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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended September 30, 2011

or

For the transition period from           to         

Commission File Number: 000-53894

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

(Exact name of registrant as specified in its charter)

3801 Las Vegas Boulevard South

Las Vegas, Nevada 89109

(Address of principal executive offices and zip code)

(702) 739-2722

(Registrant’s telephone number, including area code)

n/a

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark 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.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of October 31, 2011 there were 4,579,151 shares outstanding of the registrant’s Class A Common Stock, $0.01 par value and no shares outstanding of the registrant’s Class B Common Stock, $0.01 par value.  The issued and outstanding equity securities of the registrant are not publicly traded.

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PART I. FINANCIAL INFORMATION

Item I. Financial Statements

TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

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

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TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

(unaudited)

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

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TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

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

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TROPICANA LAS VEGAS HOTEL AND CASINO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Background

Organization

Tropicana Las Vegas Hotel and Casino, Inc., is a Delaware corporation formed in June 2009 for the purpose of owning and operating Tropicana Las Vegas Holdings, LLC and its subsidiaries (the “Predecessor”), including the operations of Tropicana Las Vegas Hotel and Casino, LLC dba Tropicana Resort and Casino Las Vegas (“Tropicana Las Vegas”) from Tropicana Entertainment Holdings, LLC (“TEH”), in connection with the Predecessor’s plan of reorganization (the “Bankruptcy Plan”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”).

References herein to “we,” “us,” “our” or “Company” refer to Tropicana Las Vegas Hotel and Casino, Inc. unless the context specifically requires otherwise.

Background

On May 5, 2008 (the “Petition Date”), TEH together with certain of its subsidiaries, including the Predecessor, filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) for relief, seeking to reorganize their businesses under the provisions of the Bankruptcy Code (the “Chapter 11 Cases”). As TEH and certain of its subsidiaries progressed towards an exit from the Chapter 11 Cases, it was determined that given their capital structures and the claims arising thereunder, as well as the nature of the business operations, two separate plans were warranted. Accordingly, TEH proposed two separate plans of reorganization, one for the Predecessor and one for TEH’s other gaming properties.

The Bankruptcy Plan was confirmed by the Bankruptcy Court on May 5, 2009 and became effective on July 1, 2009 (the “Effective Date”). Pursuant to the Bankruptcy Plan, among other things:

·                  we were formed to own and operate the assets related to the Predecessor which were owned by the lenders under the Predecessor’s $440.0 million Senior Secured Term Loan (the “Las Vegas Term Loan”);

·                  we issued shares of our class A common stock, $0.01 par value per share (“Class A Common”), to holders of secured claims under the Las Vegas Term Loan (“Lenders”);

·                  Lenders subscribed to purchase $75.0 million of our class A convertible participating preferred stock, $0.01 par value per share (“Class A Preferred”), to provide operating capital;

·                  we entered into a stockholders’ agreement with the Lenders as a condition to receiving shares of Class A Common and Class A Preferred;

·                  we issued a warrant to purchase shares of our class B common stock, $0.01 par value per share (“Class B Common”), to TEH;

·                  we entered into a lease agreement, dated June 22, 2009, with Armenco Holdings, LLC (“Armenco”), a company controlled by Alex Yemenidjian, our Chairman of the Board, Chief Executive Officer and President, whereby we leased the real and non-gaming personal property of our hotel and casino, including the restaurants, lounges, retail shops and other related support facilities, and the operation thereof, to Armenco (Note 5) who also separately acquired all of the gaming assets until such time as we were able to obtain all governmental registrations, findings of suitability, licenses, qualifications, permits and approvals pursuant to the gaming laws and regulations of the State of Nevada and Clark County liquor and gaming codes necessary for us to own and operate our gaming facility directly, which occurred on December 1, 2010, at which time the lease was terminated and Armenco transferred the gaming assets of Tropicana Las Vegas to us for nominal consideration; and

·                  we assumed certain obligations and liabilities of the Predecessor.

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2. Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein were prepared by us, in accordance with accounting principles generally accepted in the United States for interim financial information and rules and regulations of the Securities and Exchange Commission (the “SEC”).  Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements, although we believe the disclosures are adequate to make the information presented not misleading.   The interim condensed consolidated financial statements contained herein should be read in conjunction with our audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2010.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results for the interim periods have been included.  The results of operations for the three and nine months ended September 30, 2011, are not necessarily indicative of future financial results.

Upon the Effective Date, we were not licensed by Nevada gaming authorities to own and operate the gaming assets of Tropicana Las Vegas. As a result, upon consummation of the Bankruptcy Plan, the gaming assets were transferred to Armenco, a company which is licensed to own and operate gaming facilities in the state of Nevada. We do not own any legal interest in Armenco. We determined that in accordance with accounting guidance related to Accounting Standards Codification (“ASC”) 810-10, Consolidation, we were ultimately responsible for a majority of the operations’ losses and were entitled to a majority of the operations’ residual returns. As a result, the gaming operations were incorporated in our financial statements until December 1, 2010 at which time we received all licenses and approvals necessary to operate the hotel and casino and Armenco transferred the gaming assets to us.

Subsequent Events

We have evaluated all activity through the date the condensed consolidated financial statements were issued, and concluded that no other material subsequent events would require recognition in the financial statements or disclosure in the notes to the financial statements.

Recently Issued Accounting Standards

A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, that the implementation of such proposed standards would have on our financial statements.

Reclassifications

Certain information in the condensed consolidated financial statements for the three and nine months ended September 30, 2010 were reclassified to be consistent with the current year presentation, specifically within the condensed consolidated statements of operations within the “Revenues” category within the captions “other” and “food and beverage.”  These reclassifications had no effect on the previously reported net loss.

3. Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

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Capital Improvement Project

In July 2009, we began a $147.0 million renovation of Tropicana Las Vegas.  Due to changes in scope as well as to net favorable variances to the original budget, the renovation project is now expected to cost approximately $141.6 million of which $137.6 million was spent as of September 30, 2011. The capital improvement project includes:

·                  the renovation of over 1,300 rooms and suites which included updating furnishings and amenities, substantially upgrading the guest room experience;

·                  a comprehensive casino remodel including a refurbishment of the casino floor which includes new slot machines, furnishings, carpet, new ceilings, walls and columns, table layouts, gaming chairs and other items;

·                  a reconfiguration of the pedestrian bridge between Tropicana Las Vegas and MGM Grand Hotel & Casino allowing guests to enter the property directly into our new race and sports book;

·                  opening of Café Nikki, a three meal restaurant which offers American cuisine and flavors inspired by international dishes;

·                  the addition of Club Nikki and Nikki Beach which were completed in May 2011. Club Nikki features 15,000 square feet leading guests to the iconic outdoor Nikki Beach Club;

·                  opening of South Beach Market Place, providing guests with a selection of casual dining experiences;

·                  opening of a poker room;

·                  a complete remodel of the convention and exhibition center;

·                  redevelopment of the pool area;

·                  enhancement of all food and beverage facilities;

·                  a new design for outdoor signage and the façade;

·                  renovations of restroom facilities throughout the property;

·                  renovations related to notices of violations and deferred maintenance projects; and

·                  other back-of-house improvements, upgrades to information technology systems and infrastructure upgrades.

In addition, we expanded and renovated our race and sports book, expanding it to 4,200 square feet, offering a full suite of unique sports betting technology, including in-running sports wagering. We also opened the theatrical interactive environment, “The Las Vegas Mob Experience.”  Costs related to the expansion and renovation of the race and sports book and the development of the Las Vegas Mob Experience are obligations of the tenants who operate those amenities. Additionally, we plan to develop a state-of-the-art spa facility expected to be completed in November 2011, which will also be funded and operated by a third party.

4. Long-term debt

Long-term debt consists of the following (in thousands):

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Credit Agreement

In March 2010, we entered into a $60.0 million credit agreement (the “Credit Agreement”) comprised of a $50.0 million revolving credit facility (the “Revolver”) and a $10.0 million delayed draw term loan (the “Term Loan”) which was amended in April 2011 and August 2011. The maturity date for the Credit Agreement is March 2014. The Revolver bears interest at 4% per annum and the fee for any unfunded portion of the Revolver is 0.75%. Proceeds from the Revolver are being used to finance the current ongoing capital improvement project and other general corporate purposes. Proceeds from the Term Loan will be used to finance the completion of the ongoing capital improvement project. The Term Loan bears interest at 6% per annum and requires repayment of the principal balance outstanding under the Term Loan in equal monthly installments beginning on January 31, 2013.  The fee for any undrawn portion of the Term Loan is 1.00%. Pursuant to the terms of the Credit Agreement, we are required to establish an interest reserve account, as defined.

