##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 
|           |  | For the quarterly period ended June 30, 2005                                                
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|           |  | For the transition period
    from          to                                              

Commission file number 333-110484


ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.


(Exact name of registrant as specified in its charter)


|                                                                                                                                                   |  |                                         
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|DELAWARE                                                                                                                                           |  | 54-2131349                              
|(State or other jurisdiction of
    (incorporation or organization)                                                                                |  | (I.R.S. Employer
    Identification No.)
|                                                                                                                                                  
|C/o Sands Hotel & Casino
    Indiana Avenue & Brighton Park
    Atlantic City, New Jersey(Address of registrants principal executive
    offices) |  | 08401(Zip Code)                         

(609) 441-4633


(Registrants telephone number, including area code)


þ o


o þ




|                                                |  |                              |  |                               
|----------------------------------------------- |  | ---------------------------- |  | ------------------------------
|Registrant                                      |  | Class                        |  | Outstanding at August 17, 2005
|                                                |  |                              |  |                               
|Atlantic Coast Entertainment
    Holdings, Inc. |  | Common stock, $.01 par value |  | 6,916,778 shares              









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TABLE OF CONTENTS







|                       |  |                                                                                                                                                   |  |      |    | 
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                       |  |                                                                                                                                                   |  | Page |   
|                       |  |                                                                                                                                                   |  |      |   
|Part I                 |  | FINANCIAL INFORMATION                                                                                                                             |  |      |    | 
|Item 1.                |  | Unaudited Condensed Combined Financial
    Statements                                                                                             |  |      | 3  | 
|                       |  | Condensed Combined Balance Sheets as of
    June 30, 2005 (unaudited) and December 31, 2004                                                       |  |      | 3  | 
|                       |  | Condensed Combined Statements of Operations
    for the three months ended June 30, 2005 and June 30,
    2004 (unaudited)                        |  |      | 4  | 
|                       |  | Condensed Combined Statements of Operations
    for the six months ended June 30, 2005 and June 30,
    2004 (unaudited)                          |  |      | 5  | 
|                       |  | Condensed Combined Statements of
    Shareholders Equity for the year ended December 31,
    2004 and six months ended June 30, 2005 (unaudited) |  |      | 6  | 
|                       |  | Condensed Combined Statements of Cash Flows
    for the six months ended June 30, 2005 and June 30,
    2004 (unaudited)                          |  |      | 7  | 
|                       |  | Notes to Condensed Combined Financial
    Statements (unaudited)                                                                                  |  |      | 8  | 
|Item 2.                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                         |  |      | 11 | 
|Item 3.                |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                    |  |      | 19 | 
|Item 4.                |  | Controls and Procedures                                                                                                                           |  |      | 19 | 
|                      
|Part II                |  | OTHER INFORMATION                                                                                                                                 |  |      |    | 
|Item 5.                |  | Submission of Matters to a Vote of Security
    Holders                                                                                           |  |      | 20 | 
|Item 6.                |  | Exhibits                                                                                                                                          |  |      | 20 | 
|EX-31.1: CERTIFICATION
|EX-31.2: CERTIFICATION
|EX-32.1: CERTIFICATION
|EX-32.2: CERTIFICATION



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##### Table of Contents






PART I. FINANCIAL INFORMATION







|        |                                                  
|------- | -------------------------------------------------
|Item 1. | UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS




ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


CONDENSED COMBINED BALANCE SHEETS


|                                           |                                                                                                                  |                                   |         |         |                   |   |         |         |         | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------- | --------------------------------- | ------- | ------- | ----------------- | - | ------- | ------- | ------- | 
|                                           |                                                                                                                  | As of                             |         |         | As of             |  
|                                           |                                                                                                                  | June 30, 2005                     |         |         | December 31, 2004 |  
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | (Unaudited)                       |         |         |                  
|                                           |                                                                                                                  | (In thousands, except share data) |        
|ASSETS                                    
|Current Assets:                            |                                                                                                                  |                                   |         |         |                   |   |         |        
|                                           | Cash and cash equivalents                                                                                        |                                   | $       | 14,207  |                   |   | $       | 12,756  |        
|                                           | Accounts receivable, net                                                                                         |                                   |         | 4,371   |                   |   |         | 5,100   |        
|                                           | Other current assets                                                                                             |                                   |         | 10,471  |                   |   |         | 7,533   |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | Total Current Assets              |         |         | 29,049            |   |         |         | 25,389  | 
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           | Property and Equipment, net                                                                                      |                                   |         | 165,455 |                   |   |         | 171,640 |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           | Obligatory investments, net                                                                                      |                                   |         | 12,390  |                   |   |         | 11,647  |        
|                                           | Deferred financing costs and other assets                                                                        |                                   |         | 4,775   |                   |   |         | 8,113   |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | Total Other Assets                |         |         | 17,165            |   |         |         | 19,760  | 
|                                           |                                                                                                                  |                                   |         |         |                   |  
|TOTAL ASSETS                               |                                                                                                                  | $                                 | 211,669 |         |                   | $ | 216,789 |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                          
|LIABILITIES AND SHAREHOLDERS EQUITY      
|Current Liabilities:                       |                                                                                                                  |                                   |         |         |                   |   |         |        
|                                           | Line of credit                                                                                                   |                                   | $       | 3,000   |                   |   | $       |        |        
|                                           | Accounts payable-trade                                                                                           |                                   |         | 5,070   |                   |   |         | 6,710   |        
|                                           | Accrued expenses                                                                                                 |                                   |         | 8,088   |                   |   |         | 7,428   |        
|                                           | Accrued payroll and related expenses                                                                             |                                   |         | 7,649   |                   |   |         | 6,818   |        
|                                           | Accounts payable-related party                                                                                   |                                   |         | 813     |                   |   |         | 371     |        
|                                           | Current portion of capital lease obligation                                                                      |                                   |         | 317     |                   |   |         | 248     |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | Total Current Liabilities         |         |         | 24,937            |   |         |         | 21,575  | 
|                                           |                                                                                                                  |                                   |         |         |                   |  
|Long-Term Liabilities:                     |                                                                                                                  |                                   |         |         |                   |   |         |        
|                                           | Long-term debt, less current portion                                                                             |                                   |         | 37,459  |                   |   |         | 66,259  |        
|                                           | Capital lease obligations, less current portion                                                                  |                                   |         | 411     |                   |   |         | 432     |        
|                                           | Other                                                                                                            |                                   |         | 5,248   |                   |   |         | 4,920   |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | Total Long-Term Liabilities       |         |         | 43,118            |   |         |         | 71,611  | 
|                                           |                                                                                                                  |                                   |         |         |                   |  
|Total Liabilities                          |                                                                                                                  |                                   | 68,055  |         |                   |   | 93,186  |        
|                                           |                                                                                                                  |                                   |         |         |                   |  
|Commitments and Contingencies              |                                                                                                                  |                                   |         |         |                   |   |         |        
|Shareholders Equity:                      |                                                                                                                  |                                   |         |         |                   |   |         |        
|                                           | Common stock; $.01 par value share; 20,000,000 shares
    authorized; 6,912,023 and 2,882,938 shares outstanding |                                   |         | 69      |                   |   |         | 29      |        
|                                           | Additional paid-in capital                                                                                       |                                   |         | 187,226 |                   |   |         | 126,550 |        
|                                           | Warrants outstanding                                                                                             |                                   |         | 9,813   |                   |   |         | 43,587  |        
|                                           | Accumulated deficit                                                                                              |                                   |         | (53,494 | )                 |   |         | (46,563 | )      
|                                           |                                                                                                                  |                                   |         |         |                   |  
|                                           |                                                                                                                  | Total Shareholders Equity        |         |         | 143,614           |   |         |         | 123,603 | 
|                                           |                                                                                                                  |                                   |         |         |                   |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                                                                                                                  | $                                 | 211,669 |         |                   | $ | 216,789 |        
|                                           |                                                                                                                  |                                   |         |         |                   |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


