UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

Commission File Number: 333-118149

American Casino & Entertainment Properties LLC

(Exact name of registrant as specified in its charter)

(702) 380-7777

(Registrant’s telephone number, including area code)

     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 þ          No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

TABLE OF CONTENTS

PART I.     FINANCIAL INFORMATION

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED BALANCE SHEETS

See notes to condensed consolidated financial statements.

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

See notes to condensed consolidated financial statements.

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

See notes to condensed consolidated financial statements.

AMERICAN CASINO & ENTERTAINMENT PROPERTIES LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

      American Casino & Entertainment Properties LLC (the “Company” or “ACEP”) was formed in Delaware on December 29, 2003. The Company is a holding company that was formed for the purpose of acquiring the entities that own and operate the Stratosphere Casino Hotel & Tower (“Stratosphere”), Arizona Charlie’s Decatur and Arizona Charlie’s Boulder in Las Vegas, Nevada. Stratosphere had been owned by a subsidiary of our indirect parent, American Real Estate Holdings Limited Partnership (“AREH”). Arizona Charlie’s Decatur and Arizona Charlie’s Boulder were owned by Carl C. Icahn and one of his affiliated entities. Our senior management team has been responsible for the management of all three properties since 2002.

      ACEP is a subsidiary of American Entertainment Properties Corp. (“AEP”), and its ultimate parent is American Real Estate Partners, L.P. (“AREP”), a Delaware master limited partnership whose units are traded on the New York Stock Exchange. As of March 31, 2005, affiliates of Mr. Icahn owned 9,346,044 Preferred Units and 39,896,836 Depositary Units, which represent approximately 86.5% of the outstanding Preferred Units and Depositary Units of AREP. Mr. Icahn is the Chairman of the Board of Directors of American Property Investors, Inc., AREP’s general partner.

      The condensed consolidated financial statements have been prepared in accordance with the accounting policies described in our 2004 audited consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the notes to the 2004 consolidated audited financial statements presented in our Annual Report on Form 10-K, filed with the SEC on March 16, 2005 (SEC File No. 333-118149).

      In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (consisting only of a normal recurring nature), which are necessary for a fair presentation of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations of the Securities and Exchange Commission. Interim results are not necessarily indicative of results to be expected for any future interim period or for the entire fiscal year.

Principles of Consolidation and Combination

      The consolidated financial statements include the accounts of ACEP and its wholly owned subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation. For the period ended March 31, 2004, the historical financial statements were presented on a combined basis.

      As of May 26, 2004, the Company entered into an intercompany services arrangement, to provide management and consulting services, with Atlantic Coast Entertainment Holdings, Inc., the owner of the Sands Hotel and Casino in Atlantic City, New Jersey, which is controlled by affiliates of Mr. Icahn. The Company is compensated based upon an allocation of salaries plus an overhead charge of 15% of the salary allocation plus reimbursement of reasonable out-of-pocket expenses. During 2005, the Company billed Atlantic Cost Entertainment Holdings, Inc. and its affiliates approximately $136,000.

      During each of the three months ended March 31, 2005 and 2004, the Company made payments to XO Communications, Inc., which, since January 2003, has been controlled by affiliates of Mr. Icahn, for certain telecommunications services provided to us in an amount equal to approximately $41,000 and $39,000, respectively. The services provided approximated fair value.

      As of March 31, 2005 and December 31, 2004, the Company was owed approximately $676,000 and $388,000, respectively, for reimbursable expenses from related parties.

      The following discussion contains management’s discussion and analysis of our results of operations and financial condition. On May 26, 2004, we completed the purchase of Charlie’s Holding LLC, a newly formed entity that acquired Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, from Carl C. Icahn and Starfire Holding Corporation, which is wholly-owned by Mr. Icahn. Additionally, on that date, AREH contributed to us 100% of the capital stock of Stratosphere Corporation. These transactions represent a merger of entities under the common control of Mr. Icahn. Our financial statements for all periods (including for periods preceding the acquisitions) are consolidated.

Overview

      We own and operate three gaming and entertainment properties in the Las Vegas metropolitan area. The three properties are the Stratosphere Casino Hotel & Tower, which is located on the Las Vegas Strip and caters to visitors to Las Vegas, and two off-Strip casinos, Arizona Charlie’s Decatur and Arizona Charlie’s Boulder, which cater primarily to residents of Las Vegas and the surrounding communities. The Stratosphere is one of the most recognized landmarks in Las Vegas and our two Arizona Charlie’s properties are well-recognized casinos in their respective marketplaces. Each of our properties offers customers a value-oriented experience by providing competitive odds in our casinos, high-quality rooms in our hotels, award-winning dining facilities and, at the Stratosphere, an offering of competitive value-oriented entertainment attractions. We believe the value we offer our patrons, together with a strong focus on customer service, will enable us to continue to attract customers to our properties.

