##### 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 September 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


o þ




|                             |                |                               |  |                                 | 
|---------------------------- | -------------- | ----------------------------- |  | ------------------------------- | 
|Registrant                   |                | Class                         |  | Outstanding at November 4, 2005
|                             |                |                               |  |                                
|Atlantic Coast Entertainment |                | Common stock, $0.01 par value |  | 6,916,914 shares               
|                             | Holdings, Inc. |                               |  |                                 | 









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TABLE OF CONTENTS


|                       |  |                                                                                                                                                                 |  |      |    | 
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                       |  |                                                                                                                                                                 |  | Page |   
|                       |  |                                                                                                                                                                 |  |      |   
|Part I                 |  | FINANCIAL INFORMATION                                                                                                                                           |  |      |    | 
|                      
|Item 1.                |  | Unaudited Condensed Consolidated Financial
    Statements                                                                                                       |  |      | 2  | 
|                       |  | Condensed Consolidated Balance Sheets as of
    September 30, 2005 (unaudited) and December 31,
    2004                                                        |  |      | 2  | 
|                       |  | Condensed Consolidated Statements of
    Operations for the three months ended September 30, 2005
    and September 30, 2004 (unaudited)                        |  |      | 3  | 
|                       |  | Condensed Consolidated Statements of
    Operations for the nine months ended September 30, 2005 and
    September 30, 2004 (unaudited)                         |  |      | 4  | 
|                       |  | Condensed Consolidated Statements of
    Shareholders Equity for the year ended December 31,
    2004 and nine months ended September 30, 2005
    (unaudited) |  |      | 5  | 
|                       |  | Condensed Consolidated Statements of Cash
    Flows for the nine months ended September 30, 2005 and
    September 30, 2004 (unaudited)                         |  |      | 6  | 
|                       |  | Notes to Condensed Consolidated Financial
    Statements (unaudited)                                                                                            |  |      | 7  | 
|Item 2.                |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                                                                       |  |      | 11 | 
|Item 3.                |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                                                                  |  |      | 18 | 
|Item 4.                |  | Controls and Procedures                                                                                                                                         |  |      | 18 | 
|                      
|Part II                |  | OTHER INFORMATION                                                                                                                                               |  |      |    | 
|                      
|Item 1.                |  | Legal Proceedings                                                                                                                                               |  |      | 19 | 
|                      
|Item 6.                |  | Exhibits                                                                                                                                                        |  |      | 19 | 
|EX-31.1: CERTIFICATION
|EX-31.2: CERTIFICATION
|EX-32.1: CERTIFICATION
|EX-32.2: CERTIFICATION



1



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##### Table of Contents






PART I. FINANCIAL INFORMATION







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

ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED CONSOLIDATED BALANCE SHEETS