In April 2011, we entered into a first amendment to our Credit Agreement (the “First Amendment”).  Among other things, the First Amendment (i) amends the financial covenants we are subject to under the Credit Agreement; (ii) eliminates a provision that would have released the interest reserve under the Credit Agreement to us upon the 18 month anniversary of the Credit Agreement upon certain conditions and milestones; (iii) restricts our payment of management fees to Trilliant Management while there remains a principal amount outstanding under the Term Loan; and (iv) restricts the expenditure of capital on our capital improvement projects to not more than $61.2 million in 2011 and $10.0 million in 2012.

In August 2011, we entered into a second amendment and limited duration waiver to our Credit Agreement (the “Second Amendment”).  Among other things, the Second Amendment (i) provides a temporary waiver by the lenders of an existing default as fully disclosed in Note 6; and (ii) provides an additional thirty (30) days for the Company to provide its baseline financial projections to the administrative agent and lenders.

In November 2011, we entered into a second limited duration waiver to our Credit Agreement (the “Waiver”).  Among other things, the Waiver provides a temporary waiver by the lender of an existing default as fully disclosed in Note 6.

The Credit Agreement contains certain financial and other covenants. The covenants, among other things, restrict, subject to certain exceptions, our ability to incur additional indebtedness; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions; engage in certain transactions with affiliates; and make investments.  Substantially all the assets of Tropicana Las Vegas are pledged as collateral under the Credit Agreement.  With the exception of the following regarding Murder, Inc., LLC (“Murder Inc.”), we believe we are in compliance with our covenants as of September 30, 2011.

Pursuant to a lease dated June 7, 2010, we leased certain space within our property to Murder Inc., LLC (the “Tenant”) for the development of a theatrical interactive environment, “The Las Vegas Mob Experience” (the “Mob Experience”).  The lease is guaranteed by Eagle Group Holdings, LLC.  In connection with the Tenant’s construction of the Mob Experience, the general contractor and certain subcontractors contend that approximately $4.6 million remains due and unpaid, and in August 2011, they recorded liens against our property to secure payment thereof.  We are aware that these liens constitute an event of default under our Credit Agreement and have entered into the Second Amendment and Waiver, as previously mentioned, whereby the Company has until February 18, 2012 to have such liens released, insured over or bonded.

Other long-term debt

In June 2010, we entered into an equipment financing agreement in the amount of $1.2 million at an interest rate of 6.9%, maturing in July 2015. The agreement requires monthly payments of $21,000 that began August 2010, and a residual payment of $116,000 to be paid in the final month.

We lease certain equipment under capital leases. These agreements are capitalized at the present value of the future minimum lease payments at inception and are included in property and equipment. Under the terms, the lease agreements are non-interest bearing. As a result, no imputed interest was recorded as it was not material to the financial statements.

5. Related Party Transactions

Armenco Lease

As discussed in Note 1, on June 22, 2009, we entered into a lease agreement with Armenco (the “Armenco Lease”) in which we leased the real and non-gaming personal property of our hotel and casino, including the restaurants, lounges, retail shops and other related support facilities, and the operation thereof to Armenco until such time as we were able to obtain all governmental registrations, findings of suitability, licenses, qualifications, permits and approvals pursuant to the gaming laws and regulations of the State of Nevada and Clark County liquor and gaming codes necessary for us to own and operate our gaming facility directly, which occurred on December 1, 2010 resulting in the termination of the Armenco Lease. Under the terms of the lease, we were required to pay a fee equal to 2% of net revenues and 5% of EBITDA, each as defined, to Armenco. Armenco in turn paid rent in the amount of $1.00 per month. We incurred approximately $0.3 million and $0.8 million in expense related to the Armenco Lease for the three and nine months ended September 30, 2010, respectively, which was included in management fees in the accompanying unaudited condensed consolidated statements of operations.

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Management Agreement

Effective December 1, 2010, as discussed above, the Armenco Lease was terminated and the operation of our hotel and casino is managed by Trilliant Management, LP (“Trilliant Management”), pursuant to the terms of the management agreement entered into in May 2010 (the “Management Agreement”). Trilliant Management is controlled by its general partner, Trilliant Gaming Nevada Inc. (“Trilliant Gaming”), which is owned by each of Mr. Alex Yemenidjian, our Chairman of the Board, Chief Executive Officer and President, Mr. Timothy Duncanson, a director of the Company and Mr. Gerald Schwartz, the chairman and controlling stockholder of Onex Corporation. Together Messrs. Yemenidjian, Duncanson and Schwartz own 100% of the outstanding voting securities of Trilliant Gaming. The only other outstanding capital stock of Trilliant Gaming is one non-voting preferred share held by Mr. Yemenidjian, which share had a subscription price of $10,000 and upon a liquidation of Trilliant Gaming, is entitled to receive the subscription price plus any accrued and unpaid dividends (dividends accrue at the rate of 8% per annum). This one non-voting preferred share represents a de minimus ownership interest in and has no effect on the control of Trilliant Gaming. A stockholder agreement between Messrs. Yemenidjian, Duncanson and Schwartz sets forth the rights of each of them with respect to control of Trilliant Gaming and, in turn, our securities owned by the Onex Armenco Gaming Entities. The Onex Armenco Gaming Entities were formed by entities affiliated with Onex Corporation.

The Management Agreement provides for Trilliant Management to assist us in the management and operation of Tropicana Las Vegas. The Management Agreement terminates on November 30, 2020. For each fiscal year or portion thereof during the term of the Management Agreement, we will pay Trilliant Management a fee equal to the sum of 2% of all revenue from the operation of Tropicana Las Vegas (the “Revenue Fee”) and 5% of EBITDA after reduction of the Revenue Fee (each as defined). We incurred approximately $0.5 million and $1.3 million in expense related to the Management Agreement for the three and nine months ended September 30, 2011, respectively, which were included in management fees in the accompanying unaudited condensed consolidated statements of operations.

Consulting Agreement

In September 2011, we entered into a consulting agreement with Michael Ribero (“Mr. Ribero”), an independent director of our Company, to provide consulting services to us in connection with potential marketing initiatives of the Company.  The Agreement, which has a term from September 1 to December 31, 2011, provides for Mr. Ribero to receive $12,500 per month, plus performance bonuses at our discretion, and reimbursement of all reasonable business expenses incurred on behalf of the Company.  Mr. Ribero holds the title of Strategic Advisor, Office of the Chairman.

6. Commitments and Contingencies

Pursuant to the Bankruptcy Plan, we have assumed certain obligations and liabilities of the Predecessor, particularly liabilities in respect of post-bankruptcy petition administrative expenses. As of September 30, 2011, we have paid (or agreed to pay) approximately $2.5 million in allowed priority and cure claims and in non-professional fee administrative expenses and, with the exception of five disputed administrative/priority claims in the aggregate asserted amount of approximately $1.3 million, we do not anticipate any material additions to such claims or expenses. Professionals employed at the expense of the bankruptcy estates of the Predecessor and other debtors have filed applications for allowance of approximately $13.0 million in professional fees and expenses against the Predecessor. We dispute and have objected to many of those applications in advance of hearings before the Bankruptcy Court, the first of which occurred on May 11, 2011, and addressed issues of allocation of fees and expenses between the Predecessor and TEH. A second hearing on all other issues subject to the objections will occur approximately eight (8) weeks after the resolution of the allocation issues submitted to the Bankruptcy Court at the hearing that occurred on May 11, 2011. We believe that our liability in respect of such claimed professional fees and expenses will be materially less than the amounts requested, but we can give no assurance in this regard. In addition, the Company has taken the position that, pursuant to the Bankruptcy Plan, it is responsible only for the Predecessor’s appropriate allocation of professional fees and expenses that were unpaid at the time of confirmation of the Bankruptcy Plan, which would be an amount less than the amount of fees and expenses that the Company’s objections concede should be allocated to the Predecessor.  TEH, on the other hand, has asserted that the Predecessor should be responsible for payment of the entire amount of fees and expenses ultimately allocated to the Predecessor, an amount that TEH asserts should be 50% of the entire amounts requested. TEH also has asserted a claim of approximately $520,000 for management fees and an unliquidated contingent claim relating to alleged workers’ compensation liabilities. We dispute a portion of the claimed management fees and are currently in discussions with TEH regarding a resolution. We dispute the claim in respect of workers’ compensation liabilities in its entirety. However, no assurance can be given that the claims asserted will be ultimately disallowed or will not have a material adverse impact on the Company.

