its regular oversight functions.

For a more complete description of the gaming regulatory requirements affecting our business, see “Item 1 — Business — Regulation and Licensing.”

The Company extends credit to a large portion of its customers, and it may not be able to collect gaming receivables from its credit players.

The Company conducts its gaming activities on a credit basis as well as a cash basis.  This credit is unsecured.  Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than patrons who tend to wager lower amounts.  High-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a positive or negative impact on cash flow and earnings in a particular quarter.

The Company extends credit to those customers whose level of play and financial resources warrant, in the opinion of management, an extension of credit.  For the year ended December 31, 2010, the table games drop at the Hotel was approximately 33% from credit-based guest wagering.  The default rate on credit extended to the Hotel’s table gaming customers was less than one percent of the total amount of credit issued since the Hotel was acquired.  However, economic conditions in the United States and elsewhere could cause this default rate to significantly increase.

While gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” and judgments on gaming debts are enforceable under the current laws of Nevada, and Nevada judgments on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the U.S. Constitution, other jurisdictions may determine that enforcement of gaming debts is against public policy.  Although courts of some foreign nations will enforce gaming debts directly and the assets in the United States of foreign debtors may be reached to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations.

The Company is controlled by entities that may have conflicts of interest with the Company.

                The majority of the Company's voting equity is controlled by investment funds affiliated with Colony Capital, LLC and its subsidiaries.  Colony Capital is a global real estate investment firm and may from time to time acquire and hold interests in businesses that compete directly or indirectly with the Company.  Colony Capital, through its subsidiaries and investment funds currently owns and operates casinos and/or casino-hotels in Atlantic City, New Jersey and Tunica, Mississippi.

On February 20, 2008, Whitehall Street Real Estate Funds, an affiliate of WH/LVH Managers Voteco, a minority owner of the Company’s Class A Units, acquired American Casino & Entertainment Properties.  American Casino & Entertainment Properties owns three casino/hotels in Las Vegas and one casino/hotel in Laughlin, Nevada.

An outbreak of highly infectious disease could adversely affect the number of visitors to Las Vegas and disrupt the Company’s operations, resulting in a material adverse effect on the Company’s financial condition, results of operations and cash flows.

In 2003, Taiwan, China, Hong Kong, Singapore and certain other regions experienced an outbreak of a new and highly contagious form of atypical pneumonia now known as severe acute respiratory syndrome (“SARS”).  As a result of the outbreak, there was a decrease in travel to and from, and economic activity in, affected regions.  Potential future outbreaks of SARS, avian flu or other highly infectious diseases in Las Vegas may adversely affect the number of visitors to Las Vegas.  Furthermore, an outbreak might disrupt the Company’s ability to adequately staff its business and could generally disrupt its operations.  If any of the Company’s customers or employees is suspected of having contracted certain highly contagious diseases, the Hotel may be required to quarantine these customers or employees or the affected areas of our facilities and temporarily suspend part or all of our operations at affected facilities.  Any outbreak of such a highly infectious disease could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.

Travel patterns may be adversely affected by fear of a widespread pandemic such as may be caused by the H1N1 virus.

The public may become cautious of travel should the H1N1 virus become widespread or if the public fears the H1N1 virus will be widespread.  A further downturn in air travel would adversely affect the Las Vegas hospitality market and our Property in particular.

The physical condition of, and improvements to, the Hotel may require the remediation or abatement of certain environmental conditions.

The Hotel was originally developed in 1969 and multiple expansions and alterations have taken place throughout the history of the property.  Portions of the Hotel are known to contain asbestos containing materials, which require abatement or encapsulation if disturbed.  Other environmental conditions may be found that require remediation in isolated areas.  While the Company has identified the location of asbestos containing materials and has implemented an asbestos management plan, the extent of potential environmental conditions cannot be determined definitively and may result in substantial additional expense in the event additional or currently unknown conditions are detected or in the event the disturbance of asbestos becomes necessary in the ordinary operations of the Hotel.

ITEM 1B(T).—     UNRESOLVED STAFF COMMENTS

None

ITEM 2.—PROPERTIES

The Company owns and operates the Las Vegas Hilton (the “Hotel”), a casino resort located in Las Vegas, Nevada.

The Hotel is located one block east of the Las Vegas Strip (the “Strip”) on approximately fifty-nine acres of land between Paradise Road and Joe W. Brown Drive adjacent to the Las Vegas Convention Center.  It has approximately 2,950 hotel rooms and suites, an approximately 74,000 square feet casino with approximately 49 table games and 937 slot machines, a race and sports book, 11 restaurants, approximately 4,800 parking spaces, approximately 200,000 square feet of meeting/convention space, a 1,600-seat showroom, a 300 seat cabaret theater, retail outlets, a wedding chapel, an outdoor pool and a spa and health club.