CONDENSED COMBINED STATEMENTS OF OPERATIONS


|                                           |                                      |                             |           |        |               |   |           |        |        |  
|------------------------------------------ | ------------------------------------ | --------------------------- | --------- | ------ | ------------- | - | --------- | ------ | ------ | -
|                                           |                                      | Three Months                |           |        | Three Months  |  
|                                           |                                      | Ended                       |           |        | Ended         |  
|                                           |                                      | June 30, 2005               |           |        | June 30, 2004 |  
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | (Unaudited)                 |          
|                                           |                                      | (In thousands, except share |          
|                                           |                                      | data)                       |          
|REVENUES:                                  |                                      |                             |           |        |               |   |           |       
|                                           | Casino                               |                             | $         | 37,377 |               |   | $         | 41,112 |       
|                                           | Hotel                                |                             |           | 2,890  |               |   |           | 2,780  |       
|                                           | Food and beverage                    |                             |           | 5,415  |               |   |           | 5,800  |       
|                                           | Other                                |                             |           | 886    |               |   |           | 1,020  |       
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Gross Revenues              |           |        | 46,568        |   |           |        | 50,712 |  
|                                           | Less promotional allowances          |                             |           | 5,645  |               |   |           | 6,142  |       
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Net Revenues                |           |        | 40,923        |   |           |        | 44,570 |  
|                                           |                                      |                             |           |        |               |  
|COSTS AND EXPENSES:                        |                                      |                             |           |        |               |   |           |       
|                                           | Casino                               |                             |           | 12,195 |               |   |           | 12,937 |       
|                                           | Hotel                                |                             |           | 1,189  |               |   |           | 734    |       
|                                           | Food and beverage                    |                             |           | 1,884  |               |   |           | 2,067  |       
|                                           | Other operating expenses             |                             |           | 250    |               |   |           | 211    |       
|                                           | Selling, general and administrative  |                             |           | 22,224 |               |   |           | 22,835 |       
|                                           | Depreciation and amortization        |                             |           | 3,881  |               |   |           | 3,660  |       
|                                           | Provision for obligatory investments |                             |           | (25    | )             |   |           | 219    |       
|                                           | Gain on sale of assets               |                             |           | (1     | )             |   |           | (31    | )     
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Total Costs And Expenses    |           |        | 41,597        |   |           |        | 42,632 |  
|                                           |                                      |                             |           |        |               |  
|INCOME (LOSS) FROM OPERATIONS              |                                      |                             | (674      | )      |               |   | 1,938     |       
|                                           |                                      |                             |           |        |               |  
|OTHER INCOME (EXPENSE):                    |                                      |                             |           |        |               |   |           |       
|                                           | Interest income                      |                             |           | 147    |               |   |           | 87     |       
|                                           | Interest expense                     |                             |           | (3,333 | )             |   |           | (3,144 | )     
|                                           | Debt restructuring costs             |                             |           |       |               |   |           | (1,129 | )     
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Total other expense, net    |           |        | (3,186        | ) |           |        | (4,186 | )
|                                           |                                      |                             |           |        |               |  
|LOSS BEFORE INCOME TAXES                   |                                      |                             | (3,860    | )      |               |   | (2,248    | )     
|Provision for income taxes                 |                                      |                             | 251       |        |               |   | 245       |       
|                                           |                                      |                             |           |        |               |  
|NET LOSS                                   |                                      | $                           | (4,111    | )      |               | $ | (2,493    | )     
|                                           |                                      |                             |           |        |               |  
|Basic/diluted loss per common share        |                                      | $                           | (0.85     | )      |               | $ | (0.86     | )     
|                                           |                                      |                             |           |        |               |  
|Weighted average common shares outstanding |                                      |                             | 4,831,853 |        |               |   | 2,882,938 |       
|                                           |                                      |                             |           |        |               |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED COMBINED STATEMENTS OF OPERATIONS


|                                           |                                      |                             |           |        |               |   |           |        |        |  
|------------------------------------------ | ------------------------------------ | --------------------------- | --------- | ------ | ------------- | - | --------- | ------ | ------ | -
|                                           |                                      | Six Months                  |           |        | Six Months    |  
|                                           |                                      | Ended                       |           |        | Ended         |  
|                                           |                                      | June 30, 2005               |           |        | June 30, 2004 |  
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | (Unaudited)                 |          
|                                           |                                      | (In thousands, except share |          
|                                           |                                      | data)                       |          
|REVENUES:                                  |                                      |                             |           |        |               |   |           |       
|                                           | Casino                               |                             | $         | 74,718 |               |   | $         | 79,231 |       
|                                           | Hotel                                |                             |           | 5,184  |               |   |           | 5,068  |       
|                                           | Food and beverage                    |                             |           | 10,281 |               |   |           | 10,790 |       
|                                           | Other                                |                             |           | 1,693  |               |   |           | 1,947  |       
|                                           |                                      |                             |           |        |               |  
|                                           | Gross Revenues                       |                             |           | 91,876 |               |   |           | 97,036 |       
|                                           | Less promotional allowances          |                             |           | 10,988 |               |   |           | 11,476 |       
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Net Revenues                |           |        | 80,888        |   |           |        | 85,560 |  
|                                           |                                      |                             |           |        |               |  
|COSTS AND EXPENSES:                        |                                      |                             |           |        |               |   |           |       
|                                           | Casino                               |                             |           | 24,022 |               |   |           | 25,151 |       
|                                           | Hotel                                |                             |           | 1,892  |               |   |           | 1,389  |       
|                                           | Food and beverage                    |                             |           | 3,450  |               |   |           | 4,094  |       
|                                           | Other operating expenses             |                             |           | 459    |               |   |           | 414    |       
|                                           | Selling, general and administrative  |                             |           | 45,088 |               |   |           | 43,852 |       
|                                           | Depreciation and amortization        |                             |           | 7,907  |               |   |           | 7,226  |       
|                                           | Provision for obligatory investments |                             |           | 213    |               |   |           | 587    |       
|                                           | Gain on sale of assets               |                             |           | (5     | )             |   |           | (31    | )     
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Total Costs And Expenses    |           |        | 83,026        |   |           |        | 82,682 |  
|                                           |                                      |                             |           |        |               |  
|INCOME (LOSS) FROM OPERATIONS              |                                      |                             | (2,138    | )      |               |   | 2,878     |       
|                                           |                                      |                             |           |        |               |  
|OTHER INCOME (EXPENSE):                    |                                      |                             |           |        |               |   |           |       
|                                           | Interest income                      |                             |           | 254    |               |   |           | 158    |       
|                                           | Interest expense                     |                             |           | (4,526 | )             |   |           | (6,334 | )     
|                                           | Debt restructuring costs             |                             |           | (23    | )             |   |           | (1,839 | )     
|                                           |                                      |                             |           |        |               |  
|                                           |                                      | Total other expense, net    |           |        | (4,295        | ) |           |        | (8,015 | )
|                                           |                                      |                             |           |        |               |  
|LOSS BEFORE INCOME TAXES                   |                                      |                             | (6,433    | )      |               |   | (5,137    | )     
|Provision for income taxes                 |                                      |                             | 498       |        |               |   | 512       |       
|                                           |                                      |                             |           |        |               |  
|NET LOSS                                   |                                      | $                           | (6,931    | )      |               | $ | (5,649    | )     
|                                           |                                      |                             |           |        |               |  
|Basic/diluted loss per common share        |                                      | $                           | (1.79     | )      |               | $ | (1.96     | )     
|                                           |                                      |                             |           |        |               |  
|Weighted average common shares outstanding |                                      |                             | 3,862,779 |        |               |   | 2,882,938 |       
|                                           |                                      |                             |           |        |               |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED COMBINED STATEMENTS OF SHAREHOLDERS EQUITY


