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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2007
 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.
  DELAWARE
    
    54-2131349(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)c/o Stratosphere Casino Hotel & Tower 
2000 Las Vegas Boulevard SouthLas Vegas, NV
(Address of registrants principal executive offices)
    
    89104
(Zip Code)
 (702) 380-7777  )
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
  o o þ
 o þ
  Registrant
    
    Class
    
    Outstanding at May 14, 2007Atlantic Coast Entertainment
Holdings, Inc.
    
    Common stock, $0.01 par value
    
    9,678,806 shares




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TABLE OF CONTENTS
 PagePart I Financial InformationItem 1. Unaudited Condensed Consolidated Financial Statements
    
    
    2Condensed Consolidated Balance Sheets as of March 31, 2007
(unaudited) and December 31, 2006
    
    
    2Condensed Consolidated Statements of Income for the three months ended
March 31, 2007 and March 31, 2006 (unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three months
ended
March 31, 2007 and March 31, 2006 (unaudited)
    
    
    4Condensed Consolidated Statements of Shareholders Equity as of
December 31, 2006 and for the three months ended March 31, 2007
(unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    13Item 4. Controls and Procedures
    
    
    14Part II Other InformationItem 1. Legal Proceedings
    
    
    15Item 1A. Risk Factors
    
    
    15Item 4. Submission of Matters to a Vote of Security Holders
    
    
    15Item 6. Exhibits
    
    
    16EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION
  1




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PART I. FINANCIAL INFORMATION
 
 Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 As ofMarch 31, 2007
    
    
    December 31, 2006(Unaudited)(in thousands, except share data)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    9,010
    
    
    $
    1,258Restricted Cash
    
    
    203,311
    
    
    
    200,515Deferred tax asset  current
    
    
    3,641
    
    
    
    3,641Other current assets
    
    
    210
    
    
    
    439Total current assets
    
    
    216,172
    
    
    
    205,853Other assets:Deferred tax asset  non-current
    
    
    8,918
    
    
    
    12,617Total other assets
    
    
    8,918
    
    
    
    12,617Total Assets
    
    $
    225,090
    
    
    $
    218,470LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    132
    
    
    $
    347Accounts payable-related party and accrued expenses
    
    
    150
    
    
    
    352Total current liabilities:
    
    
    282
    
    
    
    699Total Liabilities
    
    
    282
    
    
    
    699Commitments and ContingenciesShareholders Equity:Common stock, $0.01 par value
per share; 20,000,000 shares authorized;
9,523,624 and 9,389,860 shares outstanding
    
    
    95
    
    
    
    94Additional paid-in capital
    
    
    229,312
    
    
    
    227,192Warrants outstanding
    
    
    7,549
    
    
    
    9,669Accumulated deficit
    
    
    (12,148
    )
    
    
    (19,184
    )Total shareholders equity
    
    
    224,808
    
    
    
    217,771Total Liabilities and Shareholders Equity
    
    $
    225,090
    
    
    $
    218,470
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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006(Unaudited)(In thousands, except share data)Revenues:Casino
    
    $
    
    
    
    $
    37,350Hotel
    
    
    
    
    
    
    2,888Food and beverage
    
    
    
    
    
    
    4,405Other income
    
    
    
    
    
    
    538Gross Revenues
    
    
    
    
    
    
    45,181Less promotional allowances
    
    
    
    
    
    
    4,408Net Revenues
    
    
    
    
    
    
    40,773Costs and Expenses (Income):Casino
    
    
    
    
    
    
    11,358Hotel
    
    
    
    
    
    
    1,228Food and beverage
    
    
    
    
    
    
    2,077Other operating expenses
    
    
    
    
    
    
    231Selling, general and administrative
    
    
    (8,259
    )
    
    
    21,112Depreciation and amortization
    
    
    
    
    
    
    3,823Provision for obligatory investments
    
    
    
    
    
    
    368Total Costs and Expenses
    
    
    (8,259
    )
    
    
    40,197Income From Operations
    
    
    8,259
    
    
    
    576Other Income (Expense):Interest income
    
    
    2,566
    
    
    
    203Interest expense
    
    
    
    
    
    
    (658
    )Total other expense, net
    
    
    2,566
    
    
    
    (455
    )Income Before Income Taxes
    
    
    10,825
    
    
    
    121Provision for income taxes
    
    
    3,789
    
    
    
    252Net Income (Loss)
    
    $
    7,036
    
    
    $
    (131
    )Income (loss) per common share  basic
    
    $
    0.75
    
    
    $
    (0.02
    )Income (loss) per common share  diluted
    
    $
    0.70
    
    
    $
    (0.02
    )Weighted average common shares outstanding
    
    
    9,408,002
    
    
    
    6,916,914Fully diluted shares outstanding
    
    
    10,000,000
    
    
    
    6,916,914
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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31, 2007
    
