##### 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 1934For the quarterly period ended
    September 30, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For 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

08401(Zip Code)(Address of registrants
    principal executive offices)   (609) 441-4633
 (Registrants telephone
    number, including area
    code )
   (Former name, former address and
    former fiscal year, if changed since last report)
  þ o
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
    Registrant

Class

Outstanding at November 6, 2006Atlantic Coast Entertainment
    Holdings, Inc.

Common stock, $
0.01 par value



9,389,723 shares




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##### 



TABLE OF
    CONTENTS
  
  PagePart I


FINANCIAL
    INFORMATIONItem 1.


Unaudited Condensed
    Consolidated Financial Statements


2Condensed
    Consolidated Balance Sheets as of September 30, 2006
    (unaudited) and December 31, 2005


2Condensed
    Consolidated Statements of Income for the three months ended
    September 30, 2006 and September 30, 2005
    (unaudited)


3Condensed
    Consolidated Statements of Income for the nine months ended
    September 30, 2006 and September 30, 2005
    (unaudited)


4Condensed
    Consolidated Statements of Cash Flows for the nine months ended
    September 30, 2006 and September 30, 2005
    (unaudited)


5Condensed
    Consolidated Statements of Shareholders Equity as of
    December 31, 2005 and for the nine months ended
    September 30, 2006 (unaudited)


6Notes to Condensed
    Consolidated Financial Statements (unaudited)


7Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


11Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


17Item 4.


Controls and
    Procedures


17Part II


OTHER
    INFORMATIONItem 1.


Legal
    Proceedings


18Item 1A.


Risk
    Factors


18Item 4.


Submission of
    Matters to a Vote of Security Holders


18Item 6.


Exhibits


18EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-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.
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
  As of


As ofSeptember 30, 2006


December 31, 2005(Unaudited)(In thousands, except share data)ASSETSCurrent Assets:Cash and cash equivalents

$
19,931


$
13,711Accounts receivable, net


3,595



3,745Deferred income taxes


16,138



Other current assets


7,433



10,170Total Current Assets


47,097



27,626Property and equipment, net


154,537



160,603Obligatory investments, net


13,530



12,929Deferred income taxes


11,939



Deferred financing costs and other
    assets


980



3,510Total Other Assets


26,449



16,439TOTAL ASSETS

$
228,083


$
204,668LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent Liabilities:Line of credit

$



$
1,500Accounts payable


2,628



3,746Related party payable


188



559Accrued expenses


8,775



7,940Accrued payroll and related
    expenses


17,132



6,798Note payable






2,048Current portion of capital lease
    obligation


280



310Total Current Liabilities


29,003



22,901Long-Term Liabilities:Long-term debt, less current
    portion






37,459Capital lease obligations, less
    current portion


37



251Other


4,434



5,965Total Long-Term Liabilities


4,471



43,675Total Liabilities


33,474



66,576Commitments and ContingenciesShareholders Equity:Common stock; $0.01 par
    value; 20,000,000 shares authorized; 9,389,723 and
    6,916,914 shares outstanding


94



69Additional paid-in capital


227,188



187,304Warrants outstanding


9,673



9,735Accumulated deficit


(42,346
)


(59,016
)Total Shareholders Equity


194,609



138,092TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
228,083


$
204,668    2




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME
  Three Months EndedSeptember 30, 2006


September 30, 2005(Unaudited)(In thousands, except share data)REVENUES:Casino

$
37,345


$
39,373Hotel


3,836



3,705Food and beverage


5,500



7,225Other income


547



923Gross Revenues


47,228



51,226Less promotional allowances


5,663



6,768Net Revenues


41,565



44,458COSTS AND EXPENSES:Casino


11,325



12,815Hotel


1,189



1,334Food and beverage


2,066



2,549Other operating expenses


185



436Selling, general and administrative


34,669



24,346Depreciation and amortization


2,534



4,026Provision for obligatory
    investments


237



295Gain on sale of assets


(2
)


(1
)Total Costs and Expenses


52,203



45,800LOSS FROM OPERATIONS


(10,638
)


(1,342
)OTHER INCOME (EXPENSE):Interest income


308



166Interest expense


(471
)


(739
)Total other expense, net


(163
)


(573
)LOSS BEFORE INCOME TAXES


(10,801
)


(1,915
)Provision (benefit) for income
    taxes


(27,900
)


266NET INCOME (LOSS)

$
17,099


$
(2,181
)Basic/diluted income (loss) per
    common share

$
2.24


$
(0.32
)Weighted average common shares
    outstanding


7,617,676



6,916,892    3




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME
  Nine Months EndedSeptember 30, 2006