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On August 15, 2011, we received the last required signature page to the Settlement Agreement, dated August 9, 2011 (the “Trademark Settlement Agreement”), that we entered into with, among others, the defendants to the civil action pending in the Eighth Judicial District Court in the County of Clark, Nevada, styled Tropicana Las Vegas, Inc. and Hotel Ramada of Nevada, LLC v. Aztar Corporation and Tropicana Entertainment, LLC (Case No. A09595469-B) (the “Trademark Action”). The Trademark Settlement Agreement confirms, among other things, that (i) we own and have the exclusive right to use the “Tropicana Las Vegas” (or “Trop LV”) and the “Tropicana LV” (or “Trop LV”) marks within 50 miles of our facility (the “Las Vegas Area”) in the business of providing entertainment and hospitality services, and on the internet and for advertising purposes without geographic limitation, and (ii) Tropicana Entertainment, LLC owns and has the exclusive right to use the “Tropicana” and “Trop” marks, in connection with a modifier indicating the type of service being provided or designating a geographic location, outside of the Las Vegas Area, and for advertising purposes without geographic limitation. The Trademark Settlement Agreement also provides for the mutual release of all claims by and between the parties thereto related to the trademarks that are subject to the Trademark Action (and certain other related matters). Also on August 15, 2011, the parties to the Trademark Settlement Agreement filed a joint motion with the Bankruptcy Court seeking approval of such agreement. A hearing on the motion seeking approval of the Trademark Settlement Agreement was held by the Bankruptcy Court on September 13, 2011.  At such hearing, the Bankruptcy Court approved the Trademark Settlement Agreement. Thereafter, on September 28, 2011, the Trademark Settlement Agreement became effective in accordance with its terms.  As a result, the Trademark Action and all other disputes between the parties have now been resolved under the terms of the Trademark Settlement Agreement.

We are the lessor under a lease dated as of June 7, 2010 (the “Lease”), with Murder, Inc., LLC, as tenant (the “Tenant”), and Eagle Group Holdings, LLC (“Eagle Group”), as guarantor, respecting use and operation of the “Mob Experience” exhibit operating in exhibition space at the Tropicana Las Vegas.  On or about July 13, 2011, M.J. Dean Construction, Inc. (the “Contractor”), recorded a Notice of Lien on property owned by the Company, claiming $4,640,732 in unpaid amounts for work performed on the property at the direction of Tenant.  On October 4, 2011, the Contractor recorded an Amended Notice of Lien, making the same claim.  In addition, various subcontractors hired by the Contractor have recorded notices of liens in the aggregate amount of $2,215,116 on property owned by the Company.  We believe that such notices are duplicative of the notices filed by the Contractor.  Three of the subcontractors have filed suit seeking to enforce their liens in the aggregate amount of $1,058,689. We are aware that these liens constitute an event of default under our Credit Agreement and have entered into the Second Amendment and Waiver, as previously mentioned, whereby the Company has until February 18, 2012 to have such liens released, insured over or bonded.

As a result of the imposition of those mechanics’ liens and other breaches under the Lease, the Tenant is in default under the Lease.  We have engaged in negotiations with the Tenant, the Contractor and a third-party investor of the Tenant regarding that default and the possibility of a consensual restructuring of the Tenant’s financial affairs.  Those negotiations resulted in an agreement in principle pursuant to which Tenant would commence bankruptcy proceedings and seek confirmation of a plan of reorganization that would provide, among other things, for the removal of the mechanics liens, modification of the Lease, and our agreement to defer collection of rent under the Lease during the pendency of Tenant’s bankruptcy case.

In order to effectuate such restructuring, on October 17, 2011, Tenant filed a petition for relief under chapter 11 of the Bankruptcy Code, thereby commencing the reorganization case styled In re Murder, Inc., LLC, which is pending before the United States Bankruptcy Court for the District of Nevada, Las Vegas Division (the “Nevada Bankruptcy Court”), as Case No. 11-26317-BAM.  At a hearing held on October 24, 2011, the Nevada Bankruptcy Court established a plan confirmation schedule, which provides for, among other things, a hearing commencing on January 9, 2012, regarding the proposed confirmation of Tenant’s plan of reorganization, which seeks to implement the consensual restructuring described in the preceding paragraph.  While we support the prompt confirmation of Tenant’s plan of reorganization, no assurance can be given that such plan will be confirmed by the Nevada Bankruptcy Court and become effective.

On or about August 25, 2011, Eagle Group and other individuals and an entity affiliated with it filed against the Company, in the Nevada District Court for Clark County Nevada, a third party complaint in an action entitled Vion Operations LLC, et. al. v. Jay L. Bloom, et al., Case No. A-11-646131-C.  That third party complaint asserted a claim for breach of the Lease and related claims for breach of the implied covenant of good faith and fair dealing and for contribution.  We dispute any liability for such claims and, on or about September 20, 2011, the third party plaintiffs dismissed their complaint, without prejudice, against the Company.  Because such dismissal was without prejudice, it is possible that the claims will be asserted again in the future, in which case it is anticipated that we would deny all liability.

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In the ordinary course of business, we enter into numerous agreements that contain standard guarantees and indemnities whereby we indemnify another party for breaches of representations and warranties. Many of these parties are also indemnified against any third party claim resulting from the transaction that is contemplated in the underlying agreement such as a lease agreement. While some of these guarantees extend only for the duration of the underlying agreement, many survive the expiration of the term of the agreement. There are no explicit limitations on the maximum potential amount of future payments that we could be required to make under some of these guarantees. We are unable to develop an estimate of the maximum potential amount of future payments to be made under these guarantees as the triggering events are not predictable. We maintain insurance coverage that mitigates some potential payments to be made.

7. Stockholders’ Equity

Preferred Stock

We are authorized to issue up to 750,000 shares of our Class A Preferred, 545,702 shares of our Class A Series 2 Convertible Participating Preferred Stock (“Class A Series 2 Preferred”, collectively with Class A Preferred, “Existing Preferred”), and 350,000 shares of our Class A Series 3 Convertible Participating Preferred Stock, $0.01 par value per share, “Class A Series 3 Preferred”, collectively with Existing Preferred, “Preferred Stock”) of which 750,000 shares, 545,585 shares and 350,000 of Class A Preferred, Class A Series 2 Preferred, and Class A Series 3 Preferred, respectively, were outstanding at September 30, 2011.

In April 2010, we consummated a $50.0 million rights offering, pursuant to which we issued and sold 500,000 shares of our Class A Series 2 Preferred to certain of our stockholders. As part of this rights offering, we also issued an additional 40,000 shares of Class A Common to purchasers in the rights offering who provided a “backstop” to the offering (i.e., purchasing the shares of Class A Series 2 Preferred that were unsubscribed for by the other stockholders to ensure that we could raise the full $50.0 million from the rights offering).  Further, we issued an additional 45,585 shares of Class A Series 2 Preferred to the lead arranger and administrative agent of the Credit Agreement as consideration for providing the Term Loan and Revolver (Note 4).

In May 2011, we consummated a $35.0 million rights offering, pursuant to which we issued and sold 350,000 shares of our Class A Series 3 Preferred to certain of our stockholders.  The Class A Series 3 Preferred has the same terms as our Existing Preferred, except that the initial conversion price of the Class A Series 3 Preferred is $15 per share rather than the $25 per share of the Existing Preferred.  As part of the rights offering, we issued an additional 46,666 shares of our Class A Common to purchasers in the rights offering who provided a “backstop” to the offering (i.e., purchasing the shares of Class A Series 3 Preferred that were unsubscribed for by the other stockholders to ensure that we could raise the full $35.0 million from the rights offering).  The proceeds from the Class A Series 3 Preferred are being used for general corporate purposes, including funding of our ongoing capital improvement project.