|                                           |                                                                                                             |                                   |         |         |                   |   |         |         |         | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------- | --------------------------------- | ------- | ------- | ----------------- | - | ------- | ------- | ------- | 
|                                           |                                                                                                             | As of                             |         |         | As of             |  
|                                           |                                                                                                             | September 30, 2005                |         |         | December 31, 2004 |  
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | (Unaudited)                       |         |         |                  
|                                           |                                                                                                             | (In thousands, except share data) |        
|ASSETS                                    
|Current Assets:                            |                                                                                                             |                                   |         |         |                   |   |         |        
|                                           | Cash and cash equivalents                                                                                   |                                   | $       | 14,210  |                   |   | $       | 12,756  |        
|                                           | Accounts receivable, net                                                                                    |                                   |         | 3,664   |                   |   |         | 5,100   |        
|                                           | Other current assets                                                                                        |                                   |         | 8,963   |                   |   |         | 7,533   |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | Total Current Assets              |         |         | 26,837            |   |         |         | 25,389  | 
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           | Property and equipment, net                                                                                 |                                   |         | 163,103 |                   |   |         | 171,640 |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           | Obligatory investments, net                                                                                 |                                   |         | 12,696  |                   |   |         | 11,647  |        
|                                           | Deferred financing costs and other assets                                                                   |                                   |         | 4,414   |                   |   |         | 8,113   |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | Total Other Assets                |         |         | 17,110            |   |         |         | 19,760  | 
|                                           |                                                                                                             |                                   |         |         |                   |  
|Total Assets                               |                                                                                                             | $                                 | 207,050 |         |                   | $ | 216,789 |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                          
|LIABILITIES AND SHAREHOLDERS EQUITY      
|Current Liabilities:                       |                                                                                                             |                                   |         |         |                   |   |         |        
|                                           | Line of credit                                                                                              |                                   | $       | 1,000   |                   |   | $       |        |        
|                                           | Accounts payable-trade                                                                                      |                                   |         | 3,291   |                   |   |         | 6,710   |        
|                                           | Accrued expenses                                                                                            |                                   |         | 9,799   |                   |   |         | 7,428   |        
|                                           | Accrued payroll and related expenses                                                                        |                                   |         | 6,813   |                   |   |         | 6,818   |        
|                                           | Related party payables                                                                                      |                                   |         | 1,014   |                   |   |         | 371     |        
|                                           | Current portion of capital lease obligation                                                                 |                                   |         | 305     |                   |   |         | 248     |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | Total Current Liabilities         |         |         | 22,222            |   |         |         | 21,575  | 
|                                           |                                                                                                             |                                   |         |         |                   |  
|Long-Term Liabilities:                     |                                                                                                             |                                   |         |         |                   |   |         |        
|                                           | Long-term debt, less current portion                                                                        |                                   |         | 37,459  |                   |   |         | 66,259  |        
|                                           | Capital lease obligations, less current portion                                                             |                                   |         | 330     |                   |   |         | 432     |        
|                                           | Other                                                                                                       |                                   |         | 5,606   |                   |   |         | 4,920   |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | Total Long-Term Liabilities       |         |         | 43,395            |   |         |         | 71,611  | 
|                                           |                                                                                                             |                                   |         |         |                   |  
|Total Liabilities                          |                                                                                                             |                                   | 65,617  |         |                   |   | 93,186  |        
|                                           |                                                                                                             |                                   |         |         |                   |  
|Commitments and Contingencies              |                                                                                                             |                                   |         |         |                   |   |         |        
|Shareholders Equity:                      |                                                                                                             |                                   |         |         |                   |   |         |        
|                                           | Common stock; $0.01 par value; 20,000,000 shares
    authorized; 6,916,914 and 2,882,938 shares outstanding |                                   |         | 69      |                   |   |         | 29      |        
|                                           | Additional paid-in capital                                                                                  |                                   |         | 187,304 |                   |   |         | 126,550 |        
|                                           | Warrants outstanding                                                                                        |                                   |         | 9,735   |                   |   |         | 43,587  |        
|                                           | Accumulated deficit                                                                                         |                                   |         | (55,675 | )                 |   |         | (46,563 | )      
|                                           |                                                                                                             |                                   |         |         |                   |  
|                                           |                                                                                                             | Total Shareholders Equity        |         |         | 141,433           |   |         |         | 123,603 | 
|                                           |                                                                                                             |                                   |         |         |                   |  
|Total Liabilities and Shareholders Equity |                                                                                                             | $                                 | 207,050 |         |                   | $ | 216,789 |        
|                                           |                                                                                                             |                                   |         |         |                   |  



