##### Table of Contents



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 June 30, 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
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)c/o Stratosphere Casino Hotel & Tower2000 Las Vegas Boulevard SouthLas Vegas, NV
    
    89104(Address of registrants principal executive offices)
    
    (Zip Code)
 (702) 380-7777  )
 
  þ o
  o o þ
 o þ
  Registrant
    
    Class
    
    Outstanding at August 14, 2007Atlantic Coast Entertainment
    
    Common stock, $0.01 par value
    
    9,967,087 sharesHoldings, Inc.




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TABLE OF CONTENTS
 PagePart I            Financial Information
    
    2Item 1. Unaudited Condensed Consolidated Financial Statements
    
    2Condensed Consolidated Balance Sheets as of June 30, 2007
(unaudited) and December 31, 2006
    
    2Condensed Consolidated Statements of Income for the three months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    3Condensed Consolidated Statements of Income for the six months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    4Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2007 and June 30, 2006 (unaudited)
    
    5Condensed Consolidated Statements of Shareholders Equity as of
December 31, 2006 and for the six months ended June 30, 2007
(unaudited)
    
    6Notes to Condensed Consolidated Financial Statements (unaudited)
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    15Item 4. Controls and Procedures
    
    15Part II            Other Information
    
    17Item 1. Legal Proceedings
    
    17Item 1A. Risk Factors
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    17Item 6. Exhibits
    
    17EX-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 ofJune 30, 2007
    
    
    December 31, 2006(Unaudited)(in thousands, except share data)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    9,050
    
    
    $
    1,258Restricted Cash
    
    
    205,943
    
    
    
    200,515Deferred tax asset  current
    
    
    3,641
    
    
    
    3,641Other current assets
    
    
    31
    
    
    
    439Total current assets
    
    
    218,665
    
    
    
    205,853Other assets:Deferred tax asset  non-current
    
    
    8,153
    
    
    
    12,617Total other assets
    
    
    8,153
    
    
    
    12,617Total Assets
    
    $
    226,818
    
    
    $
    218,470LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    23
    
    
    $
    347Accounts payable-related party and accrued expenses
    
    
    271
    
    
    
    352Total current liabilities:
    
    
    294
    
    
    
    699Total Liabilities
    
    
    294
    
    
    
    699Commitments and ContingenciesShareholders Equity:Common stock, $0.01 par value per share; 20,000,000
shares authorized;
9,967,087 and 9,389,860 shares outstanding
    
    
    100
    
    
    
    94Additional paid-in capital
    
    
    236,861
    
    
    
    227,192Warrants outstanding
    
    
    
    
    
    
    9,669Accumulated deficit
    
    
    (10,437
    )
    
    
    (19,184
    )Total shareholders equity
    
    
    226,524
    
    
    
    217,771Total Liabilities and Shareholders Equity
    
    $
    226,818
    
    
    $
    218,470
  2




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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Three Months EndedJune 30, 2007
    
    
    June 30, 2006(Unaudited)(In thousands, except share data)Revenues:Casino
    
    $
    
    
    
    $
    37,604Hotel
    
    
    
    
    
    
    3,397Food and beverage
    
    
    
    
    
    
    4,746Other income
    
    
    
    
    
    
    600Gross Revenues
    
    
    
    
    
    
    46,347Less promotional allowances
    
    
    
    
    
    
    4,691Net Revenues
    
    
    
    
    
    
    41,656Costs and Expenses (Income):Casino
    
    
    
    
    
    
    11,736Hotel
    
    
    
    
    
    
    1,353Food and beverage
    
    
    
    
    
    
    2,379Other operating expenses
    
    
    
    
    
    
    170Selling, general and administrative
    
    
    285
    
    
    
    21,665Depreciation and amortization
    
    
    
    
    
    
    3,802Provision for obligatory investments
    
    
    
    
    
    
    265Gain on sale of assets
    
    
    (345
    )
    
    
    (49
    )Total Costs and Expenses
    
    
    (60
    )
    
    
    41,321Income From Operations
    
    
    60
    
    
    
    335Other Income (Expense):Interest income
    
    
    2,625
    
    
    
    265Interest expense
    
    
    
    
    
    
    (644
    )Total other expense, net
    
    
    2,625
    
    
    
    (379
    )Income (Loss) Before Income Taxes
    
    
    2,685
    
    
    
    (44
    )Provision for income taxes
    
    
    974
    
    
    