(Unaudited)


|                                 |  |                                      |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |   |         |   |  |   |         |  
|-------------------------------- |  | ------------------------------------ | --------- |  | ------ | ---------- | ------- | ------- |  | - | -------- | ----------- |  | ------- | ------- | - | ----- | - | ------- | - |  | - | ------- | -
|                                 |  |                                      |           |  |        | Additional |         |         |  |   |          |             | 
|                                 |  | Common                               |           |  |        |            | Paid-In |         |  |   |          | Accumulated |  |         |        
|                                 |  | Shares                               |           |  | Amount |            |         | Capital |  |   | Warrants |             |  | Deficit |         |   | Total |  
|                                 |  |                                      |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  
|                                 |  | (In thousands, except share amounts) |          
|BALANCE, December 31, 2004       |  |                                      | 2,882,938 |  |        | $          | 29      |         |  | $ | 126,550  |             |  | $       | 43,587  |   |       | $ | (46,563 | ) |  | $ | 123,603 |  
|Conversion of 3% notes           |  |                                      | 1,898,181 |  |        |            | 19      |         |  |   | 29,500   |             |  |         |         |   |       |   |         |   |  |   | 29,519  |  
|Exercise of warrants             |  |                                      | 2,130,904 |  |        |            | 21      |         |  |   | 33,774   |             |  |         | (33,774 | ) |       |   |         |   |  |   | 21      |  
|Return of capital to GB Holdings |  |                                      |           |  |        |            |         |         |  |   | (2,598   | )           |  |         |         |   |       |   |         |   |  |   | (2,598  | )
|Net Loss                         |  |                                      |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |   | (6,931  | ) |  |   | (6,931  | )
|                                 |  |                                      |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  
|BALANCE, June 30, 2005           |  |                                      | 6,912,023 |  |        | $          | 69      |         |  | $ | 187,226  |             |  | $       | 9,813   |   |       | $ | (53,494 | ) |  | $ | 143,614 |  
|                                 |  |                                      |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED COMBINED STATEMENTS OF CASH FLOWS