All of the assets of the Company, including the Hotel, serve as collateral for the Term Loan.

ITEM 3.—LEGAL PROCEEDINGS

In the normal course of business, the Company is subject to various litigation, claims and assessments.  The Company is not currently a party to any material litigation and, it is not aware of any material action, suit or proceeding against it that has been threatened by any person. 

ITEM 4.—SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5.— MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

No established public trading market exists for the Company’s common equity.  There are no current plans, proposals, arrangements or understandings with any person with regard to the development of a trading market in the Company’s equity.

Holders

As of December 31, 2010, the Company had four holders of record of its Class A Membership Units and three holders of record of its Class B Membership Units.

Securities Issued Under Equity Compensation Plans

The following table provides information as of December 31, 2010, regarding the number of Membership Units that may be issued under the Company’s 2004 Incentive Plan.

Distributions

The Company has never paid any distributions on its Membership Units.  Certain provisions of the Term Loan, as well as the gaming approvals required by the Nevada Gaming Authorities, contain restrictions on the payment of dividends or other distributions by the Company.

Purchases of Equity Securities by the Company

During the year ended December 31, 2010, the Company did not repurchase any units of its common equity, either as part of a publicly announced plan or program or otherwise.  No publicly announced plans or programs are currently in place under which the Company may purchase shares of its common equity.

ITEM 6.—SELECTED FINANCIAL DATA  

The historical selected financial data of the Company set forth below should be read in conjunction with “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.  The statement of operations data for the years ended December 31, 2010, 2009 and 2008, and the balance sheet data at December 31, 2010 and 2009 of the Company are derived from, and are qualified by reference to, the audited financial statements included elsewhere in this Annual Report on Form 10-K.

ITEM 7.—    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, the financial statements and related notes thereto and other financial information included in this Annual Report on Form 10-K.  Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking.

Overview

Casino revenue is derived primarily from patrons wagering on slot machines, table games and other gaming activities.  Table games generally include blackjack or twenty one, poker, craps, baccarat, mini-baccarat, pai-gow poker and roulette.  Other gaming activities include race book and a sports book.  Casino revenue is defined as the win from gaming activities, computed as the difference between gaming wins and losses, not the total amounts wagered.  “Table game volume,” “table game drop” (terms which are used interchangeably), and “slot handle” are casino industry specific terms that are used to identify the amount wagered by patrons for a casino table game or slot machine, respectively.  “Table game hold” and “slot hold” represent the percentage of the total amount wagered by patrons that the casino has won.  Hold is derived by dividing the amount won by the casino by the amount wagered by patrons.  Casino revenue is recognized at the end of each gaming day.

Casino revenues vary from time to time due to general economic conditions, popularity of entertainment offerings, table game hold, slot hold, and occupancy percentages in the hotel.  Casino revenues also vary depending upon the amount of gaming activity, as well as variations in the odds for different games of chance.  Casino revenues, room revenues, food and beverage revenues and other revenues vary due to general economic conditions and competition.

Rooms revenue is derived from rooms and suites rented to guests.  “Average daily rate” is an industry specific term used to define the average amount of revenue per rented room per day.  “Occupancy percentage” defines the total percentage of rooms occupied, and is computed by dividing the number of rooms occupied by the total number of rooms available.  Room revenue is recognized at the time the room is provided to the guest.

Food and beverage revenues are derived from food and beverage sales in the food outlets of the Hotel, including restaurants, room service and banquets.  Food and beverage revenue is recognized at the time the food and/or beverage is provided to the guest.

Other revenue includes retail sales, entertainment sales, and other miscellaneous income at the casino/hotel.  Such revenue is recognized at the time the goods or services are provided to the guest.

Summary Financial Results  

The Hotel offers hotel, gaming, dining, entertainment, retail and spa amenities at one location in Las Vegas and under one operating segment.  Approximately 32% of the Hotel’s gross revenue is derived from gaming and 35% is derived from room revenue.  Room revenue is significant because of the Hotel’s location next to the Las Vegas Convention Center and its related emphasis on group, convention and trade show business.

The following table summarizes the Hotel’s results of operations (in thousands):

Comparison of the Year Ended December 31, 2010 with the Year Ended December 31, 2009

Revenue Information

The breakdown of the Property’s net revenue is as follows (dollars in thousands):

Net revenue for the year ended December 31, 2010 was $187.7 million, representing a decrease of $13.0 million or 6.5% when compared to $200.7 million of net revenues for the year ended December 31, 2009.  The decrease in net revenue was due primarily to:  (1) a decrease in casino revenue of $13.4 million primarily due to decreased table games and slot volume, and (2) a decrease in other revenue of $1.0 million primarily as a result of decreased entertainment revenue.