Results of Operations

      Consolidated gross revenues increased 9.4% to $88.8 million for the three months ended March 31, 2005 from $81.2 million for the three months ended March 31, 2004. This increase was primarily due to an increase in casino revenues, as well as increases in hotel, food and beverage, tower, retail and other revenues, primarily attributable to an increase in business volume, as discussed below.

      Consolidated casino revenues increased 12.0% to $47.7 million for the three months ended March 31, 2005 from $42.6 million for the three months ended March 31, 2004, of which consolidated slot machine revenues were $28.3 million, or 59.3% of consolidated casino revenues, and consolidated table game revenues were $6.9 million, or 14.5% of consolidated casino revenues, for the three months ended March 31, 2005 compared to $19.0 million and $6.9 million, respectively, for the three months ended March 31, 2004. This increase was primarily due to an increase in slot hold percentage.

      Consolidated hotel revenues increased 13.7% to $15.8 million, or 17.8% of consolidated gross revenues, for the three months ended March 31, 2005 from $13.9 million, or 17.1% of consolidated gross revenues, for the three months ended March 31, 2004. This increase was primarily due to an increase in the average daily room rate from $56.48 to $66.85, or 18.4%. The increase in the average daily room rate was primarily attributable to a change in our hotel market mix and an increase in tourism in the Las Vegas market.

      Consolidated hotel operating expenses increased 7.1% to $6.0 million, or 38.0% of consolidated hotel revenues, for the three months ended March 31, 2005 from $5.6 million, or 40.3% of consolidated hotel revenues, for the three months ended March 31, 2004. This increase was primarily due to an increase in labor costs.

      Consolidated food and beverage operating expenses increased 6.9% to $12.4 million, or 72.5% of consolidated food and beverage revenues for the three months ended March 31, 2005 from $11.6 million, or 69.5% of consolidated food and beverage revenues, for the three months ended March 31, 2004. This increase was primarily due to an increase in labor costs and costs associated with an increase in business volume.

      Consolidated other operating expenses increased 12.5% to $3.6 million, or 43.9% of consolidated tower, retail and other revenues for the three months ended March 31, 2005 from $3.2 million, or 40.0% of consolidated tower, retail and other revenues, for the three months ended March 31, 2004. This increase was primarily due to an increase in labor costs.

      Consolidated selling, general and administrative expenses were primarily comprised of marketing, advertising, repair and maintenance, utilities and other administrative expenses. These expenses increased 8.2% to $19.7 million, or 22.2% of consolidated gross revenues for the three months ended March 31, 2005 from $18.2 million, or 22.4% of consolidated gross revenues, for the three months ended March 31, 2004. This increase was primarily due to an increase in payroll expenses, credit card fees and property taxes.

      The increase in interest expense was primarily attributable to $4.2 million in interest expense associated with the $215.0 million 7.85% senior secured notes due 2012, which were issued on January 29, 2004.

Financial Condition

Liquidity and Capital Resources

      Our primary source of cash is from the operation of our properties. For the three months ended March 31, 2005, net cash provided by operating activities totaled approximately $15.8 million compared to approximately $13.4 million for the three months ended March 31, 2004. In addition to cash from operations, cash is available to us, if necessary, under our senior secured revolving credit facility entered into by us, as borrower, and certain of our subsidiaries, as guarantors. The senior secured revolving credit facility allows for borrowings of up to $20.0 million, subject to us complying with financial and other covenants, until January 29, 2008. We had availability under our credit facility of $20.0 million at March 31, 2005, subject to continuing compliance with existing covenant restrictions. At March 31, 2005, we had cash and cash equivalents of $85.9 million.

      Our primary use of cash is for capital spending and to pay the interest on our 7.85% senior secured notes which mature in 2012 with interest payments due February 1 and August 1 of each year. Our capital spending was approximately $4.7 million and $0.8 million for the three months ended March 31, 2005 and 2004, respectively. We have estimated our 2005 capital spending at approximately $25.0 million, which we anticipate to include approximately $8.1 million to refurbish rooms, install the new Insanity ride and construct a night club at the Stratosphere and approximately $4.5 million to expand the gaming floor, including purchasing slot machines, at Arizona Charlie’s Boulder. The remainder of our capital spending estimate for 2005 will be for upgrades or maintenance to our existing assets.