The Preferred Stock constitutes a class of our preferred stock, consisting of an aggregate of 1,645,702 shares having a per share liquidation preference amount equal to the greater of (i) $100 plus the amount of accrued and unpaid dividends for any prior dividend periods; and (ii) an amount equal to the amount the holders of the Preferred Stock would have received upon liquidation, dissolution or winding up of the Company had such holders converted their shares of the Preferred Stock into shares of our common stock immediately prior to such liquidation, dissolution or winding up.

Dividends on the Preferred Stock are payable semi-annually in arrears, when, as and if authorized and declared by our board of directors out of legally available funds, on a cumulative basis on the $100 per share original purchase price plus the amount of cumulated and unpaid dividends for any prior dividend periods. Dividends on the Preferred Stock are calculated at a rate of 12.5% per annum and are payable semi-annually in arrears, commencing in February 2010 for the Class A Preferred, October 2010 for the Class A Series 2 Preferred and August 2011 for the Class A Series 3 Preferred. Each dividend will be payable to holders of record as they appear on our stock register on the applicable record date, which will be the 15th calendar day immediately preceding the related dividend payment date (whether or not a business day), or such other record date determined by our board of directors that is not more than 60 nor less than ten days prior to the related dividend payment date. Each period from and including a dividend payment date (or the date of the issuance of the Preferred Stock) to but excluding the following dividend payment date is referred to as a “dividend period.” Dividends payable for each dividend period are computed on the basis of a 360-day year consisting of twelve 30-day months. Any payment of a dividend will first be credited against the earliest cumulated but unpaid dividend due with respect to such share that remains payable.

Dividends on the Preferred Stock are cumulative. If for any reason our board of directors does not declare a dividend on the Preferred Stock for a particular dividend period, or if our board of directors declares less than a full dividend, we will remain obligated to pay the unpaid portion of the dividend for that period and the unpaid dividend will compound on each subsequent dividend date (meaning that dividends for future dividend periods will be calculated on any unpaid dividend amounts for prior dividend periods).

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We are not obligated to pay holders of the Preferred Stock any dividend in excess of the dividends on the Preferred Stock that are payable as described above. There is no sinking fund with respect to dividends on the Preferred Stock. So long as the Preferred Stock remains outstanding, we may not declare or pay a dividend or other distribution on our common stock or any other shares that rank junior to the Preferred Stock (other than dividends payable solely in common stock), and we generally may not directly or indirectly purchase, redeem or otherwise acquire any shares of common stock unless all accrued and unpaid dividends on the Preferred Stock for all past dividend periods are paid in full. As of September 30, 2011, we had approximately $34.3 million in unrecorded dividend liability.

Each share of Preferred Stock is convertible into shares of common stock. Each holder of the Preferred Stock is entitled to convert any and all shares of such stock into shares of Class A Common or Class B Common (at the option of such holder) provided that the conversion of Preferred Stock to Class A Common will not be permitted unless such conversion is in compliance with, and such holder has, all necessary approvals and licenses under all applicable gaming laws. The number of shares of Class A Common or Class B Common (at the option of such holder) that each Preferred Stock can be converted into can be determined by dividing (i) the sum of the $100 per share original purchase price of the Preferred Stock and the amount of cumulated and unpaid dividends for any prior dividend periods by (ii) the conversion price at the time of the conversion. The initial conversion price is $25 for Class A Preferred and Class A Series 2 Preferred and $15 for Class A Series 3 Preferred. Each outstanding share of Preferred Stock will automatically convert into a number of shares of Class A Common or Class B Common, as the case may be, upon any initial public offering of our common stock on a national stock exchange.

Subject to any preferences that may be granted to the holders of our preferred stock, each holder of common stock is entitled to receive ratably such dividends as may be declared by our board of directors out of funds legally available therefore, as well as any distributions to the stockholders and, in the event of liquidation, dissolution or winding up of the Company, is entitled to share ratably in all assets of the Company remaining after payment of liabilities.

Common Stock

We are authorized to issue up to 15,000,000 shares of our Class A Common of which 4,579,151 shares were outstanding as of September 30, 2011.  We are authorized to issue up to 5,182,808 shares of our Class B Common of which no shares were issued as of September 30, 2011. Except as otherwise provided by our articles of incorporation or Nevada law, each holder of the Class A Common is entitled to one vote, in person or by proxy, for each share standing in such holder’s name on our stock transfer records. To the fullest extent permitted by law, holders of Class B Common shall not be entitled to vote on any matter submitted to a vote of our stockholders. Each share of Class A Common is convertible into a share of Class B Common, in each case as adjusted for any stock dividends, splits, combinations, recapitalizations, reclassifications and similar events.  Each share of Class B Common is convertible into a share of Class A Common, in each case as adjusted for any stock dividends, splits, combinations, recapitalizations, reclassifications and similar events, provided that such conversion is in compliance with, and such holder has, all necessary approvals and licenses under all applicable gaming laws.

Holders of shares of common stock are entitled to receive dividends only when, as and if approved by our board of directors from funds legally available for the payment of dividends, after payment of dividends on our outstanding series of preferred stock. Our stockholders are entitled to share ratably in the assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, voluntarily or involuntarily, after payment of, or adequate provision for, all of our known debts and liabilities and of any preferences of the Class A Preferred, Class A Series 2 Preferred, Class A Series 3 Preferred, or any other series of our preferred stock that may be outstanding in the future. These rights are subject to the preferential rights of any other series of our preferred stock that may then be subject to compliance with the stockholders’ agreement, dated July 1, 2009 (the “Stockholders’ Agreement”) and applicable federal and state securities laws, including the Nevada Gaming Control Act, our common stock may be transferred without any restrictions or limitations.

Pursuant to the Bankruptcy Plan, we issued a warrant to purchase up to 664,122 shares of our Class B Common to TEH (the “TE Warrant”).  As of September 30, 2011, the TE Warrant is outstanding. The TE Warrant is exercisable by TEH at any time on or prior to the earlier of (i) 5:00 pm, New York City time, on July 1, 2013, or (ii) a date on which we sell, lease, transfer or otherwise dispose of substantially all of our property, assets or business, another person or entity acquires all or substantially all of our shares of common stock or we consolidate with or merge with or into another person or entity or enter into a business combination with another person. The exercise price per share for the TE Warrant is equal to (a) $66,412,373 plus interest accrued from and after July 1, 2009 at the rate of 15% per annum, compounded annually, divided by (b) 664,122. As of September 30, 2011, the exercise price of the TE Warrant was $133.74. In order to exercise the TE Warrant, TEH is required to become a party to the Stockholders’ Agreement. Based on the valuation models used and related assumptions, no value was ascribed to the TE Warrant in the accompanying unaudited condensed consolidated financial statements.

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Changes in stockholders’ equity for the nine months ended September 30, 2011 were as follows (dollars in thousands, unaudited):

8. Share-Based Compensation

In September 2010, our board of directors approved, and we adopted, the 2010 Non-Employee Director Restricted Stock Plan (the “2010 Plan”) which provided for the grant of restricted stock to non-employee directors.  During the year ended December 31, 2010, 8,000 restricted stock awards were granted with a weighted average grant date fair value of $4.89, of which 2,000 vested immediately and the remaining will vest equally over 3 years.

In September 2011, our board of directors approved, and we adopted, the 2011 Non-Employee Director Restricted Stock Plan (the “2011 Plan”) which provided for the grant of restricted stock to non-employee directors.  In September 2011, we granted 4,000 restricted stock awards, of which 1,000 vested immediately and the remaining will vest equally over 3 years.

We account for share-based awards exchanged for services in accordance with the authoritative accounting guidance for share-based payments. Under the guidance, share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award.  For the three and nine months ended September 30, 2011, we recognized $7,000 and $12,000, respectively, of share-based compensation expense which was included in general and administrative expenses on the accompanying condensed consolidated statements of operations.

9. Basic and Diluted Net Loss Per Share

We compute net loss per share in accordance with accounting guidance which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statements of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

All potential dilutive shares of 7.8 million and 8.2 million for the three and nine months ended September 30, 2011, respectively, and 5.3 million and 5.6 million for the three and nine months ended September 30, 2010, respectively, were anti-dilutive, and therefore were not included in the computation of diluted earnings per share. As a result, basic EPS was equal to diluted EPS for the three and nine months ended September 30, 2011 and 2010.