In 2010, table games revenue decreased approximately 19.6% and slot revenue decreased approximately 16.4% compared to revenues in 2009.  The table games and slot volume decreased primarily due to lower spending by gaming visitors and fierce competition in the Las Vegas market. The economic downturn limited the number of visitors.  Multi-location competitors offered gaming guests higher credit limits, longer payment terms, increased player incentives and enriched casino marketing programs.  Similar programs were considered by the Hotel but not implemented because they did not meet our profitability benchmarks.  Race and sports book wagering during 2010 was similar to 2009 levels, but an unfavorable win percentage, especially on Super Bowl Sunday, produced a shortfall of win in 2010 compared to 2009.  

The Company’s casino operating margin declined between 2010 and 2009.  For the year ended December 31, 2010 the casino operating margin was 12.2%; for the year ended December 31, 2009 the casino operating margin was 19.6%.  The lower operating margin was primarily due to higher proportionate labor costs.  The Company anticipates that visitor volume and competition will continue to be a challenge in 2011. The Company will focus on new hotel marketing initiatives, increasing operating efficiencies, maintaining high convention-related hotel occupancy and taking advantage of the Hilton affiliation to maintain visitor volume.

The Hotel maintained an average daily room rate of $86 in both 2010 and 2009.  Occupancy was also similar for the two years.  The convention segment for the year ended December 31, 2010 had higher occupancy but also had lower ADR than the year ended December 31, 2009.  The leisure segment experienced the opposite between 2010 and 2009.  The leisure segment had lower occupancy but higher ADR.  Operating margins were very similar for the two years.  The hotel operating margin for the year ended December 31, 2010 was 60.0%.  The hotel operating margin for the year ended December 31, 2009 was 61.2%.  The slight decline is margin was primarily due to increases from bargaining unit hourly rates.

Food and beverage revenues were $59.7 million during 2010, virtually unchanged compared to $59.8 million for 2009.  The Hotel’s food and beverage operating margin for the year ended December 31, 2010 was 28.8% compared to 31.9% for the year ended December 31, 2009.  This decrease in margin was primarily due to an increase in union labor and higher beverage costs.

Other revenues include retail sales, entertainment sales and miscellaneous income at the Hotel.  Other revenue decreased $1.0 million or 7.9% in 2010 from $12.1 million in 2009.  The decrease is attributable to entertainment ticket sales.  The Company primarily utilized four-wall acts instead of headliners.  Four-wall acts contract for the use of the Hilton Theater and generally retain the revenue from the ticket sales. 

Operating Cost and Expense Information

Fluctuations in the Hotel’s operating costs and expenses are generally based upon the change in volume of guests staying in the Hotel and utilizing the Hotel’s amenities, including the hotel, casino, food and beverage, entertainment, spa and retail outlets.

The breakdown of operating costs and expenses is as follows (dollars in thousands):

Operating costs and expenses decreased $10.4 million, or 4.8%, to $208.4 million for the year ended December 31, 2010 compared to $218.9 million for the year ended December 31, 2009.  The decrease was primarily attributable to decreased wage and benefit expenses caused by lower business volumes at the Hotel.

Casino

The decrease in casino expense is primarily related to a decrease in the volume of gaming activity.  Spending levels for labor, benefits and promotional spending decreased in relation to lower gaming revenue volume.

Rooms

Operating expense for the Hotel’s room department increased slightly from $28.4 million for the year ended December 31, 2009 to $29.2 million for the year ended December 31, 2010.  Since occupancy was similar between 2009 and 2010, operating expenses were very similar to prior year levels..

Food and Beverage

Operating expense for the Hotel’s food and beverage increased $1.8 million, or 4.3% year-over-year.  The increase was primarily due to an increase in labor and benefits.

Other

Other operating expenses decreased approximately $2.8 million, or 30.3%, year-over-year.  The decrease is primarily attributable to decreases in entertainment expenses.  Lower artist fees, which are included in other expenses, were incurred because the Hotel entered into more contracts in which the artist fees were absorbed by the producers of such events and because the resident entertainers appeared less frequently in 2010 than in 2009.

General and Administrative

General and administrative expenses decreased $3.3 million or 6.0% year-over-year. The decrease was attributed to a decrease in discretionary wages and lower advertising costs.