      We believe operating cash flows and borrowings available under the senior secured revolving credit facility will be adequate to meet our anticipated future requirements for working capital, capital spending and scheduled interest payments on the notes and under the senior secured revolving credit facility, lease payments and other permitted indebtedness at least through the next twelve months. Although no additional financing is currently contemplated, we will seek, if necessary and to the extent permitted under the indenture governing the notes and the terms of the senior secured revolving credit facility, additional financing through bank borrowings or debt or equity financings. However, additional financing, if needed, may not be available to us, or if available, the financing may not be on terms favorable to us. Our estimates of our reasonably anticipated liquidity needs may not be accurate and new business developments or other unforeseen events will not occur, resulting in the need to raise additional funds.

      Our 7.85% senior secured notes due 2012 restrict the payment of cash dividends or distributions, the purchase of equity interests, the purchase, redemption, defeasance or acquisition of debt subordinated to the investments as “restricted payments.” The notes also prohibit the incurrence of debt, or the issuance of

disqualified or preferred stock, as defined, with certain exceptions, provided that we may incur debt or issue disqualified stock if, immediately after such incurrence or issuance, the ratio of consolidated cash flow to fixed charges (each as defined) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional indebtedness is incurred or disqualified stock or preferred stock is issued would have been at least 2.0 to 1.0, determined on a pro forma basis giving effect to the debt incurrence or issuance. As of March 31, 2005, such ratio was 4.1 to 1.0. The notes also restrict the creation of liens, the sale of assets, mergers, consolidations or sales of substantially all of our assets, the lease or grant of a license, concession, other agreement to occupy manage or use our assets, the issuance of capital stock of restricted subsidiaries and certain related party transactions. The notes allow us to incur indebtedness, among other things, of up to $50 million under credit facilities, non-recourse financing of up to $15 million to finance the construction, purchase or lease of personal or real property used in our business, permitted affiliate subordinated indebtedness (as defined), the issuance of additional 7.85% senior secured notes due 2012 in an aggregate principal amount not to exceed 2.0 times net cash proceeds received from equity offerings and permitted affiliate subordinated debt and additional indebtedness of up to $10.0 million.

      Additionally, our senior secured revolving credit facility allows for borrowings of up to $20.0 million, including the issuance of letters of credit of up to $10.0 million. Loans made under the senior secured revolving facility will mature and the commitments under them will terminate in January 2008. At March 31, 2005, there were not any borrowings or letters of credit outstanding under the facility. The facility contains restrictive covenants similar to those contained in the 7.85% senior secured notes due 2012. In addition, the facility requires that, as of the last date of each fiscal quarter, our ratio of net property, plant and equipment for key properties to consolidated first lien debt be not less than 5.0 to 1.0 and our ratio of consolidated first lien debt to consolidated cash flow not be more than 1.0 to 1.0. At March 31, 2005, these ratios were 86.3 to 1.0 and 0.0 to 1.0, respectively.

Contractual Obligations

      The following table summarizes contractual obligations and commitments to make future payments under certain contracts, including long-term debt obligations, and capital leases at March 31, 2005.

Forward-Looking Statements

      With the exception of historical matters, the matters discussed in this report are forward looking statements. Forward-looking statements may relate to, among other things, future performance generally, business development activities, future capital expenditures, financing sources and availability and the effects of regulation and competition. When we use the words “believe,” “intend,” “expect,” “may,” “will,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements.

      We warn you that forward-looking statements are only predictions. Actual events or results may differ as a result of risks that we face. Forward-looking statements speak only as of the date they were made and we undertake no obligation to update them.

TRENDS AND OTHER UNCERTAINTIES

      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. All of our debt is at a fixed rate of interest. We can borrow, from time to time, up to $20.0 million under the senior secured revolving credit facility for working capital purposes. At March 31, 2005, there were no borrowings under the facility.

      The fair value of our long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to us for debt of the same remaining maturities. As such, the estimated fair value of long-term debt outstanding is approximately $224.7 million as of March 31, 2005.

      We do not invest in derivative financial instruments, interest rate swaps or other investments that alter interest rate exposure.

      As of March 31, 2005, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to the Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are currently effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

      During the quarter ended March 31, 2005, there were no changes in our internal control over financial reporting that materially affected, or are likely to affect, our internal control over financial reporting.

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.

Date: May 6, 2005

PART II. OTHER INFORMATION