September 30, 2005(Unaudited)(In thousands, except share data)REVENUES:Casino

$
112,299


$
114,091Hotel


10,121



8,889Food and beverage


14,651



17,506Other income


1,685



2,616Gross Revenues


138,756



143,102Less promotional allowances


14,762



17,756Net Revenues


123,994



125,346COSTS AND EXPENSES:Casino


34,419



36,837Hotel


3,770



3,226Food and beverage


6,522



5,999Other operating expenses


586



895Selling, general and administrative


77,446



69,434Depreciation and amortization


10,159



11,933Provision for obligatory
    investments


870



508Gain on sale of assets


(51
)


(6
)Total Costs and Expenses


133,721



128,826LOSS FROM OPERATIONS


(9,727
)


(3,480
)OTHER INCOME (EXPENSE):Interest income


776



420Interest expense


(1,773
)


(5,265
)Debt restructuring costs






(23
)Total other expense, net


(997
)


(4,868
)LOSS BEFORE INCOME TAXES


(10,724
)


(8,348
)Provision (benefit) for income
    taxes


(27,394
)


764NET INCOME (LOSS)

$
16,670


$
(9,112
)Basic/diluted income (loss) per
    common share

$
2.33


$
(1.86
)Weighted average common shares
    outstanding


7,154,128



4,892,004    4




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine Months EndedSeptember 30, 2006


September 30, 2005(Unaudited)(In thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income (loss)

$
16,670


$
(9,112
)Adjustments to reconcile net
    income (loss) to net cash provided by operating activities:Depreciation and amortization


10,159



11,933Gain on sale of assets


(51
)


(6
)Provision for obligatory
    investments


870



508Changes in operating assets and
    liabilities:Accounts receivable, net


150



1,436Deferred income taxes


(28,077
)


Other assets


3,473



2,105Accounts payable and accrued
    expenses


10,051



(1,053
)Other liabilities


896



1,405Net Cash Provided By Operating
    Activities


14,141



7,216CASH FLOWS FROM INVESTING
    ACTIVITIES:Acquisition of property and
    equipment


(3,938
)


(3,044
)Purchase of obligatory investments


(39
)


(1,738
)Proceeds from sale of obligatory
    investments


168



138Proceeds from sale of property and
    equipment


51



6Net Cash Used In Investing
    Activities


(3,758
)


(4,638
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Proceeds from borrowing on line of
    credit






3,000Payments on line of credit


(1,500
)


(2,000
)Payments on notes payable


(2,048
)


Increase (decrease) in related
    party payables


(371
)


643Payments on capital lease
    obligation


(244
)


(190
)Proceeds from exercised warrants






21Return of capital of GB Holdings,
    Inc.






(2,598
)Net Cash Used In Financing
    Activities


(4,163
)


(1,124
)Net increase in cash and cash
    equivalents


6,220



1,454Cash and cash
    equivalents  beginning of period


13,711



12,756Cash And Cash
    Equivalents  end of period

$
19,931


$
14,210SUPPLEMENTAL DISCLOSURES OF CASH
    FLOW INFORMATION:Cash paid during the period for
    interest, net of amounts capitalized

$
75


$
300Cash paid during the period for
    income taxes

$
867


$
764NON-CASH INVESTING AND FINANCING
    ACTIVITIES:Exercise of warrants

$
62


$
33,852Purchase of equipment with capital
    lease

$



$
145Conversion of notes payable and
    accrued interest to common stock

$
39,847


$
29,519    5




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.



CONDENSED
    CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY  AdditionalCommon





Paid-In





AccumulatedShares


Amount


Capital


Warrants


Deficit


Total(In thousands, except share data)BALANCE, DECEMBER 31, 2005


6,916,914


$
69


$
187,304


$
9,735


$
(59,016
)

$
138,092Conversion of 3% notes


2,468,884



25



39,822











39,847Exercise of warrants


3,925







62



(62
)






Net income


















16,670



16,670BALANCE, SEPTEMBER 30, 2006


9,389,723


$
94


$
227,188


$
9,673


$
(42,346
)

$
194,609    6




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Note 1.
    The
    Company      Note 2.
    Sale of
    ACE Gaming              Note 3.
    Basis of
    Presentation  Form 10-K
 7




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 333-110484).
    Principles
    of Consolidation
    Recently
    Issued Accounting Pronouncements
        Note 4.
    Related
    Party Transactions   8