Depreciation and Amortization

Depreciation expense decreased approximately $1.1 million in 2010 compared to 2009.  Certain short-lived assets, namely slot machines, have become fully depreciated between 2009 and 2010.

Interest (Income) Expense

The following table summarizes information related to the Company’s interest expense on long-term debt and interest income during the year ended December 31, 2010 (in thousands, except percentages):

Interest expense includes $903,425 of amortization related to deferred financing costs and $68,072 reflecting the change in the value of the interest rate cap.  No interest was capitalized during 2009.

Net Income (Loss)

The Hotel recorded a net loss of $34.1 million for the year ended December 31, 2010, compared with a net loss of $28.9 million for the year ended December 31, 2009.

The decrease in the net income is attributed to the decrease in operating income offset by a decrease in operating expenses and an increase in interest expense.  A reconciliation follows (in thousands):

Comparison of the Year Ended December 31, 2009 with the Year Ended December 31, 2008

Revenue Information

The breakdown of the Property’s net revenue is as follows (dollars in thousands):

Net revenue for the year ended December 31, 2009 was $200.7 million, representing a decrease of $81.0 million or 28.7% when compared to $281.7 million of net revenues during 2008.  The decrease in net revenue was due to:  (1) a decrease in casino revenue of $16.8 million due to decreased table games and slot revenue partially offset by increased race and sportsbook revenue, (2) a decrease in room revenue of $42.4 million primarily as a result of a decrease in the average daily hotel room rate, and (3) a decrease in food and beverage revenue of $15.7 million primarily as a result of a decline in banquets and catering and other segments related to the conventioneer and (4) a decrease in other revenue of $10.4 million primarily as a result of decreased entertainment revenue.

In 2009, table games revenue decreased approximately 27.4% and slot revenue decreased approximately 19.5%.  The shortfall in table games and slot revenue was somewhat offset by a 20.2% increase in the Race and Sportsbook win.  Table games and slot volume decreased primarily due to lower spending by gaming visitors and fierce competition in the Las Vegas market. The economic downturn limited the number of visitors.  Multi-location competitors offered gaming guests higher credit limits, longer payment terms, increased player incentives and enriched casino marketing programs.  The shortfall in table games and slot revenue was somewhat offset by a 20.2% increase in the Race and Sportsbook win.  The increase in Race and Sportsbook win was primarily due to an increase in the related hold percentage much of which was driven by favorable Super Bowl results. 

The Company’s casino operating margin was basically unchanged between 2009 and 2008.  For the year ended December 31, 2009 the casino operating margin was 19.6%; for the year ended December 31, 2008 the casino operating margin was 19.4%.  With total casino revenues declining 17.3% between the two years, the Company was able to proportionately reduce casino-related expenses. 

The Hotel maintained an average daily room rate of $86 in 2009 compared to $125 in 2008.  Room revenues during 2009 were $73.2 million, representing a decrease of $42.4 million or 36.7% when compared to $115.6 million during 2008.  The decrease in room revenue was primarily the result of the decrease in the average daily room rate.  Occupancy, especially in the convention segment, was also a contributor to the hotel revenue shortfall.  Operating margins fell from 71.0% in 2008 compared to 61.2% in 2009 due to the significant decrease in hotel room rates.

Food and beverage revenues were $59.8 million during 2009 compared to $75.5 million for 2008.  Food and beverage revenue declined due to lower occupancy especially in those outlets that cater to the conventioneer.  The Hotel’s food and beverage operating margin for the year ended December 31, 2009 was 31.9% compared to 29.3% for the year ended December 31, 2008.  This increase in margin was achieved by lower labor and benefit costs.

Other revenues include retail sales, entertainment sales and miscellaneous income at the Hotel.  Other revenue decreased $10.4 million or 46.0% in 2009 from $22.5 million in 2008.  The decrease is attributable to a decrease in entertainment ticket sales due to fewer performances by headliners and by utilizing more four-wall acts.  Four-wall acts contract for the use of the Hilton Theater and generally retain the revenue from the ticket sales. 

Operating Cost and Expense Information

Fluctuations in the Hotel’s operating costs and expenses are generally based upon the change in volume of guests staying in the Hotel and utilizing the Hotel’s amenities, including the hotel, casino, food and beverage, entertainment, spa and retail outlets.

The breakdown of operating costs and expenses is as follows (dollars in thousands):

Operating costs and expenses decreased $48.3 million, or 18.1%, to $218.9 million for the year ended December 31, 2009 compared to $267.1 million for the year ended December 31, 2008.  The decrease was primarily attributable to decreased wage and benefit expenses caused by lower business volumes at the Hotel.