    254Net Income (Loss)
    
    $
    1,711
    
    
    $
    (298
    )Income (loss) per common share  basic
    
    $
    0.18
    
    
    $
    (0.04
    )Income (loss) per common share  diluted
    
    $
    0.17
    
    
    $
    (0.04
    )Weighted average common shares outstanding
    
    
    9,696,470
    
    
    
    6,916,914Fully diluted shares outstanding
    
    
    9,967,087
    
    
    
    6,916,914
  3




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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 Six Months EndedJune 30, 2007
    
    
    June 30, 2006(Unaudited)(In thousands, except share data)Revenues:Casino
    
    $
    
    
    
    $
    74,954Hotel
    
    
    
    
    
    
    6,285Food and beverage
    
    
    
    
    
    
    9,151Other income
    
    
    
    
    
    
    1,138Gross Revenues
    
    
    
    
    
    
    91,528Less promotional allowances
    
    
    
    
    
    
    9,099Net Revenues
    
    
    
    
    
    
    82,429Costs and Expenses (Income):Casino
    
    
    
    
    
    
    23,094Hotel
    
    
    
    
    
    
    2,581Food and beverage
    
    
    
    
    
    
    4,456Other operating expenses
    
    
    
    
    
    
    401Selling, general and administrative
    
    
    (7,974
    )
    
    
    42,777Depreciation and amortization
    
    
    
    
    
    
    7,625Provision for obligatory investments
    
    
    
    
    
    
    633Gain on sale of assets
    
    
    (345
    )
    
    
    (49
    )Total Costs and Expenses
    
    
    (8,319
    )
    
    
    81,518Income From Operations
    
    
    8,319
    
    
    
    911Other Income (Expense):Interest income
    
    
    5,191
    
    
    
    468Interest expense
    
    
    
    
    
    
    (1,302
    )Total other expense, net
    
    
    5,191
    
    
    
    (834
    )Income Before Income Taxes
    
    
    13,510
    
    
    
    77Provision for income taxes
    
    
    4,763
    
    
    
    506Net Income (Loss)
    
    $
    8,747
    
    
    $
    (429
    )Income (loss) per common share  basic
    
    $
    0.92
    
    
    $
    (0.06
    )Income (loss) per common share  diluted
    
    $
    0.88
    
    
    $
    (0.06
    )Weighted average common shares outstanding
    
    
    9,553,987
    
    
    
    6,916,914Fully diluted shares outstanding
    
    
    9,967,087
    
    
    
    6,916,914
  4




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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30, 2007
    
    
    June 30, 2006(Unaudited)(In thousands)Cash Flows From Operating Activities:Net income (loss)
    
    $
    8,747
    
    
    $
    (429
    )Adjustments to reconcile net income (loss) to net cash provided
by operating activities:Depreciation and amortization
    
    
    
    
    
    
    7,625Gain on sale of assets held for sale
    
    
    (345
    )
    
    
    (49
    )Provision for obligatory investments
    
    
    
    
    
    
    633Changes in operating assets and liabilities:Accounts receivable, net
    
    
    
    
    
    
    (915
    )Deferred income taxes
    
    
    4,464
    
    
    
    Other assets
    
    
    237
    
    
    
    1,585Accounts payable and accrued expenses
    
    
    (325
    )
    
    
    1,579Other liabilities
    
    
    
    
    
    
    651Net Cash Provided By Operating Activities
    
    
    12,778
    
    
    
    10,680Cash Flows From Investing Activities:Acquisition of property and equipment
    
    
    
    
    
    
    (3,129
    )Purchase of obligatory investments
    
    
    
    
    
    
    (1,020
    )Proceeds from sale of obligatory investments
    
    
    
    
    
    
    87Proceeds from sale of property and equipment
    
    
    
    
    
    
    49Proceeds from sale of assets held for sale
    
    
    930
    
    
    
    Purchase price adjustment on sale of The Sands
    
    
    (414
    )
    
    
    Increase in restricted cash
    
    
    (5,428
    )
    
    
    Net Cash Used In Investing Activities
    
    
    (4,912
    )
    
    
    (4,013
    )Cash Flows From Financing Activities:Proceeds from borrowing on line of credit
    
    
    
    
    
    
    1,000Payments on line of credit
    
    
    
    
    
    
    (2,500
    )Decrease in related party payables
    
    
    (80
    )
    
    
    (436
    )Payments on notes payable
    
    
    