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  out-of-pocket
            Note 5.
    Line of
    Credit   9




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ATLANTIC
    COAST ENTERTAINMENT HOLDINGS, INC.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Note 6.
    Commitments
    and Contingencies  Legal
    Proceedings
        Note 7.
    Income
    Taxes     10




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
  Overview
      Number ofCasino

Hotel

Number of

Number ofSquare Footage

Rooms

Slots

Table Games80,000

620

1,997

84              11




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##### Table of Contents



Results
    of Operations
  Three
    Months Ended September 30, 2006 Compared to Three Months
    Ended September 30, 2005
  Three Months EndedSeptember 30,2006


2005


% Change(in millions)INCOME STATEMENT
    DATA:Revenues:Casino

$
37.3


$
39.4



(5.3
)%Hotel


3.9



3.7



5.4
%Food and beverage


5.5



7.2



(23.6
)%Other


0.5



0.9



(44.4
)%Gross revenues


47.2



51.2



(7.8
)%Less promotional allowances


5.6



6.8



(17.6
)%Net revenues


41.6



44.4



(6.3
)%Costs and expenses:Casino


11.3



12.8



(11.7
)%Hotel


1.2



1.3



(7.7
)%Food and beverage


2.1



2.6



(19.2
)%Other operating expenses


0.2



0.4



(50.0
)%Selling, general and administrative


34.7



24.3



42.8
%Depreciation and amortization


2.5



4.0



(37.5
)%Provision for obligatory
    investments


0.2



0.3



(33.3
)%Total costs and expenses


52.2



45.7



14.2
%Income (loss) from operations

$
(10.6
)

$
(1.3
)


(715.4
)%   Gross
    Revenues
    Casino
    Revenues
    Non-Casino
    Revenues
   12




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Promotional
    Allowances
    Operating
    Expenses
              Interest
    Expense
   13




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##### Table of Contents



Nine
    Months Ended September 30, 2006 Compared to Nine Months
    Ended September 30, 2005
  Nine MonthsEndedSeptember 30,2006


2005


% Change(in millions)INCOME STATEMENT
    DATA:Revenues:Casino

$
112.3


$
114.1



(1.6
)%Hotel


10.1



8.9



13.5
%Food and beverage


14.7



17.5



(16.0
)%Other


1.7



2.6



(34.6
)%Gross revenues


138.8



143.1



(3.0
)%Less promotional allowances


14.8



17.8



(16.9
)%Net revenues


124.0



125.3



(1.0
)%Costs and expenses:Casino


34.4



36.9



(6.8
)%Hotel


3.8



3.2



18.8
%Food and beverage


6.5



6.0



8.3
%Other operating expenses


0.6



0.9



(33.3
)%Selling, general and administrative


77.3



69.4



11.4
%Depreciation and amortization


10.2



11.9



(14.3
)%Provision for obligatory
    investments


0.9



0.5



80.0
%Total costs and expenses


133.7



128.8



3.8
%Income (loss) from operations

$
(9.7
)

$
(3.5
)


(177.1
)%   Gross
    Revenues
    Casino
    Revenues
    Non-Casino
    Revenues
     14




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##### Table of Contents



Promotional
    Allowances
    Operating
    Expenses
              Interest
    Expense
    Financial
    Condition
  Liquidity
    and Capital Resources
   15




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Recently
    Issued Accounting Pronouncements
       16




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##### Table of Contents



Forward
    Looking Statements
  Form 10-K
  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  Rule 13a-15(e) 15d-15(e).
     17




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##### Table of Contents



Part II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings         Item 1A.
    Risk
    Factors  Form 10-K Form 10-K,
  We are
    in the process of closing The Sands.
     Item 4.
    Submission
    of Matters to a Vote of Security Holders           Item 6.
    Exhibits  Regulation S-K
 18




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SIGNATURES
    
  
       19




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##### Table of Contents



EXHIBITS INDEX
  ExhibitNo.

Description10
.1

Acquisition Agreement, dated as of
    September 3, 2006 by and among Pinnacle Entertainment,
    Inc., Atlantic Coast Entertainment Holding, Inc., ACE Gaming,
    LLC, American Real Estate Holdings Limited Partnership, AREP
    Boardwalk Properties LLC, PSW Properties LLC, AREH MLK LLC and
    Mitre Associates LLC (incorporated by reference to
    Exhibit 2.1 to Atlantic Coast Entertainment Holdings,
    Inc.s
    Form 8-K
    (SEC File
    No. 333-110484),
    filed on September 6, 2006).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.