Casino

The decrease in casino expense is primarily related to a decrease in the volume of gaming activity.  Spending levels for wages and benefits and promotional spending was decreased in relation to lower gaming revenue volume.

Rooms

Operating expense for the Hotel’s room department decreased $5.2 million or 15.4% year-over-year.  The decrease was primarily due to decreased variable cost such as labor and benefits, laundry expenses and commissions paid for group room blocks.

Food and Beverage

Operating expense for the Hotel’s food and beverage decreased $12.7 million, or 23.7% year-over-year.  The decrease was primarily due to volume-related costs such as variable labor and cost of sales.

Other

Other operating expenses decreased approximately $6.2 million, or 39.8%, year-over-year.  The decrease is primarily attributable to decreases in entertainment expenses.  Lower artist fees, which are included in other expenses, were incurred because the Hotel entered into more contracts in which the artist fees were absorbed by the producers of such events and because the resident entertainers appeared less frequently than in 2008.

General and Administrative

General and administrative expenses decreased $10.9 million or 16.5% year-over-year. The decrease was attributed to a decrease in discretionary wages, lower advertising costs and lower fees paid to an affiliate for shared management services.

Depreciation and Amortization

Depreciation expense is approximately the same for the year ended December 31, 2009 compared to the year ended December 31, 2008.  Limited additional property renovations were completed in 2009. 

Interest (Income) Expense

The following table summarizes information related to the Company’s interest expense on long-term debt and interest income during the year ended December 31, 2009 (in thousands, except percentages):

Interest expense includes $605,000 of amortization related to deferred financing costs and $37,500 reflecting the change in the value of the interest rate cap.  No interest was capitalized during 2009.

Net Income (Loss)

The Hotel recorded a net loss of $28.9 million for the year ended December 31, 2009, compared with a net loss of $437,000 for the year ended December 31, 2008.

The decrease in the net income is attributed to the decrease in operating income offset by the decrease in interest expense.  A reconciliation follows (in thousands):

Liquidity and Capital Resources

Cash flows of the Company for the year ended December 31, 2010 compared to the year ended December 31, 2009 consisted of the following:

Cash Flows – Operating Activities

Cash flow used in operations was $13.4 million in 2010 compared to $1.3 million provided by operations in 2009.  The decrease in cash flow used in operations was primarily due to the increase in net loss between the two periods and the reduction of accounts payable and accrued expenses

Cash Flows – Investing Activities  

During the year ended December 31, 2010, the Company paid out $4.8 million for numerous maintenance capital projects.  The Company expects to spend nominal amounts on capital projects in 2011.  Any 2011 capital expenditure projects will be financed from existing cash balances and 2011 operating cash flow.  The Company also reduced restricted cash during the year ended December 31, 2010 in order to fund operations.

Cash Flows – Financing Activities

For the year ended December 31, 2010, $20.7 million of cash was provided by financing activities.  The additional cash was received as part of the extension of the Term Loan discussed in Note 8.  For the year ended December 31, 2009, $17.0 million was used to fund financing activities primarily with a $20.0 million repayment of the Term Loan. For the year ended December 31, 2010, $1.2 million of debt issuance costs were expended.  During the year ended December 31, 2009, $1.5 million of debt issuance costs were incurred.  As of December 31, 2010 the Term Loan has a total balance of $230 million and a portion of the Term Loan funded by an affiliate has a total balance of $22.0 million. 

Interest on the Term Loan accrues at a rate of one month LIBOR plus 4.0%.  The LIBOR rate has a minimum of 1.5%.  The Term Loan provides for no amortization during the term. The Term Loan is collateralized by a first priority deed of trust on the Hotel.

Pursuant to the terms of the Term Loan, the Company purchased an interest rate cap with LIBOR strike rate of 5.75% for the first two years of the Term Loan and an interest rate cap with LIBOR strike rate of 6.25% for any extension periods.  As of December 31, 2010 the unamortized value of the interest rate cap is $55,928.

The Term Loan had an original expiration date of May 10, 2008.  Upon the satisfaction of certain conditions, the Term Loan provided for three, one year extensions.  The Company exercised the first extension option in 2008.  On August 14, 2009 the Company and Goldman Sachs Mortgage Company (the “Lender”) executed the First Amendment to Loan Agreement and Omnibus Loan Modification Agreement.  The agreement extended the Term Loan due date for two years.  Also as part of the loan modification, the Company was required to obtain a new extension rate cap agreement, pay an extension fee and out-of-pocket expenses incurred by the Lender and meet certain debt yield benchmarks.  The Company paid $20 million in principal during 2009 as part of the negotiated extension as of June 30, 2009.