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##### Table of Contents



ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                           |                                      |                                   |           |        |                    |   |           |        |        |  
|------------------------------------------ | ------------------------------------ | --------------------------------- | --------- | ------ | ------------------ | - | --------- | ------ | ------ | -
|                                           |                                      | Three Months                      |           |        | Three Months       |  
|                                           |                                      | Ended                             |           |        | Ended              |  
|                                           |                                      | September 30, 2005                |           |        | September 30, 2004 |  
|                                           |                                      |                                   |           |        |                    |  
|                                           |                                      | (Unaudited)                       |          
|                                           |                                      | (In thousands, except share data) |          
|Revenues:                                  |                                      |                                   |           |        |                    |   |           |       
|                                           | Casino                               |                                   | $         | 39,373 |                    |   | $         | 40,463 |       
|                                           | Hotel                                |                                   |           | 3,705  |                    |   |           | 3,286  |       
|                                           | Food and beverage                    |                                   |           | 7,225  |                    |   |           | 5,689  |       
|                                           | Other income                         |                                   |           | 923    |                    |   |           | 868    |       
|                                           |                                      |                                   |           |        |                    |  
|                                           |                                      | Gross Revenues                    |           |        | 51,226             |   |           |        | 50,306 |  
|                                           | Less promotional allowances          |                                   |           | 6,768  |                    |   |           | 6,146  |       
|                                           |                                      |                                   |           |        |                    |  
|                                           |                                      | Net Revenues                      |           |        | 44,458             |   |           |        | 44,160 |  
|                                           |                                      |                                   |           |        |                    |  
|Costs and Expenses:                        |                                      |                                   |           |        |                    |   |           |       
|                                           | Casino                               |                                   |           | 12,815 |                    |   |           | 13,002 |       
|                                           | Hotel                                |                                   |           | 1,334  |                    |   |           | 1,016  |       
|                                           | Food and beverage                    |                                   |           | 2,549  |                    |   |           | 1,935  |       
|                                           | Other operating expenses             |                                   |           | 436    |                    |   |           | 192    |       
|                                           | Selling, general and administrative  |                                   |           | 24,346 |                    |   |           | 23,191 |       
|                                           | Depreciation and amortization        |                                   |           | 4,026  |                    |   |           | 3,793  |       
|                                           | Provision for obligatory investments |                                   |           | 295    |                    |   |           | 300    |       
|                                           | Gain on sale of assets               |                                   |           | (1     | )                  |   |           | (7     | )     
|                                           |                                      |                                   |           |        |                    |  
|                                           |                                      | Total Costs and Expenses          |           |        | 45,800             |   |           |        | 43,422 |  
|                                           |                                      |                                   |           |        |                    |  
|Income (Loss) From Operations              |                                      |                                   | (1,342    | )      |                    |   | 738       |       
|                                           |                                      |                                   |           |        |                    |  
|Other Income (Expense):                    |                                      |                                   |           |        |                    |   |           |       
|                                           | Interest income                      |                                   |           | 166    |                    |   |           | 77     |       
|                                           | Interest expense                     |                                   |           | (739   | )                  |   |           | (1,498 | )     
|                                           | Debt restructuring costs             |                                   |           |       |                    |   |           | (913   | )     
|                                           |                                      |                                   |           |        |                    |  
|                                           |                                      | Total other expense, net          |           |        | (573               | ) |           |        | (2,334 | )
|                                           |                                      |                                   |           |        |                    |  
|Loss Before Income Taxes                   |                                      |                                   | (1,915    | )      |                    |   | (1,596    | )     
|Provision for income taxes                 |                                      |                                   | 266       |        |                    |   | 278       |       
|                                           |                                      |                                   |           |        |                    |  
|Net Loss                                   |                                      | $                                 | (2,181    | )      |                    | $ | (1,874    | )     
|                                           |                                      |                                   |           |        |                    |  
|Basic/diluted loss per common share        |                                      | $                                 | (0.32     | )      |                    | $ | (0.65     | )     
|                                           |                                      |                                   |           |        |                    |  
|Weighted average common shares outstanding |                                      |                                   | 6,916,892 |        |                    |   | 2,882,938 |       
|                                           |                                      |                                   |           |        |                    |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY





CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


|                                           |                                      |                                   |           |         |                    |   |           |         |         |  
|------------------------------------------ | ------------------------------------ | --------------------------------- | --------- | ------- | ------------------ | - | --------- | ------- | ------- | -
|                                           |                                      | Nine Months                       |           |         | Nine Months        |  
|                                           |                                      | Ended                             |           |         | Ended              |  
|                                           |                                      | September 30, 2005                |           |         | September 30, 2004 |  
|                                           |                                      |                                   |           |         |                    |  
|                                           |                                      | (In thousands, except share data) |          
|                                           |                                      | (Unaudited)                       |          
|Revenues:                                  |                                      |                                   |           |         |                    |   |           |        
|                                           | Casino                               |                                   | $         | 114,091 |                    |   | $         | 119,694 |        
|                                           | Hotel                                |                                   |           | 8,889   |                    |   |           | 8,354   |        
|                                           | Food and beverage                    |                                   |           | 17,506  |                    |   |           | 16,479  |        
|                                           | Other income                         |                                   |           | 2,616   |                    |   |           | 2,815   |        
|                                           |                                      |                                   |           |         |                    |  
|                                           |                                      | Gross Revenues                    |           |         | 143,102            |   |           |         | 147,342 |  
|                                           | Less promotional allowances          |                                   |           | 17,756  |                    |   |           | 17,622  |        
|                                           |                                      |                                   |           |         |                    |  
|                                           |                                      | Net Revenues                      |           |         | 125,346            |   |           |         | 129,720 |  
|                                           |                                      |                                   |           |         |                    |  
|Costs and Expenses:                        |                                      |                                   |           |         |                    |   |           |        
|                                           | Casino                               |                                   |           | 36,837  |                    |   |           | 38,153  |        
|                                           | Hotel                                |                                   |           | 3,226   |                    |   |           | 2,405   |        
|                                           | Food and beverage                    |                                   |           | 5,999   |                    |   |           | 6,029   |        
|                                           | Other operating expenses             |                                   |           | 895     |                    |   |           | 606     |        
|                                           | Selling, general and administrative  |                                   |           | 69,434  |                    |   |           | 67,043  |        
|                                           | Depreciation and amortization        |                                   |           | 11,933  |                    |   |           | 11,019  |        
|                                           | Provision for obligatory investments |                                   |           | 508     |                    |   |           | 887     |        
|                                           | Gain on sale of assets               |                                   |           | (6      | )                  |   |           | (38     | )      
|                                           |                                      |                                   |           |         |                    |  
|                                           |                                      | Total Costs and Expenses          |           |         | 128,826            |   |           |         | 126,104 |  
|                                           |                                      |                                   |           |         |                    |  
|Income (Loss) From Operations              |                                      |                                   | (3,480    | )       |                    |   | 3,616     |        
|                                           |                                      |                                   |           |         |                    |  
|Other Income (Expense):                    |                                      |                                   |           |         |                    |   |           |        
|                                           | Interest income                      |                                   |           | 420     |                    |   |           | 235     |        
|                                           | Interest expense                     |                                   |           | (5,265  | )                  |   |           | (7,832  | )      
|                                           | Debt restructuring costs             |                                   |           | (23     | )                  |   |           | (2,752  | )      
|                                           |                                      |                                   |           |         |                    |  
|                                           |                                      | Total other expense, net          |           |         | (4,868             | ) |           |         | (10,349 | )
|                                           |                                      |                                   |           |         |                    |  
|Loss Before Income Taxes                   |                                      |                                   | (8,348    | )       |                    |   | (6,733    | )      
|Provision for income taxes                 |                                      |                                   | 764       |         |                    |   | 790       |        
|                                           |                                      |                                   |           |         |                    |  
|Net Loss                                   |                                      | $                                 | (9,112    | )       |                    | $ | (7,523    | )      
|                                           |                                      |                                   |           |         |                    |  
|Basic/diluted loss per common share        |                                      | $                                 | (1.86     | )       |                    | $ | (2.61     | )      
|                                           |                                      |                                   |           |         |                    |  
|Weighted average common shares outstanding |                                      |                                   | 4,892,004 |         |                    |   | 2,882,938 |        
|                                           |                                      |                                   |           |         |                    |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY


|                                       |  |                                   |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |   |         |   |  |   |         |  
|-------------------------------------- |  | --------------------------------- | --------- |  | ------ | ---------- | ------- | ------- |  | - | -------- | ----------- |  | ------- | ------- | - | ----- | - | ------- | - |  | - | ------- | -
|                                       |  |                                   |           |  |        | Additional |         |         |  |   |          |             | 
|                                       |  | Common                            |           |  |        |            | Paid-In |         |  |   |          | Accumulated |  |         |        
|                                       |  | Shares                            |           |  | Amount |            |         | Capital |  |   | Warrants |             |  | Deficit |         |   | Total |  
|                                       |  |                                   |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  
|                                       |  | (In thousands, except share data) |          
|                                       |  | (Unaudited)                       |          
|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                   |  |                                   | 2,135,795 |  |        |            | 21      |         |  |   | 33,852   |             |  |         | (33,852 | ) |       |   |        |   |  |   | 21      |  
|Return of capital to GB Holdings, Inc. |  |                                   |          |  |        |            |        |         |  |   | (2,598   | )           |  |         |         |   |       |   |        |   |  |   | (2,598  | )
|Net loss                               |  |                                   |          |  |        |            |        |         |  |   |         |             |  |         |         |   |       |   | (9,112  | ) |  |   | (9,112  | )
|                                       |  |                                   |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  
|Balance, September 30, 2005            |  |                                   | 6,916,914 |  |        | $          | 69      |         |  | $ | 187,304  |             |  | $       | 9,735   |   |       | $ | (55,675 | ) |  | $ | 141,433 |  
|                                       |  |                                   |           |  |        |            |         |         |  |   |          |             |  |         |         |   |       |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                    |                                                                                     |                          |        |        |                    |   |         |        |        |  
|----------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------ | ------ | ------ | ------------------ | - | ------- | ------ | ------ | -
|                                                                                    |                                                                                     | Nine Months              |        |        | Nine Months        |  
|                                                                                    |                                                                                     | Ended                    |        |        | Ended              |  
|                                                                                    |                                                                                     | September 30, 2005       |        |        | September 30, 2004 |  
|                                                                                    |                                                                                     |                          |        |        |                    |  
|                                                                                    |                                                                                     | (In thousands)           |       
|                                                                                    |                                                                                     | (Unaudited)              |       
|Cash Flows From Operating Activities:                                               |                                                                                     |                          |        |        |                    |   |         |       
|                                                                                    | Net loss                                                                            |                          | $      | (9,112 | )                  |   | $       | (7,523 | )     
|                                                                                    | Adjustments to reconcile net loss to net cash provided by
    operating activities: |                          |        |        |                    |   |         |        |       
|                                                                                    | Depreciation and amortization                                                       |                          |        | 11,933 |                    |   |         | 11,019 |       
|                                                                                    | Gain on sale or disposal of assets                                                  |                          |        | (6     | )                  |   |         | (38    | )     
|                                                                                    | Provision for obligatory investments                                                |                          |        | 508    |                    |   |         | 887    |       
|                                                                                    | Changes in operating assets and liabilities:                                        |                          |        |        |                    |   |         |        |       
|                                                                                    |                                                                                     | Accounts receivable, net |        |        | 1,436              |   |         |        | 856    |  
|                                                                                    |                                                                                     | Other current assets     |        |        | (1,430             | ) |         |        |       |  
|                                                                                    |                                                                                     | Other non-current assets |        |        | 3,535              |   |         |        | 55     |  
|                                                                                    |                                                                                     | Accounts payable  trade |        |        | (3,419             | ) |         |        | (3,196 | )
|                                                                                    |                                                                                     | Accrued expenses         |        |        | 2,366              |   |         |        | 6,750  |  
|                                                                                    |                                                                                     | Other                    |        |        | 1,405              |   |         |        | (1,272 | )
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Net Cash Provided By Operating Activities                                           |                                                                                     |                          | 7,216  |        |                    |   | 7,538   |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Cash Flows From Investing Activities:                                               |                                                                                     |                          |        |        |                    |   |         |       