10. Income Taxes

The financial results include no income tax expense (benefit) for the three and nine months ended September 30, 2011 and 2010 as our effective income tax rate for both periods was 0%. The difference between the federal statutory rate of 35% and our effective income tax rate at September 30, 2011 and 2010 was primarily due to a valuation allowance recorded. Looking forward, our effective income tax rate may fluctuate due to changes in tax legislation, changes in our estimates of federal tax credits, changes in our assessment of uncertainties as valued under accounting guidance for uncertainty in income taxes, as well as accumulated interest and penalties.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with, and is qualified in its entirety by, our condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q.  This discussion contains certain “forward-looking statements,” including information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar expressions, as well as statements in future tense, identify forward-looking statements.  Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements.

Overview and Recent Events

Our primary business is the ownership and operation of Tropicana Las Vegas which offers casino gaming, hotel accommodations, dining, entertainment, retail shopping and other resort amenities. Tropicana Las Vegas is a hotel casino property conveniently located at the corner of Tropicana Avenue and Las Vegas Boulevard on the Las Vegas Strip. Our property currently offers 1,375 remodeled hotel rooms and suites, a 50,000 square foot casino floor, three restaurants, three casual dining venues, several lounges, two entertainment venues and more than 60,000 square feet of flexible convention and meeting space.

Gaming and other leisure activities we offer represent discretionary expenditures and participation in such activities may decline during economic downturns, during which consumers generally earn less disposable income. As a casino-based company, our operating results are highly dependent on the volume of customers to our property, which in turn impacts the price that we can charge for our hotel rooms and food and beverage menu items and other amenities.

Capital Improvement Project.  The following renovations were recently completed as part of the $147.0 million capital improvement project which began in July 2009.  Due to changes in scope as well as to net favorable variances to the original budget, the renovation project is now expected to cost approximately $141.6 million:

·                  the renovation of over 1,300 rooms and suites which included updating furnishings and amenities, substantially upgrading the guest room experience;

·                  a comprehensive casino remodel including a refurbishment of the casino floor which includes new slot machines, furnishings, carpet, new ceilings, wall and columns, table layouts, gaming chairs and other items;

·                  a reconfiguration of the pedestrian bridge between Tropicana Las Vegas and MGM Grand Hotel & Casino allowing guests to enter the property directly into our new race and sports book;

·                  opening of Café Nikki, a three meal restaurant which offers American cuisine and flavors inspired by international dishes;

·                  the addition of Club Nikki and Nikki Beach which were completed in May 2011. Club Nikki features 15,000 square feet leading guests to the iconic outdoor Nikki Beach Club;

·                  opening of South Beach Market Place, providing guests with a selection of casual dining experiences;

·                  opening of a poker room;

·                  a complete remodel of the convention and exhibition center;

·                  redevelopment of the pool area;

·                  the enhancement of all food and beverage facilities;

·                  a new design for outdoor signage and the façade;

·                  renovations of restroom facilities throughout the property;

·                  renovations related to notices of violations and deferred maintenance projects; and

·                  other back-of-house improvements, upgrades to information technology systems and infrastructure upgrades.

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In addition, we expanded and renovated our race and sports book, expanding it to 4,200 square feet offering a full suite of unique sports betting technology, including in-running sports wagering.  We also opened the theatrical interactive environment, “The Las Vegas Mob Experience”.  Costs related to the expansion and renovation of the race and sports book and the development of the Las Vegas Mob Experience are obligations of the tenants who operate those amenities.

Additionally, we are constructing a state-of-the-art spa facility expected to be completed in November 2011, which will also be funded and operated by a third party.

While phases of the capital improvement project are still to be completed, the completion of various items such as the renovation of the hotel rooms and suites, the opening of Café Nikki, Nikki Beach and Club Nikki, have resulted in increased revenues and corresponding expenses.  As the capital improvement project reaches completion, we anticipate experiencing continued increases in revenues and corresponding expenses.

Rights Offering

In May 2011, we consummated a $35.0 million rights offering, pursuant to which we issued and sold 350,000 shares of our Class A Series 3 Convertible Participating Preferred Stock, par value $0.01 per share (“Class A Series 3 Preferred”) to certain of our stockholders.  The proceeds are being used for general corporate purposes, including funding of our ongoing capital improvement project.

Amendments to Credit Agreement

In April 2011, we entered into the first amendment to our Credit Agreement (the “First Amendment”).  Among other things, the First Amendment (i) amends the financial covenants we are subject to under the Credit Agreement; (ii) requires that we begin repaying the principal balance outstanding under the Term Loan in equal monthly installments beginning on January 31, 2013; (iii) eliminates a provision that would have released the interest reserve under the Credit Agreement to us upon the 18 month anniversary of the Credit Agreement upon certain conditions and milestones; (iv) restricts our payment of management fees to Trilliant Management while there remains a principal amount outstanding under the Term Loan; and (v) restricts the expenditure of capital on our capital improvement projects to not more than $61.2 million in 2011 and $10.0 million in 2012.

In August 2011, we entered into a second amendment and Limited Duration Waiver to our Credit Agreement (the “Second Amendment”).  Among other things, the Second Amendment (i) provides a temporary waiver by the lenders of an existing default, specifically those related to Murder Inc. as previously disclosed; and (ii) provides an additional thirty (30) days for the Company to provide its baseline financial projections to the administrative agent and lenders.

In November 2011, we entered into a second limited duration waiver to our Credit Agreement (the “Waiver”).  Among other things, the Waiver provides a temporary waiver by the lender of an existing default.

Termination of a Material Definitive Agreement

On September 23, 2011, Tropicana Las Vegas, Inc. (the “Company”) terminated the Management Agreement, dated April 14, 2010 (the “Management Agreement”), among the Company, Nikki Beach Las Vegas LLC (“NBLV”) and Penrod Management Group, Inc. (“Penrod”).  Prior to the termination, NBLV and Penrod managed the Nikki Beach nightclub and beach club (the “Clubs”) at the Company’s hotel and casino pursuant to the Management Agreement.  The Company terminated the Management Agreement due to the failure by NBLV to comply with and perform the covenants, agreements, terms and conditions set forth therein, and NBLV’s repudiation of its contractual obligation to achieve a targeted “net income” for the Clubs.  The termination was effective immediately, and NBLV and Penrod ceased management of the Clubs as of September 23, 2011.  Following the termination, the Company has taken over management of the Clubs.

Key Financial Metrics

Casino Revenue.  Casino revenue is derived primarily from customers wagering on slot machines, table games and other gaming activities. Table games generally include blackjack or twenty one, craps, mini-baccarat, roulette and other specialty games. Other gaming activities include poker. Casino revenue is defined as the net win from gaming activities, computed as the difference between gaming wins and losses, not the total amounts wagered. “Table game drop” and “slot handle” are casino industry specific terms that are used to identify the amount wagered by customers at tables and slot machines, respectively. “Table game hold” and “slot hold” represent the percentage of the total amount wagered by customers that the casino has won. Hold is derived by dividing the amount won by the casino by the amount wagered by customers. Casino revenue is recognized at the end of each gaming day. Casino revenue varies from time to time due to table game hold, slot hold and the amount of gaming activity.

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Room Revenue.  Room revenue is derived from hotel rooms and suites rented to guests. “Average daily rate” is an industry specific term used to define the average amount of revenue per room per rented room 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 rooms are provided to guests. Hotel room revenue varies depending upon the occupancy level of the hotel and the rates that can be charged.

Food and Beverage Revenue.  Food and beverage revenue is derived from food and beverage sales in the food outlets of the hotel casino, including restaurants, room service and banquets. Food and beverage revenue is recognized at the time the relevant food or beverage service is provided to guests.

Operating Costs and Expenses.  Operating costs and expenses include the direct costs associated with, among other things, operating the casino, hotel, food and beverage outlets and other casino and hotel operations (including retail amenities, concessions, entertainment offerings and certain other ancillary services conducted at the casino). These direct costs primarily relate to payroll, supplies, costs of goods sold and gaming taxes and licenses. Gaming taxes and license fees are based upon such factors as a percentage of the gross revenues or net gaming proceeds received and the number of gaming devices and table games operated. Gaming license fees and taxes may also vary with changes in applicable legislation. Operating costs and expenses also include the costs of marketing, advertising and promotions, general and administrative costs and the costs of maintenance and utilities in addition to depreciation and amortization expense.