The Company entered into a Second Amendment to the Loan Agreement dated July 30, 2010.  The modified loan increased the principal amount of the loan by $22 million subject to terms and conditions of the Loan Agreement.  Concurrent to the funding, a participation agreement was executed with LVH Finance, LLC (the “Participant”) whereby the Participant funded the $22 million principal.  The Second Amendment extended the due date of the term loan to December 31, 2012 and calls for interest to be paid at LIBOR plus 4.0% through June 2011.  The LIBOR spread increases at 0.5% increments at six month intervals.  The LIBOR rate has a floor of 1.5%.  No interest is to accrue on the $22 million additional funding.  See also Footnote 8 to the financial statements.

Other Factors Affecting Liquidity

Covenants under the term loan restrict the Company’s future borrowing capacity. However, subject to certain conditions, the Term Loan does permit the Company to incur additional debt to fund working capital. If circumstances warrant, the Company may seek to obtain a working capital line of credit.

The Company's independent registered public accounting firm included an explanatory paragraph that expresses substantial doubt as to the Company's ability to continue as a going concern in their audit reports contained in this Annual Report on Form 10-K for the year ended December 31, 2010.  The Company cannot provide any assurance that it will in fact operate its business profitably, maintain existing financings, or obtain sufficient financing in the future to sustain its business in the event the Company is not successful in its efforts to generate sufficient revenue and operating cash flow.

The Company’s ability to continue as a going concern will be determined by its ability to obtain additional funding or restructure or negotiate waivers on its existing indebtedness and to generate sufficient revenue to cover its operating expenses.  The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue in existence.

The Company is evaluating a range of financial and strategic alternatives in addressing trends in the Company’s operating results and financial position.  These alternatives include refinancing, restructuring the Company’s financial obligations or the infusion of capital by ownership.

Contractual Obligation and Other Commitments

The following table summarizes the Company’s contractual obligations and commitments (amount in thousands):

________________

Off-Balance Sheet Arrangements

The Company is not currently subject to any off-balance sheet arrangements which it believes will have a material adverse impact on its financial condition.

Debt Instruments

The following table provides information about the Company’s long-term debt at December 31, 2010 (amounts in thousands):

The Term Loan originated May 11, 2006 and had an initial principal amount of $209.2 million with interest accruing at a rate of one month LIBOR plus 2.9%.  The Company extended the loan effective August 2009.  As part of the extension agreement, the Company was required to make principal payments totaling $20 million, pay fees totaling $1.5 million, purchase an interest rate cap and pay out-of-pocket expenses to the Lender. 

On July 30, 2010, the Company executed a Loan Modification Agreement which extended the due date of the term loan to December 31, 2012, provided for $22 million in additional borrowings and cured default interest that accrued from June 1, 2010.  See Note 8 for additional requirements of the Loan Modification Agreement.

Litigation Contingencies and Available Resources

In the normal course of business, the Company is subject to various litigation, claims and assessments.  The Company is not currently a party to any material litigation and it is not aware of any material action, suit or proceeding against it that has been threatened by any person.

Critical Accounting Policies

Significant Accounting Policies and Estimates

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States.  Certain of its accounting policies, including the determination of slot club promotion liability, the estimated useful lives assigned to its assets, asset impairment, insurance reserves, purchase price allocations made in connection with its acquisitions and the calculation of its income tax liabilities, require that it apply significant judgment in defining the appropriate assumptions for calculating financial estimates.  By their nature, these judgments are subject to an inherent degree of uncertainty.  The Company’s judgments are based on its historical experience, terms of existing contracts, observance of trends in the gaming industry and information available from other outside sources.  There can be no assurance that actual results will not differ from the Company’s estimates.  To provide an understanding of the methodology the Company applies, its significant accounting policies and basis of presentation are discussed below, as well as where appropriate in this discussion and analysis and in the notes to the Company’s financial statements.

Player Reward Promotions

The Company’s player reward program allows customers to redeem points earned from their gaming activity for cash and complimentary food, beverage, rooms, entertainment and merchandise.  At the time redeemed, the retail value of complimentaries is recorded as revenue with a corresponding offsetting amount included in promotional allowances.  The cost associated with complimentary food, beverage, rooms, entertainment and merchandise redeemed is recorded in casino costs and expenses.  The Company also records a liability for the estimated cost of the outstanding points that it believes will ultimately be redeemed.  

Self-Insurance Reserve

The Company is self insured up to certain stop loss amounts for workers’ compensation and general liability claims.  In estimating this accrual, the Company considers historical loss experience and makes judgments about the expected levels of costs per claim.  The Company believes its estimates of future liability are reasonable based upon its methodology; however, changes in accident frequency and severity and other factors could materially affect the estimate for this liability.