    
    
    
    (1,365
    )Proceeds from sale of stock
    
    
    6
    
    
    
    Payments on capital lease obligation
    
    
    
    
    
    
    (167
    )Net Cash Used In Financing Activities
    
    
    (74
    )
    
    
    (3,468
    )Net increase in cash and cash equivalents
    
    
    7,792
    
    
    
    3,199Cash and cash equivalents  beginning of period
    
    
    1,258
    
    
    
    13,711Cash And Cash Equivalents  end of period
    
    $
    9,050
    
    
    $
    16,910Supplemental Disclosures of Cash Flow Information:Cash paid during the period for interest, net of amounts capitalized
    
    $
    
    
    
    $
    61Cash paid during the period for income taxes
    
    $
    300
    
    
    $
    339Non-cash Investing and Financing Activities:Exercise of warrants
    
    $
    9,147
    
    
    $
    Cancellation of warrants
    
    $
    522
    
    
    $
    
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ATLANTIC COAST ENTERTAINMENT HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
 Six Months Ended June 30, 2007
(Unaudited)
 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
    
    
    577,227
    
    
    
    6
    
    
    
    9,147
    
    
    
    (9,147
    )
    
    
    
    
    
    
    6Cancellation of warrants
    
    
    
    
    
    
    
    
    
    
    522
    
    
    
    (522
    )
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,747
    
    
    
    8,747Balance, June 30, 2007
    
    
    9,967,087
    
    
    $
    100
    
    
    $
    236,861
    
    
    $
    
    
    
    $
    (10,437
    )
    
    $
    226,524
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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
   7




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Principles of Consolidation
  Recently Issued Accounting Pronouncements
      Note 4. Related Party Transactions
  8




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Note 5. Commitments and Contingencies
 Legal Proceedings
   Note 6. Income Taxes
  9




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Note 7. Earnings (Loss) per Share
     10




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Unaudited)
    
    
    (Unaudited)(In thousands, except share data)Basic earnings (loss) per share:Net income (loss)
    
    $
    1,711
    
    
    $
    (298
    )
    
    $
    8,747
    
    
    $
    (429
    )Weighted average commmon shares outstanding
    
    
    9,696,470
    
    
    
    6,916,914
    
    
    
    9,553,987
    
    
    
    6,916,914Net income (loss) per share
    
    $
    0.18
    
    
    $
    (0.04
    )
    
    $
    0.92
    
    
    $
    (0.06
    )Diluted earnings (loss) per share:Net income (loss)
    
    $
    1,711
    
    
    $
    (298
    )
    
    $
    8,747
    
    
    $
    (429
    )Weighted average commmon shares outstanding
    
    
    9,696,470
    
    
    
    6,916,914
    
    
    
    9,553,987
    
    
    
    6,916,914Dilutive shares resulting from exercise of warrants
    
    
    270,617
    
    
    
    
    
    
    
    413,100
    
    
    
    Weighted average shares and common stock equivalents outstanding
    
    
    9,967,087
    
    
    
    6,916,914
    
    
    
    9,967,087
    
    
    
    6,916,914Net income (loss) per share
    
    $
    0.17
    
    
    $
    (0.04
    )
    
    $
    0.88
    
    
    $
    (0.06
    )
 11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
     12




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Results of Operations
 Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006
 Three Months EndedJune 30,2007
    
    2006
    
    % Change(In millions)INCOME STATEMENT DATA:Net revenues
    
    $
    
    
    
    $
    41.7
    
    
    
    -100.0
    %Income from operations
    
    
    0.1
    
    
    
    0.3
    
    
    
    -66.7
    %
    Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006
 Six Months EndedJune 30,2007
    
    2006
    
    % Change(In millions)INCOME STATEMENT DATA:Net revenues
    
    $
    
    
    
    $
    82.4
    
    
    
    -100.0
    %Income from operations
    
    
    8.3
    
    
    
    0.9
    
    
    
    822.2
    %
    Financial Condition
 Liquidity and Capital Resources
  13




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Recently Issued Accounting Pronouncements
   14




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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
  15




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Part II. Other Information
 
 Item 1. Legal Proceedings
   
 Item 1A. Risk Factors
  Item 1B. Unresolved Staff Comments
   
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
  17




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Signatures
  Atlantic Coast Entertainment
Holdings, Inc./s/     Denise BartonDenise BartonChief Financial Officer  18




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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.
 19