|                                                   |                                                                                     |                |        |        |               |   |        |        |  
|-------------------------------------------------- | ----------------------------------------------------------------------------------- | -------------- | ------ | ------ | ------------- | - | ------ | ------ | -
|                                                   |                                                                                     | Six Months     |        |        | Six Months    |  
|                                                   |                                                                                     | Ended          |        |        | Ended         |  
|                                                   |                                                                                     | June 30, 2005  |        |        | June 30, 2004 |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   |                                                                                     | (Unaudited)    |       
|                                                   |                                                                                     | (In thousands) |       
|CASH FLOWS FROM OPERATING ACTIVITIES:              |                                                                                     |                |        |        |               |   |        |       
|Net loss                                           |                                                                                     | $              | (6,931 | )      |               | $ | (5,649 | )     
|                                                   | Adjustments to reconcile net loss to net cash provided by
    operating activities: |                |        |        |               |   |        |        |  
|Depreciation and amortization                      |                                                                                     |                | 7,907  |        |               |   | 7,226  |       
|(Gain) Loss on sale or disposal of assets          |                                                                                     |                | (5     | )      |               |   | (31    | )     
|Provision for obligatory investments               |                                                                                     |                | 213    |        |               |   | 587    |       
|Changes in operating assets and liabilities:       |                                                                                     |                |        |        |               |   |        |       
|                                                   | Accounts receivable, net                                                            |                |        | 729    |               |   |        | (2     | )
|                                                   | Other assets                                                                        |                |        | 297    |               |   |        | 1,102  |  
|                                                   | Accounts payable  trade                                                            |                |        | (1,640 | )             |   |        | (2,374 | )
|                                                   | Accrued expenses                                                                    |                |        | 1,491  |               |   |        | 2,788  |  
|                                                   | Other Liabilities                                                                   |                |        | 1,047  |               |   |        | 154    |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Net Cash Provided By Operating Activities                                           |                |        | 3,108  |               |   |        | 3,801  |  
|                                                   |                                                                                     |                |        |        |               |  
|CASH FLOWS FROM INVESTING ACTIVITIES:              |                                                                                     |                |        |        |               |   |        |       
|Acquisition of property and equipment              |                                                                                     |                | (1,473 | )      |               |   | (6,190 | )     
|Purchase of obligatory investments                 |                                                                                     |                | (1,094 | )      |               |   | (1,072 | )     
|Cash proceeds from sale of obligatory investments  |                                                                                     |                | 137    |        |               |   | 209    |       
|Cash proceeds from sale of property and equipment  |                                                                                     |                | 5      |        |               |   | 31     |       
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Net Cash Used In Investing Activities                                               |                |        | (2,425 | )             |   |        | (7,022 | )
|                                                   |                                                                                     |                |        |        |               |  
|CASH FLOWS FROM FINANCING ACTIVITIES:              |                                                                                     |                |        |        |               |   |        |       
|Proceeds from borrowing on line of credit          |                                                                                     |                | 3,000  |        |               |   |       |       
|Increase in related party payables                 |                                                                                     |                | 442    |        |               |   | 4,100  |       
|Proceeds from exercised warrants                   |                                                                                     |                | 21     |        |               |   |       |       
|Payments on capital lease obligation               |                                                                                     |                | (97    | )      |               |   |       |       
|Return of capital of GB Holdings, Inc.             |                                                                                     |                | (2,598 | )      |               |   |       |       
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Net Cash Provided by Financing Activities                                           |                |        | 768    |               |   |        | 4,100  |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Net increase in cash and cash equivalents                                           |                |        | 1,451  |               |   |        | 879    |  
|                                                   | Cash and cash equivalents  beginning of period                                     |                |        | 12,756 |               |   |        | 16,904 |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Cash And Cash Equivalents  End of Period                                           |                | $      | 14,207 |               |   | $      | 17,783 |  
|                                                   |                                                                                     |                |        |        |               |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |                                                                                     |                |        |        |               |   |        |       
|                                                   | Cash paid for interest                                                              |                | $      | 219    |               |   | $      | 6,050  |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Cash paid for income taxes                                                          |                | $      | 517    |               |   | $      | 603    |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Interest capitalized                                                                |                | $      | 5      |               |   | $      | 101    |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Exercise of warrants                                                                |                | $      | 33,774 |               |   | $      |       |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Purchase of equipment with capital lease                                            |                | $      | 145    |               |   | $      |       |  
|                                                   |                                                                                     |                |        |        |               |  
|                                                   | Conversion of notes payable and accrued interest to common stock                    |                | $      | 29,519 |               |   | $      |       |  
|                                                   |                                                                                     |                |        |        |               |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS









|        |            
|------- | -----------
|NOTE 1. | THE COMPANY











|        |                      
|------- | ---------------------
|NOTE 2. | BASIS OF PRESENTATION



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS  (Continued)






|                                      |  |   |        | 
|------------------------------------- |  | - | ------ | 
|Current assets, primarily prepayments |  | $ | 266    | 
|Long-term debt, current portion       |  | $ | 43,741 | 
|Note payable related party            |  | $ | 21,900 | 
|Accrued interest                      |  | $ | 2,984  | 









| |                          
| | -------------------------
| | PRINCIPLES OF COMBINATION





|        |                           
|------- | --------------------------
|NOTE 3. | RELATED PARTY TRANSACTIONS







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##### Table of Contents



ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS  (Continued)








|        |               
|------- | --------------
|NOTE 4. | LINE OF CREDIT









|        |                  
|------- | -----------------
|NOTE 5. | LEGAL PROCEEDINGS



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##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS



OVERVIEW












11



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##### Table of Contents





RESULTS OF OPERATIONS








|               |        |           |       |  |     |           |  |  |             |  |  |  |    | 
|-------------- | ------ | --------- | ----- |  | --- | --------- |  |  | ----------- |  |  |  | -- | 
|               |        | Number of |       |  |     |           | 
|Casino         |        |           | Hotel |  |     | Number of |  |  | Number of   | 
|Square Footage |        |           | Rooms |  |     | Slots     |  |  | Table Games | 
|               |        |           |       |  |     |           |  |  |             | 
|               | 82,000 |           |       |  | 620 |           |  |  | 2,161       |  |  |  | 92 | 