Derivative Instruments and Hedging Activities

The Company seeks to manage its market risk, including interest rate risk associated with variable rate borrowings, through balancing fixed-rate and variable-rate borrowings with the use of derivative financial instruments. The Company accounts for derivative financial instruments in accordance with Accounting Standards Codification Topic 815. The fair value of derivative financial instruments are recognized as assets or liabilities at each balance sheet date, with changes in fair value affecting net income (loss) or comprehensive income (loss) as applicable. The Company’s current interest rate swaps do not qualify for hedge accounting.  Accordingly, changes in the fair value of the interest rate swaps are presented as an increase (decrease) in fair value of swaps in the accompanying Statements of Operations.

Allowance for Doubtful Accounts

The Company’s receivables balances relate primarily to its hotel and casino operations.  The Company reserves an estimated amount for receivables that may not be collected.  The Company estimates the allowance for doubtful accounts by applying standard reserve percentages to aged account balances under a specific dollar amount and specifically analyzing the collectability of each account with a balance over the specified dollar amount, based on the age of the account, the customer’s financial condition, collection history and any other known information.

The allowance for doubtful accounts as a percentage of receivables as of December 31, 2010 increased when compared to December 31, 2009 primarily as a result of the decrease in the account receivable balance.  Receivables have decreased due to tightened credit criteria.  The Company maintains strict controls over the issuance of markers and aggressively pursues collection from those customers who fail to pay after issuance of the marker.

Property and Equipment

Property and equipment are stated at cost.  Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets or the terms of the capitalized lease, whichever is less.  Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

Long-Lived Assets

Long-lived assets, which are not to be disposed of, including intangibles and property and equipment, are periodically reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. For assets to be held and used, the Company reviews these assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.

Recent Accounting Pronouncements

In April, 2010, the FASB released an Accounting Standards Update (ASC Topic 924) addressing the issue of accounting for casino jackpots.  The update addresses the issue of the accounting diversity regarding the accrual of a jackpot liability for base jackpots.  The pronouncement requires a liability to be recorded at the time the entity has the obligation to pay the jackpot and applies to both base and progressive jackpots.  The update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010.  The update requires the Company to reduce its current liabilities by approximately $860,000.  There will be an offset to the accumulated deficit account for a like amount.  There will be no effect on the results of operations, cash flows, or disclosures.  

ITEM 7A(T).—     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

Market risk is the risk of loss from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices.  The Company’s primary exposure to market risk is interest rate risk associated with its variable rate long-term debt.   If LIBOR were to increase 100 basis points and there were no additional borrowings, interest expense would have increased approximately $2.3 million for the year ended December 31, 2010.  The Company attempts to manage its interest rate risk by entering into interest rate cap agreements.  The Company does not hold or issue financial instruments for trading purposes and does not enter into derivative transactions that would be considered speculative positions.  The derivative financial instruments consist exclusively of interest rate cap agreements.  Differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense.

To manage counterparty credit risk in interest rate cap agreements, the Company only enters into agreements with highly rated institutions that can be expected to perform under terms of such agreements.

ITEM 8.—FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  

INDEX TO FINANCIAL STATEMENTS

The following financial statements of the Company are presented herein on the page indicated:

AUDITED FINANCIAL STATEMENTS:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

COLONY RESORTS LVH ACQUISITIONS, LLC
BALANCE SHEETS

AS OF DECEMBER 31, 2010 AND 2009

(In thousands, except membership unit data)

The accompanying notes are an integral part of these financial statements.

COLONY RESORTS LVH ACQUISITIONS, LLC
STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, 2008
(In thousands, except membership unit data)

The accompanying notes are an integral part of these financial statements.

COLONY RESORTS LVH ACQUISITIONS, LLC
STATEMENTS OF MEMBERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, 2008
(In thousands)

The accompanying notes are an integral part of these financial statements.

COLONY RESORTS LVH ACQUISITIONS, LLC
STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, 2008
(In thousands)

The accompanying notes are an integral part of these financial statements.

COLONY RESORTS LVH ACQUISITIONS, LLC
NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2010, 2009, 2008

Note 1 – ORGANIZATION AND BUSINESS OF COMPANY

Colony Resorts LVH Acquisitions, LLC, a Nevada limited liability company (the “Company”), was formed at the direction of Colony Investors VI, L.P., a Delaware limited partnership (“Colony VI”) and an affiliate of Colony Capital, LLC (“Colony Capital”), under the laws of the State of Nevada on December 18, 2003.  Pursuant to the Company’s Amended and Restated Operating Agreement, dated June 18, 2004 (the “Operating Agreement”), the Company will continue in existence perpetually.  Members of the Company, however, may terminate the Operating Agreement and dissolve the Company at any time.