|                                                                                    | Acquisition of property and equipment                                               |                          |        | (3,044 | )                  |   |         | (9,393 | )     
|                                                                                    | Purchase of obligatory investments                                                  |                          |        | (1,738 | )                  |   |         | (1,720 | )     
|                                                                                    | Cash proceeds from sale of obligatory investments                                   |                          |        | 138    |                    |   |         | 210    |       
|                                                                                    | Cash proceeds from sale of property and equipment                                   |                          |        | 6      |                    |   |         | 38     |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Net Cash Used In Investing Activities                                               |                                                                                     |                          | (4,638 | )      |                    |   | (10,865 | )     
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Cash Flows From Financing Activities:                                               |                                                                                     |                          |        |        |                    |   |         |       
|                                                                                    | Proceeds from borrowing on line of credit                                           |                          |        | 3,000  |                    |   |         |       |       
|                                                                                    | Payments on line of credit                                                          |                          |        | (2,000 | )                  |   |         |       |       
|                                                                                    | Cash transferred from GB Holdings, Inc.                                             |                          |        |       |                    |   |         | 16,920 |       
|                                                                                    | Increase in related party payables                                                  |                          |        | 643    |                    |   |         |       |       
|                                                                                    | Proceeds from exercised warrants                                                    |                          |        | 21     |                    |   |         |       |       
|                                                                                    | Payments on capital lease obligation                                                |                          |        | (190   | )                  |   |         |       |       
|                                                                                    | Cost of issuing long-term debt                                                      |                          |        |       |                    |   |         | (6,626 | )     
|                                                                                    | Return of capital of GB Holdings, Inc.                                              |                          |        | (2,598 | )                  |   |         | (4,707 | )     
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Net Cash Used In Financing Activities                                               |                                                                                     |                          | (1,124 | )      |                    |   | 5,587   |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|                                                                                    | Net increase in cash and cash equivalents                                           |                          |        | 1,454  |                    |   |         | 2,260  |       
|                                                                                    | Cash and cash equivalents  beginning of period                                     |                          |        | 12,756 |                    |   |         | 16,904 |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Cash And Cash Equivalents  end of period                                           |                                                                                     | $                        | 14,210 |        |                    | $ | 19,164  |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Supplemental Disclosures of Cash Flow Information:                                  |                                                                                     |                          |        |        |                    |   |         |       
|Cash paid during the period for interest                                            |                                                                                     | $                        | 300    |        |                    | $ | 8,338   |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Interest Capitalized                                                                |                                                                                     | $                        |       |        |                    | $ | 83      |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Cash paid during the period for income taxes                                        |                                                                                     | $                        | 764    |        |                    | $ | 691     |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Exercise of warrants                                                                |                                                                                     | $                        | 33,852 |        |                    | $ |        |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Conversion of notes payable and accrued interest to common stock                    |                                                                                     | $                        | 29,519 |        |                    | $ |        |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Acquisition of equipment with a capital lease                                       |                                                                                     | $                        | 145    |        |                    | $ |        |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Assumption of net liabilities by GB Holdings in connection with
    the Transaction |                                                                                     | $                        |       |        |                    | $ | 68,359  |       
|                                                                                    |                                                                                     |                          |        |        |                    |  
|Issuance of 3% Notes in exchange for 11% Notes                                      |                                                                                     | $                        |       |        |                    | $ | 66,259  |       
|                                                                                    |                                                                                     |                          |        |        |                    |  