Results of Operation- Three and nine months ended September 30, 2011 compared to the three and nine months ended September 30 2010

The following table highlights our results of operations (dollars in thousands, unaudited):

n/m - Not meaningful

Net Revenue.   Net revenues increased $11.0 million and $25.2 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, primarily due to the completion of the casino remodel and renovation of over 1,300 rooms and suites as well as the opening of Café Nikki in the second half of 2010 and the opening of Nikki Beach and Club Nikki in the second quarter of 2011 as part of our $147.0 million capital improvement project.  The recent capital improvement project resulted in the closure of sections of our casino floor, hotel rooms and food and beverage facilities resulting in disruption and inconvenience to our customers during 2010 and to a lesser degree during 2011.  Although we aim to minimize such disruption and inconvenience to our customers, we experienced a reduction in revenues as a result during the three and nine months ended September 30, 2010 and to a lesser extent during the three and nine months ended September 30, 2011.

Operating Loss.  The operating loss decreased by a negligible amount and $2.3 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, which was primarily due to an increase in net revenues as noted above partially offset by an increase in operating costs and expenses.  The increase in operating costs and expenses was primarily related to increased depreciation and amortization expense as a result of the completion of various phases of our capital improvement project as well as increases in preopening expenses and increases in food and beverage expenses as a result of Nikki Beach and Club Nikki which opened in May 2011.

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The following table highlights our various sources of revenues and expenses as compared to the prior period (dollars in thousands, unaudited):

Casino.  Casino revenues increased $2.9 million and $6.6 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively.  Slot revenues accounted for a majority of the increase in casino revenues as a result of the refurbishment of the casino floor and the addition of new slot machines as well as successful marketing efforts to promote repeat visits.  Casino expenses increased $1.4 million and $2.5 million for the three and nine months ended September 30, 2011, as compared to the same period in the prior year, respectively. The increases were the result of increases to complimentaries in relation to marketing efforts disclosed above, increased payroll costs as a result of added employees for the additional table games offered in connection with the completion of the casino renovations during the second quarter, and increased gaming taxes as a result of increased revenues.    As a result of the increased casino revenues, the casino operating margin increased 14 and 11 percentage points in the three and nine months ended September 30, 2011, respectively, as compared to the three and nine months ended September 30, 2010, respectively.

Room.  Room revenue increased $4.1 million and $10.0 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, which was attributable to an increase in average daily rate to $70 from $56 and $66 from $55 as well as an increase in occupancy percentage to 92% from 83% and 88% from 77% for the same periods, respectively, resulting from the availability of the newly renovated hotel rooms in the Paradise Tower placed in service in the second quarter of 2010 and the newly renovated hotel rooms in the Club Tower placed in service in the third and fourth quarter of 2010.  Room expense increased $1.5 million and $3.2 million for the three and nine months ended September 30, 2011 as compared to the same periods in the prior year, respectively, due to the opening of the renovated hotels rooms as discussed above resulting in increased payroll costs.  As a result of the increased room revenue, the hotel operating margin increased 12 percentage points and 14 percentage points in the three and nine months ended September 30, 2011 as compared to the same periods in the prior year, respectively.

Food and Beverage.  Food and beverage revenues increased approximately $4.5 million and $10.1 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010.  The increase was primarily due to the opening of Cafe Nikki in December 2010, the opening of South Beach Marketplace in April 2011, and the opening of Club Nikki and Nikki Beach in May 2011.  Food and beverage expenses increased approximately $4.4 million and $9.7 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, primarily due to the opening of Cafe Nikki and South Beach Marketplace, resulting in increased payroll costs, other operating costs and cost of goods sold.  As a result of the increased food and beverage expenses, the food and beverage operating margin decreased 4 percentage points in the three months ended September 30, 2011 as compared to the same period in the prior year, yet remained unchanged for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010.

Other.  Other revenues primarily include income from the gift shop, entertainment and leased outlets. Other revenues increased by $0.4 million for both the three months and nine months ended September 30, 2011 as compared to the three months and nine months ended September 30, 2010, primarily a result of increased income from leased outlets offset by decreases in income from gift shop revenue.  The increased leased outlets revenue was the result of the opening of our race and sports book and other entertainment venues in 2011.

Marketing, Advertising and Promotions.  Marketing, advertising and promotions expense increased $0.9 million and $1.7 million, or 171% and 89%, for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, due to increased marketing and advertising of the recently completed renovations related to our capital improvement project.

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Management Fees.  Management fees increased $0.2 million and $0.5 million, or 84% and 66%, for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, as a result of increased revenues.

General and Administrative.  General and administrative expenses decreased $0.5 million and $2.9 million, or 10% and 19%, for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively. The decrease was due in part to reduced legal expenses as a result of receiving government approvals in December 2010 allowing us to own and operate our gaming facility as well as lower payroll and operating expenses as a result of cost reduction and efficiency initiatives implemented by management.

Maintenance and Utilities.  Maintenance and utilities expense increased $0.1 million, or 4% for the three months ended September 30, 2011 as compared to the three months ended September 30, 2010, a result of increased rates on certain utilities during the summer months of 2011 and an increase in repairs and maintenance expenses during the quarter.  Maintenance and utilities expense decreased $0.3 million, or 3%, for the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010.  The decrease was the result of cost reduction efforts among the property throughout the year.

Depreciation and Amortization.  Depreciation and amortization expense increased $2.0 million and $6.1 million, or 74% and 96%, for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, primarily related to the completion of portions of our capital improvement project in various phases beginning the second half of 2010 through September 2011.

Preopening Expenses.  Preopening expenses for the three and nine months ended September 30, 2011 were zero and $2.1 million, respectively, a negligible decrease for the three months ended September 30, 2011 as compared to the three months ended 2010 and an increase of $2.0 million from the nine months ended September 30, 2010.  Preopening expenses were primarily related to the development of Club Nikki and Nikki Beach.

Writedown on Other Assets.  We wrote off $0.7 million of assets during the third quarter 2011. The write off was the result of nonperformance by a vendor to deliver certain fixed assets for our room renovations.

Interest Expense.  Gross interest expense was $0.9 million and $2.5 million for the three and nine months ended September 30, 2011, respectively, an increase of $0.4 million and $1.6 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, due to an increase in our long-term debt of $55.3 million related to borrowings under our Credit Agreement which were used to fund our capital improvement project.  Capitalized interest increased $0.9 million and $2.4 million for the three and nine months ended September 30, 2011 as compared to the three and nine months ended September 30, 2010, respectively, due to interest capitalized for our capital improvement project.

Income Tax.  The financial results include no income tax expense (benefit) for the three and nine months ended September 30, 2011 and 2010 due to a valuation allowance as we did not believe our ability to realize the benefit of tax losses incurred in these periods was more likely than not to occur.

Liquidity and Capital Resources

Our cash flows are, and will continue to be, affected by a variety of factors, many of which are outside of our control, including regulatory issues, competition, financial markets and other general business conditions. Although we are currently experiencing negative cash flow from our operations, we believe anticipated borrowing availability and our existing cash balance will be adequate to meet our financial and operating obligations in 2011. However, our results for future periods are subject to numerous uncertainties which may result in reduced liquidity that could affect our ability to meet our obligations while attempting to meet competitive pressures or adverse economic conditions.

Rights Offering

In May 2011, we consummated a $35.0 million rights offering, pursuant to which we issued and sold 350,000 shares of our Class A Series 3 Preferred to certain of our stockholders.  The Class A Series 3 Preferred has the same terms as our Existing Preferred, except that the initial conversion price of the Class A Series 3 Preferred is $15 per share rather than the $25 per share of the Existing Preferred.  As part of the rights offering, we issued an additional 46,666 shares of our Class A Common to purchasers in the rights offering who provided a “backstop” to the offering (i.e., purchasing the shares of Class A Series 3 Preferred that were unsubscribed for by the other stockholders to ensure that we could raise the full $35.0 million from the rights offering).  The proceeds from the Class A Series 3 Preferred are being used for general corporate purposes, including funding of our ongoing capital improvement project.

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Credit Agreement

In March 2010, we entered into the Credit Agreement comprised of the Revolver and Term Loan, which was amended in April and August 2011. The Revolver bears interest at 4% per annum and the fee for any unfunded portion of the Revolver is 0.75%. The Term Loan bears interest at 6% per annum and requires repayment of the principal balance outstanding under Term Loan in equal monthly installments beginning on January 31, 2013. The fee for any undrawn portion of the Term Loan is 1.00%. Pursuant to the terms of the Credit Agreement, we are required to establish an interest reserve account, as defined.