The Company’s members consist of Colony Resorts LVH Holdings, LLC (“Holdings”), which is a wholly owned subsidiary of Colony VI, a discrete investment fund managed by an affiliate of Colony Capital, Colony Resorts LVH Co-Investment Partners, L.P. (“Co-Investment Partners”), Colony Resorts LVH Coinvestment Voteco, LLC (“Co-Investment Voteco”) and Colony Resorts LVH Voteco, LLC (“Voteco”), each of which purchased Class A or Class B Membership Units on June 18, 2004 in connection with the equity financing described in Note 10.  On July 19, 2006, WH/LVH Managers Voteco, LLC (“Whitehall Voteco”) joined the Company as a member upon its acquisition of certain Class A Membership Units from Co-Investment Voteco.  On November 21, 2006, Nicholas L. Ribis (“Mr. Ribis”) joined the Company as a member upon the transfer of certain Class A and Class B Membership Units from Voteco and Holdings, respectively.

Note 2 – GOING CONCERN

The accompanying financial statements are prepared assuming that the Company will continue as a going concern and contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The Company’s ability to meet debt requirements including interest payments, fund operations and make capital improvements depends on its ability to generate cash flow in the future and/or negotiate the terms of its debt. If adverse economic conditions persist, worsen or fail to improve significantly, the Company could experience further decreases in revenues due to reduced consumer spending levels, which would cause the Company to not generate sufficient cash to fund its liquidity needs or fail to satisfy the terms of its debt. The Company cannot be assured that its business will generate sufficient cash flow from operations in an amount necessary to enable it to pay its indebtedness or to fund its other liquidity needs.

As shown in the financial statements, the Company generated net losses of $34.1 million and $28.9 million for the years ended December 31, 2010 and 2009, respectively. At December 31, 2010, the Company had cash and cash equivalents of $10.5 million and an accumulated deficit of $91.9 million.  Additionally, the Company had a working capital deficiency of $2.7 million at December 31, 2010.

The Company is evaluating a range of financial and strategic alternatives in addressing trends in the Company’s operating results and financial position. These alternatives include refinancing, restructuring the Company’s financial obligations or the infusion of capital by ownership.

The conditions and events described above raise substantial doubt about the Company’s ability to continue as a going concern.  The accompanying financial statements do not include any adjustment to reflect the possible future effects on the recoverability and classification of assets or the amount of classification of liabilities that may result should the Company be unable to continue as a going concern.

Note 3– THE ACQUISITION

On June 18, 2004, the Company completed the acquisition of substantially all of the assets of the Hotel for $291 million, which included the purchase price of $280 million, a working capital adjustment of $6 million and professional fees and other expenses related to the acquisition of $5 million.  The purchase and sale agreement dated December 24, 2003 included a provision whereby the purchase price of $280 million was subject to adjustment related to the working capital of the Hotel.  The initial working capital adjustment of $6 million was determined based upon the preliminary closing balance sheet as of May 31, 2004.  The final working capital adjustment was determined based upon the June 17, 2004 closing balance sheet.  The working capital adjustment was finalized in the quarter ended September 30, 2004 and was determined to be $6.7 million.  The Company therefore paid an additional $741,000 to Caesars in October 2004.  The acquisition has been accounted for as a purchase and, accordingly, the purchase price and working capital adjustment were allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition.  The estimated fair values of property were based upon a third-party valuation and management’s estimates.

Note 4– SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management’s Use of Estimates

The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.  On an on-going basis, management evaluates those estimates, including those related to asset impairment, accruals for slot marketing points, self-insurance, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies and litigation.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term investments with original maturities not in excess of 90 days.

Restricted Cash

The Company has on deposit $13.6 million and $7.7 million in various escrow accounts as of December 31, 2010 and 2009, respectively.  The accounts segregate funds to be used solely for renovation projects, property taxes and insurance, and also include certificates of deposit required by gaming authorities and certificates of deposits securing letters of credit in connection with self insurance policies issued by its insurance carriers and its credit card processor.

Accounts Receivable

Accounts receivable are recorded net of amounts estimated to be uncollectible.  The Company estimates an allowance for doubtful accounts to reduce the Company’s receivables to their carrying amount which approximates fair value.  The Company estimates an allowance for doubtful accounts based on a specific review of customer accounts, collection experience, and current business conditions.

Concentrations of Credit Risk