    
    March 31, 2006(Unaudited)(In thousands)Cash Flows From Operating Activities:Net income (loss)
    
    $
    7,036
    
    
    $
    (131
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    
    
    
    
    3,823Provision for obligatory investments
    
    
    
    
    
    
    368Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    (587
    )Deferred income taxes
    
    
    3,699
    
    
    
    Other assets
    
    
    229
    
    
    
    1,494Accounts payable and accrued expenses
    
    
    (426
    )
    
    
    124Other liabilities
    
    
    
    
    
    
    327Net Cash Provided By Operating Activities
    
    
    10,538
    
    
    
    5,418Cash Flows From Investing Activities:Acquisition of property and equipment
    
    
    
    
    
    
    (552
    )Purchase of obligatory investments
    
    
    
    
    
    
    (470
    )Proceeds from sale of obligatory investments
    
    
    
    
    
    
    83Increase in restricted cash
    
    
    (2,796
    )
    
    
    Net Cash Used In Investing Activities
    
    
    (2,796
    )
    
    
    (939
    )Cash Flows From Financing Activities:Proceeds from borrowing on line of credit
    
    
    
    
    
    
    1,000Payments on line of credit
    
    
    
    
    
    
    (2,500
    )Increase in related party payables
    
    
    9
    
    
    
    60Payments on notes payable
    
    
    
    
    
    
    (682
    )Proceeds from sale of stock
    
    
    1
    
    
    
    Payments on capital lease obligation
    
    
    
    
    
    
    (77
    )Net Cash Provided By (Used In) Financing Activities
    
    
    10
    
    
    
    (2,199
    )Net increase in cash and cash equivalents
    
    
    7,752
    
    
    
    2,280Cash and cash equivalents  beginning of period
    
    
    1,258
    
    
    
    13,711Cash And Cash Equivalents  end of period
    
    $
    9,010
    
    
    $
    15,991Supplemental Disclosures of Cash Flow Information:Cash paid during the period for interest, net of amounts capitalized
    
    $
    
    
    
    $
    55Cash paid during the period for income taxes
    
    $
    3,000
    
    
    $
    88Non-cash Investing and Financing Activities:Exercise of warrants
    
    $
    2,120
    
    
    $
    
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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, 2006
    
    
    9,389,860
    
    
    $
    94
    
    
    $
    227,192
    
    
    $
    9,669
    
    
    $
    (19,184
    )
    
    $
    217,771Exercise of warrants
    
    
    133,764
    
    
    
    1
    
    
    
    2,120
    
    
    
    (2,120
    )
    
    
    
    
    
    
    1Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,036
    
    
    
    7,036Balance, March 31, 2007
    
    
    9,523,624
    
    
    $
    95
    
    
    $
    229,312
    
    
    $
    7,549
    
    
    $
    (12,148
    )
    
    $
    224,808
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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 Note 1. The Company
   Note 2. Sale of ACE Gaming
   Note 3. Basis of Presentation
   6




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Principles of Consolidation
  Recently Issued Accounting Pronouncements
     Note 4. Related Party Transactions
     7




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Note 5. Commitments and Contingencies
 Legal Proceedings
     8




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Note 6. Income Taxes
     Note 7. Earnings (Loss) per Share
    9




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Three Months Ended March 31,2007
    
    
    2006(Unaudited)(In thousands, except share data)Basic earnings (loss) per share:Net income (loss)
    
    $
    7,036
    
    
    $
    (131
    )Weighted average commmon shares outstanding
    
    
    9,408,002
    
    
    
    6,916,914Net income (loss) per share
    
    $
    0.75
    
    
    $
    (0.02
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    7,036
    
    
    $
    (131
    )Weighted average commmon shares outstanding
    
    
    9,408,002
    
    
    
    6,916,914Dilutive shares resluting from exercise of warrants
    
    
    591,998
    
    
    
    Weighted average shares and common stock equivalents outstanding
    
    
    10,000,000
    
    
    
    6,916,914Net income (loss) per share
    
    $
    0.70
    
    
    $
    (0.02
    )
 10




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     11




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Results of Operations
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
 Three Months EndedMarch 31,2007
    
    2006
    
    % Change(In millions)INCOME STATEMENT DATA:Gross revenues
    
    $
    
    
    
    $
    45.2
    
    
    
    -100.0
    %Income from operations
    
    
    8.3
    
    
    
    0.6
    
    
    
    1283.3
    %
    Financial Condition
 Liquidity and Capital Resources
      12




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Recently Issued Accounting Pronouncements
     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
   13




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Item 4. Controls and Procedures
    14




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Part II. Other Information
 
 Item 1. Legal Proceedings
     
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  15




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Item 6. Exhibits
  16




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Signatures
  Atlantic Coast Entertainment
Holdings, Inc./s/  Denise BartonDenise BartonChief Financial Officer  17




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Exhibits Index
 ExhibitNo.
    
    Description31.1
    
    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.
 18