In August 2011, we entered into a second amendment and Limited Duration Waiver to our Credit Agreement (the “Second Amendment”).  Among other things, the Second Amendment (i) provides a temporary waiver by the lenders of an existing default; and (ii) provides an additional thirty (30) days for the Company to provide its baseline financial projections to the administrative agent and lenders.

In November 2011, we entered into a second limited duration waiver to our Credit Agreement (the “Waiver”).  Among other things, the Waiver provides a temporary waiver by the lender of an existing default.

The Credit Agreement contains certain financial and other covenants. The covenants, among other things, restrict, subject to certain exceptions, our ability to incur additional indebtedness; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions; engage in certain transactions with affiliates; and make investments.  Substantially all the assets of Tropicana Las Vegas are pledged as collateral under the Credit Agreement.  With the exception of the following regarding Murder, Inc., LLC (“Murder Inc.”), we believe we are in compliance with our covenants as of September 30, 2011.  As of November 8, 2011, we have $4.0 million available for borrowings under our Credit Agreement.

Pursuant to a lease dated June 7, 2010, we leased certain space within our property to Murder Inc., LLC (“the Tenant”) for the development of a theatrical interactive environment, “The Las Vegas Mob Experience” (the “Mob Experience”).  The lease is guaranteed by Eagle Group Holdings, LLC.  In connection with the Tenant’s construction of the Mob Experience, the general contractor and certain subcontractors contend that approximately $4.6 million remains due and unpaid, and in August 2011, they recorded liens against our property to secure payment thereof.  We are aware that these liens constitute an event of default under our Credit Agreement and have entered into the Second Amendment and Waiver, as previously mentioned.

Management Agreement

Beginning December 1, 2010, the operation of our hotel and casino was managed by Trilliant Management, LP (“Trilliant Management”) pursuant to the terms of the management agreement entered into in May 2010 (the “Management Agreement”). The Management Agreement provides for Trilliant Management to assist us in the management and operation of Tropicana Las Vegas.  The Management Agreement terminates on November 30, 2020. For each fiscal year or portion thereof during the term of the Management Agreement, we will pay Trilliant Management a fee equal to the sum of 2% of all revenue from the operation of Tropicana Las Vegas (the “Revenue Fee”) and 5% of EBITDA after reduction of the Revenue Fee (each as defined).

Nine months ended September 30, 2011

During the nine months ended September 30, 2011, our cash flows used in operating activities were approximately $13.5 million. Cash used for capital expenditures were approximately $45.9 million while payments on capital leases were approximately $1.1 million for the same period.  In addition, during the nine months ended September 30, 2011 we had cash flows from financing activities of approximately $62.2 million. We had total available borrowings of $50.0 million under our Revolver, which was reduced by borrowings of $45.3 million and various letters of credit of $0.7 million, leaving $4.0 million available as of September 30, 2011.  In addition, during the third quarter 2011, we borrowed $10.0 million, or our entire availability, under our Term Loan.  In May 2011, we completed a $35 million rights offering pursuant to which we issued and sold 350,000 shares of our Class A Series 3 Preferred to certain of our stockholders.

Our primary cash requirements for the remainder of 2011 are expected to include capital expenditures of approximately $4.0 million related to our capital improvement project, interest payments on our indebtedness and other operational requirements. We expect that our cash flows from operations and our availability under our Credit Agreement, together with cash on hand, will be adequate to fund our activities, including capital expenditures for our property revitalization.  We believe that our current sources of capital will be sufficient to meet our short-term liquidity requirements. We intend to satisfy our long-term liquidity requirements primarily through cash provided by operations. However, our ability to meet our long-term liquidity requirements will depend on our ability to generate adequate cash flow from our operations. In the event that the anticipated sources of capital are inadequate to fund our short-term or long-term liquidity requirements, we will be required to procure additional financing, including debt financing or additional equity financing, to fund our operations and our capital expenditures. There can be no assurance that such sources of financing will be available to us on terms acceptable to us, if at all.

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Contractual Obligations and Off-Balance Sheet Arrangements

With the exception of payments made in relationship to our capital leases, there were no material changes during the nine months ended September 30, 2011 to our contractual obligations or off-balance sheet arrangements as disclosed in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2010,

Critical Accounting Policies

A description of our critical accounting policies can be found in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2010. There were no material changes to our critical accounting policies during the nine months ended September 30, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices.  Currently our long-term debt outstanding under our Credit Agreement is at a fixed interest rate, and therefore we are not currently subject to market risk.  However, as our fixed rate debt matures, and if additional debt is acquired to fund the debt payment, future earnings and cash flows may be affected by changes in interest rates.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2011.  This conclusion is based on an evaluation conducted under the supervision and participation of the principal executive officer and principal financial officer along with the Company’s management.  Disclosure controls and procedures are those controls and procedures which ensure that information required to be disclosed in this filing is accumulated and communicated to management and is recorded, processed, summarized and reported in a timely manner and in accordance with SEC rules and regulations.

Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the third quarter 2011 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Pursuant to the Bankruptcy Plan, we have assumed certain obligations and liabilities of the Predecessor, particularly liabilities in respect of post-bankruptcy petition administrative expenses. As of September 30, 2011, we have paid (or agreed to pay) approximately $2.5 million in allowed priority and cure claims and in non-professional fee administrative expenses and, with the exception of five disputed administrative/priority claims in the aggregate asserted amount of approximately $1.3 million, we do not anticipate any material additions to such claims or expenses. Professionals employed at the expense of the bankruptcy estates of the Predecessor and other debtors have filed applications for allowance of approximately $13.0 million in professional fees and expenses against the Predecessor. We dispute and have objected too many of those applications in advance of hearings before the Bankruptcy Court, the first of which occurred on May 11, 2011, and addressed issues of allocation of fees and expenses between the Predecessor and TEH. A second hearing on all other issues subject to the objections will occur approximately eight (8) weeks after the resolution of the allocation issues submitted to the Bankruptcy Court at the hearing that occurred on May 11, 2011. We believe that our liability in respect of such claimed professional fees and expenses will be materially less than the amounts requested, but we can give no assurance in this regard. In addition, the Company has taken the position that, pursuant to the Bankruptcy Plan, it is responsible only for the Predecessor’s appropriate allocation of professional fees and expenses that were unpaid at the time of confirmation of the Bankruptcy Plan, which would be an amount less than the amount of fees and expenses that the Company’s objections concede should be allocated to the Predecessor.  TEH, on the other hand, has asserted that the Predecessor should be responsible for payment of the entire amount of fees and expenses ultimately allocated to the Predecessor, an amount that TEH asserts should be 50% of the entire amounts requested. TEH also has asserted a claim of approximately $520,000 for management fees and an unliquidated contingent claim relating to alleged workers’ compensation liabilities. We dispute a portion of the claimed management fees and are currently in discussions with TEH regarding a resolution. We dispute the claim in respect of workers’ compensation liabilities in its entirety. However, no assurance can be given that the claims asserted will be ultimately disallowed or will not have a material adverse impact on the Company.

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On August 15, 2011, we received the last required signature page to the Settlement Agreement, dated August 9, 2011 (the “Trademark Settlement Agreement”), that we entered into with, among others, the defendants to the civil action pending in the Eighth Judicial District Court in the County of Clark, Nevada, styled Tropicana Las Vegas, Inc. and Hotel Ramada of Nevada, LLC v. Aztar Corporation and Tropicana Entertainment, LLC (Case No. A09595469-B) (the “Trademark Action”). The Trademark Settlement Agreement confirms, among other things, that (i) we own and have the exclusive right to use the “Tropicana Las Vegas” (or “Trop LV”) and the “Tropicana LV” (or “Trop LV”) marks within 50 miles of our facility (the “Las Vegas Area”) in the business of providing entertainment and hospitality services, and on the internet and for advertising purposes without geographic limitation, and (ii) Tropicana Entertainment, LLC owns and has the exclusive right to use the “Tropicana” and “Trop” marks, in connection with a modifier indicating the type of service being provided or designating a geographic location, outside of the Las Vegas Area, and for advertising purposes without geographic limitation. The Trademark Settlement Agreement also provides for the mutual release of all claims by and between the parties thereto related to the trademarks that are subject to the Trademark Action (and certain other related matters). Also on August 15, 2011, the parties to the Trademark Settlement Agreement filed a joint motion with the Bankruptcy Court seeking approval of such agreement. A hearing on the motion seeking approval of the Trademark Settlement Agreement was held by the Bankruptcy Court on September 13, 2011.  At such hearing, the Bankruptcy Court approved the Trademark Settlement Agreement. Thereafter, on September 28, 2011, the Trademark Settlement Agreement became effective in accordance with its terms.  As a result, the Trademark Action and all other disputes between the parties have now been resolved under the terms of the Trademark Settlement Agreement.