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##### Table of Contents





| |                                                                    
| | -------------------------------------------------------------------
| | THREE MONTHS ENDED JUNE 30, 2005 COMPARED TO THREE
    MONTHS ENDED

JUNE 30, 2004


|                              |                                      |                          |      |      |      |   |     |          |      |  |        |       |      |   
|----------------------------- | ------------------------------------ | ------------------------ | ---- | ---- | ---- | - | --- | -------- | ---- |  | ------ | ----- | ---- | --
|                              |                                      | Three Months Ended       |     
|                              |                                      | June 30,                 |     
|                              |                                      |                          |     
|                              |                                      | 2005                     |      |      | 2004 |   |     | % Change |     
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | (in millions)            |     
|INCOME STATEMENT DATA:        |                                      |                          |      |      |      |   |     |          |      |  |        |      
|Revenues:                     |                                      |                          |      |      |      |   |     |          |      |  |        |      
|                              | Casino                               |                          | $    | 37.4 |      |   | $   | 41.1     |      |  |        | (9.1  | )%  
|                              | Hotel                                |                          |      | 2.9  |      |   |     | 2.8      |      |  |        | 4.0   | %   
|                              | Food and beverage                    |                          |      | 5.4  |      |   |     | 5.8      |      |  |        | (6.6  | )%  
|                              | Other                                |                          |      | 0.9  |      |   |     | 1.0      |      |  |        | (13.1 | )%  
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Gross revenues           |      |      | 46.6 |   |     |          | 50.7 |  |        |       | (8.2 | )%
|Less promotional allowances   |                                      |                          | 5.7  |      |      |   | 6.1 |          |      |  | (8.1   | )%   
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Net revenues             |      |      | 40.9 |   |     |          | 44.6 |  |        |       | (8.2 | )%
|Costs and expenses:           |                                      |                          |      |      |      |   |     |          |      |  |        |      
|                              | Casino                               |                          |      | 12.2 |      |   |     | 12.9     |      |  |        | (5.7  | )%  
|                              | Hotel                                |                          |      | 1.2  |      |   |     | 0.7      |      |  |        | 62.0  | %   
|                              | Food and beverage                    |                          |      | 1.9  |      |   |     | 2.1      |      |  |        | (8.9  | )%  
|                              | Other operating expenses             |                          |      | 0.2  |      |   |     | 0.2      |      |  |        | 18.5  | %   
|                              | Selling, general and administrative  |                          |      | 22.2 |      |   |     | 22.8     |      |  |        | (2.7  | )%  
|                              | Depreciation and amortization        |                          |      | 3.9  |      |   |     | 3.7      |      |  |        | 6.0   | %   
|                              | Provision for obligatory investments |                          |      | 0.0  |      |   |     | 0.2      |      |  |        | 111.4 | %   
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Total costs and expenses |      |      | 41.6 |   |     |          | 42.6 |  |        |       | (2.5 | )%
|                              |                                      |                          |      |      |      |   |     |          |     
|Income (loss) from operations |                                      | $                        | (0.7 | )    |      | $ | 2.0 |          |      |  | (134.8 | )%   
|                              |                                      |                          |      |      |      |   |     |          |     



| |               
| | --------------
| | Gross Revenues





| |                
| | ---------------
| | Casino Revenues



13



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| |                    
| | -------------------
| | Non-Casino Revenues









| |                       
| | ----------------------
| | Promotional Allowances





| |                   
| | ------------------
| | Operating Expenses













| |                 
| | ----------------
| | Interest Expense



14



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| |                                                                              
| | -----------------------------------------------------------------------------
| | SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO SIX MONTHS
    ENDED JUNE 30, 2004