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




|        |            
|------- | -----------
|Note 1. | The Company













|        |                      
|------- | ---------------------
|Note 2. | Basis of Presentation



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (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
Consolidation






|        |                           
|------- | --------------------------
|Note 3. | Related Party Transactions



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)












|        |               
|------- | --------------
|Note 4. | Line of Credit









|        |                  
|------- | -----------------
|Note 5. | Legal Proceedings



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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARY


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)








|        |                                    
|------- | -----------------------------------
|Note 6. | Recoverability of Long-Lived Assets



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



The Transaction:     Transfer of
Assets to the Company














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OVERVIEW






|        |  |           |     |  |           |  |       |             |  |  |    | 
|------- |  | --------- | --- |  | --------- |  | ----- | ----------- |  |  | -- | 
|Casino  |  | Number of |     |  |           |  |      
|Square  |  | Hotel     |     |  | Number of |  |       | Number of   | 
|Footage |  | Rooms     |     |  | Slots     |  |       | Table Games | 
|        |  |           |     |  |           |  |       |             | 
|80,000  |  |           | 620 |  |           |  | 2,161 |             |  |  | 93 | 



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RESULTS OF OPERATIONS




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Three Months Ended September 30, 2005 Compared to
    Three Months Ended September 30, 2004

|                              |                                      |                          |      |      |      |   |     |          |      |  |        |       |     |  
|----------------------------- | ------------------------------------ | ------------------------ | ---- | ---- | ---- | - | --- | -------- | ---- |  | ------ | ----- | --- | -
|                              |                                      | Three Months             |      |      |     
|                              |                                      | Ended                    |      |      |     
|                              |                                      | September 30,            |      |      |     
|                              |                                      |                          |      |      |     
|                              |                                      | 2005                     |      |      | 2004 |   |     | % Change |     
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | (In millions)            |      |      |     
|INCOME STATEMENT DATA:        |                                      |                          |      |      |      |   |     |          |      |  |        |      
|Revenues:                     |                                      |                          |      |      |      |   |     |          |      |  |        |      
|                              | Casino                               |                          | $    | 39.4 |      |   | $   | 40.4     |      |  |        | (2.5  | )% 
|                              | Hotel                                |                          |      | 3.7  |      |   |     | 3.3      |      |  |        | 12.1  | %  
|                              | Food and beverage                    |                          |      | 7.2  |      |   |     | 5.7      |      |  |        | 26.3  | %  
|                              | Other                                |                          |      | 0.9  |      |   |     | 0.9      |      |  |        | 0.0   | %  
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Gross revenues           |      |      | 51.2 |   |     |          | 50.3 |  |        |       | 1.8 | %
|Less promotional allowances   |                                      |                          | 6.8  |      |      |   | 6.1 |          |      |  | 11.5   | %    
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Net revenues             |      |      | 44.4 |   |     |          | 44.2 |  |        |       | 0.5 | %
|Costs and expenses:           |                                      |                          |      |      |      |   |     |          |      |  |        |      
|                              | Casino                               |                          |      | 12.8 |      |   |     | 13.0     |      |  |        | (1.5  | )% 
|                              | Hotel                                |                          |      | 1.3  |      |   |     | 1.0      |      |  |        | 30.0  | %  
|                              | Food and beverage                    |                          |      | 2.6  |      |   |     | 1.9      |      |  |        | 36.8  | %  
|                              | Other operating expenses             |                          |      | 0.4  |      |   |     | 0.2      |      |  |        | 100.0 | %  
|                              | Selling, general and administrative  |                          |      | 24.3 |      |   |     | 23.2     |      |  |        | 4.7   | %  
|                              | Depreciation and amortization        |                          |      | 4.0  |      |   |     | 3.8      |      |  |        | 5.3   | %  
|                              | Provision for obligatory investments |                          |      | 0.3  |      |   |     | 0.3      |      |  |        | 0.0   | %  
|                              |                                      |                          |      |      |      |   |     |          |     
|                              |                                      | Total costs and expenses |      |      | 45.7 |   |     |          | 43.4 |  |        |       | 5.3 | %
|                              |                                      |                          |      |      |      |   |     |          |     
|Income (loss) from operations |                                      | $                        | (1.3 | )    |      | $ | 0.8 |          |      |  | (262.5 | )%   
|                              |                                      |                          |      |      |      |   |     |          |     



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



Casino Revenues




13



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Non-Casino Revenues






Promotional Allowances




Operating Expenses












Interest Expense




14



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| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Nine Months Ended September 30, 2005 Compared to Nine
    Months Ended September 30, 2004