We are the lessor under a Lease dated as of June 7, 2010 (the “Lease”), with Murder, Inc., LLC, as tenant (the “Tenant”), and Eagle Group Holdings, LLC (“Eagle Group”), as guarantor, respecting use and operation of the “Mob Experience” exhibit operating in exhibition space at the Tropicana Las Vegas.  On or about July 13, 2011, M.J. Dean Construction, Inc. (the “Contractor”), recorded a Notice of Lien on property owned by the Company, claiming $4,640,732.00 in unpaid amounts for work performed on the property at the direction of Tenant.  On October 4, 2011, the Contractor recorded an Amended Notice of Lien, making the same claim.  In addition, various subcontractors hired by the Contractor have recorded notices of liens in the aggregate amount of $2,215,115.80 on property owned by the Company.  We believe that such notices are duplicative of the notices filed by the Contractor.   Three of the subcontractors have filed suit seeking to enforce their liens in the aggregate amount of $1,058,689.

As a result of the imposition of those mechanics’ liens and other breaches under the Lease, the Tenant is in default under the Lease.  We have engaged in negotiations with the Tenant, the Contractor and a third-party investor of the Tenant regarding that default and the possibility of a consensual restructuring of the Tenant’s financial affairs.  Those negotiations resulted in an agreement in principle pursuant to which Tenant would commence bankruptcy proceedings and seek confirmation of a plan of reorganization that would provide, among other things, for the removal of the mechanics liens, modification of the Lease, and our agreement to defer collection of rent under the Lease during the pendency of Tenant’s bankruptcy case.

In order to effectuate such restructuring, on October 17, 2011, Tenant filed a petition for relief under chapter 11 of the Bankruptcy Code, thereby commencing the reorganization case styled In re Murder, Inc., LLC, which is pending before the United States Bankruptcy Court for the District of Nevada, Las Vegas Division (the “Nevada Bankruptcy Court”), as Case No. 11-26317-BAM.  At a hearing held on October 24, 2011, the Nevada Bankruptcy Court established a plan confirmation schedule, which provides for, among other things, a hearing commencing on January 9, 2012, regarding the proposed confirmation of Tenant’s plan of reorganization, which seeks to implement the consensual restructuring described in the preceding paragraph.  While we support the prompt confirmation of Tenant’s plan of reorganization, no assurance can be given that such plan will be confirmed by the Nevada Bankruptcy Court and become effective

Item 1A. Risk Factors

The Company has updated its risk factors as previously disclosed in its Form 10-K for the year ended December 31, 2010. The following risk factor should be read together with the risk factors included in Part I, Item 1A of our Form 10-K for the year ended December 31, 2010.  References in the risk factors to “we,” “our” and “us” or “Company” are to Tropicana Las Vegas, Inc. unless the context specifically otherwise requires.

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We may face substantial administrative liabilities.

In the Bankruptcy Plan, we assumed certain obligations and liabilities of the Predecessor, particularly liabilities in respect of post-bankruptcy petition administrative expenses. To date we have paid (or agreed to pay) approximately $2.5 million in allowed priority and cure claims and in non-professional fee administrative expenses and, with the exception of five disputed administrative/priority claims in the aggregate asserted amount of approximately $1.3 million, we do not anticipate any material additions to such claims or expenses. We have not yet paid the $400,000 to be distributed to the Predecessors unsecured creditors in satisfaction of their unsecured claims. Professionals employed at the expense of the bankruptcy estates of the Predecessor and other debtors have filed applications for allowance of approximately $13.0 million in professional fees and expenses against the Predecessor. We dispute and have objected too many of those applications in advance of hearings before the Bankruptcy Court, the first of which occurred on May 11, 2011, and addressed issues of allocation of fees and expenses between the Predecessor and TEH.  A second hearing on all other issues subject to the objections will occur approximately eight (8) weeks after the resolution of the allocation issues submitted to the Bankruptcy Court at the hearing that occurred on May 11, 2011.  We believe that our liability in respect of such claimed professional fees and expenses will be materially less than the amounts requested, but we can give no assurance in this regard. In addition, the Company has taken the position that, pursuant to the Bankruptcy Plan, it is responsible only for the Predecessor’s appropriate allocation of professional fees and expenses that were unpaid at the time of confirmation of the Bankruptcy Plan, which would be an amount less than the amount of fees and expenses that the Company’s objections concede should be allocated to the Predecessor. TEH, on the other hand, has asserted that the Predecessor should be responsible for payment of the entire amount of fees and expenses ultimately allocated to the Predecessor, an amount that TEH asserts should be 50% of the entire amounts requested. TEH, the former ultimate owner of Tropicana Las Vegas, also has asserted a claim of approximately $520,000 for management fees and an unliquidated contingent claim relating to alleged workers’ compensation liabilities. We dispute a portion of the claimed management fee and currently are in discussions with TEH regarding a resolution. We dispute the claim in respect of workers’ compensation liabilities in its entirety. However, no assurance can be given that the claims asserted will be ultimately disallowed or will not have a material adverse impact on us.

We face risks related to future claims that may be brought against us in the future.

In addition, we are, from time to time and during the normal course of business, subject to various litigation claims and legal disputes, including contract, lease, employment and regulatory claims as well as claims made by visitors to Tropicana Las Vegas. Certain litigation claims may not be covered entirely by our insurance policies, or at all, or our insurance carriers may seek to deny coverage. In addition, litigation claims can be expensive to defend and may divert the attention of our management from the operation of Tropicana Las Vegas. Further, litigation involving visitors to Tropicana Las Vegas, even if without merit, can attract adverse media attention. As a result, litigation can have a material adverse effect on our business. We cannot predict the outcome of any action, and it is possible that adverse judgments or settlements could have a material adverse effect on our business, financial condition and results of operations.

We face risks related to our Mob Experience exhibit.

We are the lessor under a lease dated as of June 7, 2010 (the “Lease”), with Murder, Inc., LLC, as tenant (the “Tenant”), and Eagle Group Holdings, LLC (“Eagle Group”), as guarantor, respecting use and operation of the “Mob Experience” exhibit operating in exhibition space at the Tropicana Las Vegas.  On or about July 13, 2011, M.J. Dean Construction, Inc. (the “Contractor”), recorded a Notice of Lien on property owned by the Company, claiming $4,640,732 in unpaid amounts for work performed on the property at the direction of Tenant.  On October 4, 2011, the Contractor recorded an Amended Notice of Lien, making the same claim.  In addition, various subcontractors hired by the Contractor have recorded Notices of Liens in the aggregate amount of $2,215,116 on property owned by the Company.  We believe that such notices are duplicative of the notices filed by the Contractor.   Our credit facility requires that mechanics liens be insured over or bonded within 30 days.  We have obtained a Waiver from our lenders which extends the time within which such mechanics liens must be released to February 18, 2012.  If the mechanics liens are not removed, insured over or bonded by such time the lenders could call a default under our credit facility, which default could have a material adverse effect on us.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In May 2011, we consummated a $35.0 million rights offering, pursuant to which we issued and sold 350,000 shares of our Class A Series 3 Preferred to certain of our stockholders.  The Class A Series 3 Preferred has the same terms as our Existing Preferred, except that the initial conversion price of the Class A Series 3 Preferred is $15 per share rather than the $25 per share of the Existing Preferred.  As part of the rights offering, we issued an additional 46,666 shares of our Class A Common to purchasers in the rights offering who provided a “backstop” to the offering (i.e., purchasing the shares of Class A Series 3 Preferred that were unsubscribed for by the other stockholders to ensure that we could raise the full $35.0 million from the rights offering).  In accordance with the Certificate of Designation for the Class A Preferred, the holders of two thirds of the outstanding shares of Class A Preferred waived the anti-dilution rights of the Class A Preferred with respect to the issuance of the 46,666 shares of Class A Common in consideration of the oversubscription elections.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

Item 5. Other Information

None.

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Item 6. Exhibits

† Filed herewith.

* Furnished herewith.

** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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