|                              |                                      |                           |      |      |      |   |      |          |      |  |        |       |      |   
|----------------------------- | ------------------------------------ | ------------------------- | ---- | ---- | ---- | - | ---- | -------- | ---- |  | ------ | ----- | ---- | --
|                              |                                      | Six Months Ended June 30, |     
|                              |                                      |                           |     
|                              |                                      | 2005                      |      |      | 2004 |   |      | % Change |     
|                              |                                      |                           |      |      |      |   |      |          |     
|                              |                                      | (in millions)             |     
|INCOME STATEMENT DATA:        |                                      |                           |      |      |      |   |      |          |      |  |        |      
|Revenues:                     |                                      |                           |      |      |      |   |      |          |      |  |        |      
|                              | Casino                               |                           | $    | 74.7 |      |   | $    | 79.2     |      |  |        | (5.7  | )%  
|                              | Hotel                                |                           |      | 5.2  |      |   |      | 5.1      |      |  |        | (2.3  | )%  
|                              | Food and beverage                    |                           |      | 10.3 |      |   |      | 10.8     |      |  |        | (4.7  | )%  
|                              | Other                                |                           |      | 1.7  |      |   |      | 1.9      |      |  |        | (13.0 | )%  
|                              |                                      |                           |      |      |      |   |      |          |     
|                              |                                      | Gross revenues            |      |      | 91.9 |   |      |          | 97.0 |  |        |       | (5.3 | )%
|Less promotional allowances   |                                      |                           | 11.0 |      |      |   | 11.4 |          |      |  | (4.3   | )%   
|                              |                                      |                           |      |      |      |   |      |          |     
|                              |                                      | Net revenues              |      |      | 80.9 |   |      |          | 85.6 |  |        |       | (5.5 | )%
|Costs and expenses:           |                                      |                           |      |      |      |   |      |          |      |  |        |      
|                              | Casino                               |                           |      | 24.0 |      |   |      | 25.2     |      |  |        | (4.5  | )%  
|                              | Hotel                                |                           |      | 1.9  |      |   |      | 1.4      |      |  |        | 36.2  | %   
|                              | Food and beverage                    |                           |      | 3.4  |      |   |      | 4.1      |      |  |        | (15.7 | )%  
|                              | Other operating expenses             |                           |      | 0.5  |      |   |      | 0.4      |      |  |        | 10.9  | %   
|                              | Selling, general and administrative  |                           |      | 45.1 |      |   |      | 43.8     |      |  |        | 2.8   | %   
|                              | Depreciation and amortization        |                           |      | 7.9  |      |   |      | 7.2      |      |  |        | 9.4   | %   
|                              | Provision for obligatory investments |                           |      | 0.2  |      |   |      | 0.6      |      |  |        | 83.9  | %   
|                              |                                      |                           |      |      |      |   |      |          |     
|                              |                                      | Total costs and expenses  |      |      | 83.0 |   |      |          | 82.7 |  |        |       | 0.4  | % 
|                              |                                      |                           |      |      |      |   |      |          |     
|Income (loss) from operations |                                      | $                         | (2.1 | )    |      | $ | 2.9  |          |      |  | (174.3 | )%   
|                              |                                      |                           |      |      |      |   |      |          |     



| |               
| | --------------
| | Gross Revenues





| |                
| | ---------------
| | Casino Revenues



15



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| |                    
| | -------------------
| | Non-Casino Revenues









| |                       
| | ----------------------
| | Promotional Allowances





| |                   
| | ------------------
| | Operating Expenses













| |                 
| | ----------------
| | Interest Expense



16



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##### Table of Contents



FINANCIAL CONDITION




| |                                
| | -------------------------------
| | Liquidity And Capital Resources













17



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##### Table of Contents







| |                        
| | -----------------------
| | Contractual Obligations



|                                        |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |        |       |  |   |       |       | 
|--------------------------------------- | --------------- | ---------------------- | ------ | --------- | ------ | - | ----- | --------- |  | - | --------- | ----- |  | ------------- | ------ | ----- |  | - | ----- | ----- | 
|                                        |                 | Payments Due by Period |       
|                                        |                 |                        |       
|                                        |                 |                        |        | Less than |        |   |      
|Contractual Obligations and Commitments |                 | Total                  |        |           | 1 Year |   |       | 1-3 Years |  |   | 4-5 Years |       |  | After 5 Years |       
|                                        |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |       
|                                        |                 | (In thousands)         |       
|Line of Credit                          |                 | $                      | 3,000  |           |        | $ | 3,000 |           |  | $ |          |       |  | $             |       |       |  | $ |      |      
|Long-Term debt                          |                 |                        | 37,459 |           |        |   |      |           |  |   |          |       |  |               | 37,459 |       |  |   |      |      
|Capital lease obligations               |                 |                        | 728    |           |        |   | 317   |           |  |   | 393       |       |  |               | 18     |       |  |   |      |      
|Obligatory Contributions:               |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |        |       |  |   |       |      
|                                        | VLT Agreement   |                        |        | 2,860     |        |   |       | 953       |  |   |           | 1,907 |  |               |        |      |  |   |       |      | 
|                                        | CRDA obligation |                        |        | 4,709     |        |   |       | 84        |  |   |           | 157   |  |               |        | 3,319 |  |   |       | 1,149 | 
|Operating Leases:                       |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |        |       |  |   |       |      
|                                        | Madison House   |                        |        | 15,326    |        |   |       | 1,899     |  |   |           | 3,996 |  |               |        | 3,996 |  |   |       | 5,435 | 
|                                        | Equipment       |                        |        | 76        |        |   |       | 76        |  |   |           |      |  |               |        |      |  |   |       |      | 
|                                        |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |       
|Total cash obligations                  |                 | $                      | 64,158 |           |        | $ | 6,329 |           |  | $ | 6,453     |       |  | $             | 44,792 |       |  | $ | 6,584 |      
|                                        |                 |                        |        |           |        |   |       |           |  |   |           |       |  |               |       



TRENDS AND OTHER UNCERTAINTIES




| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Sands must maintain its casino license in order to operate.                                                                                                
|
| |  | The Company may need to increase capital expenditures to compete
    effectively and may not have the ability to do so.                                        
|
| |  | If the Company fails to offer competitive products and services
    or maintain the loyalty of The Sands patrons, its business
    will be adversely affected.