|                              |                                      |                          |      |       |       |   |      |          |       |  |        |       |      |   
|----------------------------- | ------------------------------------ | ------------------------ | ---- | ----- | ----- | - | ---- | -------- | ----- |  | ------ | ----- | ---- | --
|                              |                                      | Nine Months              |      |       |      
|                              |                                      | Ended                    |      |       |      
|                              |                                      | September 30,            |      |       |      
|                              |                                      |                          |      |       |      
|                              |                                      | 2005                     |      |       | 2004  |   |      | % Change |      
|                              |                                      |                          |      |       |       |   |      |          |      
|                              |                                      | (In millions)            |      |       |      
|INCOME STATEMENT DATA:        |                                      |                          |      |       |       |   |      |          |       |  |        |      
|Revenues:                     |                                      |                          |      |       |       |   |      |          |       |  |        |      
|                              | Casino                               |                          | $    | 114.1 |       |   | $    | 119.7    |       |  |        | (4.7  | )%  
|                              | Hotel                                |                          |      | 8.9   |       |   |      | 8.3      |       |  |        | 7.2   | %   
|                              | Food and beverage                    |                          |      | 17.5  |       |   |      | 16.5     |       |  |        | 6.1   | %   
|                              | Other                                |                          |      | 2.6   |       |   |      | 2.8      |       |  |        | (7.1  | )%  
|                              |                                      |                          |      |       |       |   |      |          |      
|                              |                                      | Gross revenues           |      |       | 143.1 |   |      |          | 147.3 |  |        |       | (2.9 | )%
|Less promotional allowances   |                                      |                          | 17.8 |       |       |   | 17.6 |          |       |  | 1.1    | %    
|                              |                                      |                          |      |       |       |   |      |          |      
|                              |                                      | Net revenues             |      |       | 125.3 |   |      |          | 129.7 |  |        |       | (3.4 | )%
|Costs and expenses:           |                                      |                          |      |       |       |   |      |          |       |  |        |      
|                              | Casino                               |                          |      | 36.9  |       |   |      | 38.2     |       |  |        | (3.4  | )%  
|                              | Hotel                                |                          |      | 3.2   |       |   |      | 2.4      |       |  |        | 33.3  | %   
|                              | Food and beverage                    |                          |      | 6.0   |       |   |      | 6.0      |       |  |        | 0.0   | %   
|                              | Other operating expenses             |                          |      | 0.9   |       |   |      | 0.6      |       |  |        | 50.0  | %   
|                              | Selling, general and administrative  |                          |      | 69.4  |       |   |      | 67.0     |       |  |        | 3.6   | %   
|                              | Depreciation and amortization        |                          |      | 11.9  |       |   |      | 11.0     |       |  |        | 8.2   | %   
|                              | Provision for obligatory investments |                          |      | 0.5   |       |   |      | 0.9      |       |  |        | (44.4 | )%  
|                              |                                      |                          |      |       |       |   |      |          |      
|                              |                                      | Total costs and expenses |      |       | 128.8 |   |      |          | 126.1 |  |        |       | 2.1  | % 
|                              |                                      |                          |      |       |       |   |      |          |      
|Income (loss) from operations |                                      | $                        | (3.5 | )     |       | $ | 3.6  |          |       |  | (197.2 | )%   
|                              |                                      |                          |      |       |       |   |      |          |      

Gross Revenues




Casino Revenues




15



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Non-Casino Revenues








Promotional Allowances




Operating Expenses










Interest Expense




FINANCIAL CONDITION


Liquidity and Capital Resources




16



---



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Recoverability of Long-Lived Assets




17



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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.







|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk












|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures







18



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PART II.     OTHER
INFORMATION







|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings










|        |         
|------- | --------
|Item 6. | Exhibits

| |      |  |  |                                                                                                                
| | ---- |  |  | ---------------------------------------------------------------------------------------------------------------
| | 31.1 |  |  | Certification of Principal Executive Officer, pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.
| | 31.2 |  |  | Certification of Principal Financial Officer, pursuant to
    Section 302(a) 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.          

19



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SIGNATURES






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



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EXHIBITS INDEX


|            |    |             |  |                                                                                                                
|----------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 31 | .1          |  | Certification of Principal Executive Officer, pursuant to
    Section 302(a) of the Sarbanes-Oxley Act of 2002.
|            | 31 | .2          |  | Certification of Principal Financial Officer, pursuant to
    Section 302(a) 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.