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| |   |                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Companys quarterly operating results are subject to
    fluctuations and seasonality, and if the Company fails to meet
    the expectations of securities analysts or investors, the
    Companys share price may decrease significantly.                                                                                           
|
| |  | Increased state taxation of gaming and hospitality revenues
    could adversely affect the Companys results of operations.                                                                                                                                                                                                               
|
| |  | Energy price increases may adversely affect the Companys
    costs of operations and revenues of The Sands.                                                                                                                                                                                                                              
|
| |  | A downturn in general economic conditions may adversely affect
    the Companys results of operations.                                                                                                                                                                                                                                   
|
| |  | Acts of terrorism and the uncertainty of the outcome and
    duration of the activity in Iraq and elsewhere, as well as other
    factors affecting discretionary consumer spending, have impacted
    the gaming industry and may harm the Companys operating
    results and the Companys ability to insure against certain
    risks.
|
| |  | The Company may incur losses that would not be covered by
    insurance and the cost of insurance will increase.                                                                                                                                                                                                                          
|
| |  | There are risks related to the creditworthiness of patrons of
    the casinos.                                                                                                                                                                                                                                                            
|
| |  | The Companys success depends in part on the availability
    of qualified management and personnel and on the Companys
    ability to retain such employees.                                                                                                                                                                            
|
| |  | The gaming industry is highly competitive.                                                                                                                                                                                                                                                                                                
|
| |  | Pending and enacted gaming legislation from neighboring States
    and New Jersey may harm The Sands.                                                                                                                                                                                                                                     
|
| |  | Holders of Atlantic Holdings Common Stock, Warrants, and
    3% Notes are subject to the CCC and the NJCCA.                                                                                                                                                                                                                               
|
| |  | The Company depends on short-term borrowings and can not be
    certain that funds will continue to be available.                                                                                                                                                                                                                         






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK








|        |                        
|------- | -----------------------
|Item 4. | CONTROLS AND PROCEDURES





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PART II. OTHER INFORMATION







|        |                                                    
|------- | ---------------------------------------------------
|Item 5. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS








|        |         
|------- | --------
|Item 6. | EXHIBITS

| |       |  |  |                                                                                                                         
| | ----- |  |  | ------------------------------------------------------------------------------------------------------------------------
| | 10.1* |  |  | Employment Agreement by and between Atlantic Coast Entertainment
    Holdings, Inc. and George Toth dated April 1, 2005.
| | 31.1  |  |  | Certification of Principal Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.            
| | 31.2  |  |  | Certification of Principal Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.            
| | 32.1  |  |  | Certification of Chief Executive Officer, pursuant to
    Section 906 of the Sarbanes-Oxley Act 2002.                   
| | 32.2  |  |  | Certification of Chief Financial Officer, pursuant to
    Section 906 of the Sarbanes-Oxley Act 2002.                   






| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| | * | Filed as an exhibit to Atlantic Holdings Current Report on
    Form 8-K filed with the SEC on April 27, 2005 and
    incorporated herein by reference.

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SIGNATURES






| |                             
| | ----------------------------
| | ATLANTIC COAST ENTERTAINMENT
| | HOLDINGS, INC.              
|
| | /s/ Denise Barton           
| |                             
| | Denise Barton               
| | Chief Financial Officer     



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##### Table of Contents



EXHIBITS INDEX


|        |       |             |  |                                                                                                                         
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.1* |             |  | Employment Agreement by and between Atlantic Coast Entertainment
    Holdings, Inc. and George Toth dated April 1, 2005.
|        | 31.1  |             |  | Certification of Principal Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.            
|        | 31.2  |             |  | Certification of Principal Financial Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.            
|        | 32.1  |             |  | Certification of Chief Executive Officer, pursuant to
    Section 906 of the Sarbanes-Oxley Act 2002.                   
|        | 32.2  |             |  | Certification of Chief Financial Officer, pursuant to
    Section 906 of the Sarbanes-Oxley Act 2002.                   






|  |                                                                                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Filed as an exhibit to Atlantic Holdings Current Report on
    Form 8-K filed with the SEC on April 27, 2005 and
    incorporated herein by reference.

22