~~Condensed Consolidated Statements of Income for the~~

~~three months ended March 31, 2007 and 2006 (unaudited)~~ 4

~~Condensed Consolidated Balance Sheets at~~

~~March 31, 2007 (unaudited) and December 31, 2006~~ 5

~~Condensed Consolidated Statements of Cash Flows for the~~

~~three months ended March 31, 2007 and 2006 (unaudited)~~ 6

~~Notes to Condensed Consolidated Financial Statements (unaudited)~~ 7

~~Item 2. Management's Discussion and Analysis of Financial Condition~~

~~and Results of Operations~~14

~~Item 3. Quantitative and Qualitative Disclosures About Market Risk~~20

~~Item 4. Controls and Procedures~~ 20

~~PART II - OTHER INFORMATION~~

~~Item 1. Legal Proceedings~~21

~~Item 1A. Risk Factors~~21

~~Item 6. Exhibits~~22

~~Signatures~~ 22

~~Exhibit 31.1 Certification of John Farahi pursuant to Section 302 of the~~

~~Sarbanes-Oxley Act of 2002~~ 23

~~Exhibit 31.2 Certification of Ronald Rowan pursuant to Section 302 of the~~

~~Sarbanes-Oxley Act of 2002~~ 24

~~Exhibit 32.1 Certification of John Farahi pursuant to~~

~~Section 906 of the Sarbanes-Oxley Act of 2002~~25

~~Exhibit 32.2 Certification of Ronald Rowan pursuant to~~

~~Section 906 of the Sarbanes-Oxley Act of 2002~~ 26

PART 1.I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Monarch Casino & Resort, Inc.

Condensed Consolidated Statements of Income

(Unaudited)

			Three Months Ended
			March 31,
			2007	2006	Three Months Ended September 30,						Nine Months Ended September 30,
			(UNAUDITED)	(UNAUDITED)		2007			2006			2007			2006
Revenues	Revenues
	Casino		$25,298,272	$24,124,047
	Food and beverage		10,504,215	9,744,817
	Hotel		6,827,967	6,033,935
	Other		1,188,623	1,090,050
		Gross revenues	43,819,077	40,992,849
Casino					$	29,936,988		$	27,716,814		$	84,512,978		$	77,621,373
Food and beverage						11,011,808			10,889,609			32,084,196			30,769,768
Hotel						8,002,564			8,101,167			21,857,687			20,580,811
Other						1,229,521			1,254,264			3,703,972			3,648,862
Gross revenues						50,180,881			47,961,854			142,158,833			132,620,814
Less promotional allowances	Less promotional allowances		(6,037,486)	(5,387,714)		(6,557,585	)		(6,213,477	)		(19,192,626	)		(17,644,527	)
Net revenues						43,623,296			41,748,377			122,966,207			114,976,287
		Net revenues	37,781,591	35,605,135
Operating expenses	Operating expenses
Casino						9,232,990			8,991,885			26,970,411			25,483,766
Food and beverage						5,381,681			5,143,751			15,217,367			14,634,537
Hotel						2,161,564			2,206,631			6,416,669			6,312,500
Other						386,056			384,033			1,127,113			1,116,317
Selling, general and administrative						12,731,275			11,681,175			37,054,086			35,156,852
Depreciation and amortization						1,982,184			2,139,592			6,122,600			6,430,831
Total operating expenses						31,875,750			30,547,067			92,908,246			89,134,803
Income from operations						11,747,546			11,201,310			30,057,961			25,841,484
Other income (expense)
Interest income						568,462			154,230			1,385,883			190,732
Interest expense						-			(15,401	)		(152,274	)		(74,845	)
Total other income (expense)						568,462			138,829			1,233,609			115,887
	Casino		8,469,337	8,012,162
	Food and beverage		4,968,717	4,790,771
	Hotel		2,143,340	2,103,723
	Other		363,620	314,454
	Selling, general and administrative		11,530,773	10,841,486
	Gaming development costs		30	43,765
	Depreciation and amortization		2,075,446	2,146,758
		Total operating expenses	29,551,263	28,253,119
		Income from operations
		Income from operations	8,230,328	7,352,016

Other income (expense)
	Interest income		343,884	526
	Interest expense		(149,100)	(59,444)
		Total other income (expense)	194,784	(58,918)
		Income before income taxes	8,425,112	7,293,098
Income before income taxes						12,316,008			11,340,139			31,291,570			25,957,371
Provision for income taxes	Provision for income taxes			(2,525,000)		(4,280,000	)		(3,969,098	)		(10,860,000	)		(8,996,000	)
Provision for income taxes	Provision for income taxes		(2,930,000)	(2,525,000)
		Net income	$ 5,495,112	$ 4,768,098
Net income					$	8,036,008		$	7,371,041		$	20,431,570		$	16,961,371

Earnings per share of common stock	Earnings per share of common stock
	Net income
		Basic	$ 0.29	$ 0.25
		Diluted	$ 0.28	$ 0.25
Net income
Basic					$	0.42		$	0.39		$	1.07		$	0.89
Diluted					$	0.41		$	0.38		$	1.06		$	0.88

Weighted average number of common shares and potential common shares outstanding	Weighted average number of common shares and potential common shares outstanding
		Basic	19,070,472	18,885,595
		Diluted	19,323,646	19,252,277
Basic						19,079,062			19,058,896			19,080,347			18,965,694
Diluted						19,366,043			19,245,639			19,352,064			19,263,869

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Monarch Casino & Resort, Inc.

Condensed Consolidated Balance Sheets

			March 31,	December 31,			September 30,				December 31,
			2007	2006			2007				2006
ASSETS	ASSETS		(UNAUDITED)		ASSETS		(Unaudited)
Current assets	Current assets				Current assets
Cash and cash equivalents						$	52,949,354			$	36,985,187
Receivables, net							4,590,222				3,268,970
Inventories							1,478,542				1,471,667
Prepaid expenses							3,572,182				2,833,126
Deferred income taxes							1,547,144				965,025
Total current assets							64,137,444				45,523,975
Property and equipment					Property and equipment
Land							10,339,530				10,339,530
Land improvements							3,166,107				3,166,107
Buildings								78,955,538				78,955,538
Building improvements								10,435,062				10,435,062
Furniture and equipment								71,746,192				72,708,061
Leasehold improvements								1,346,965				1,346,965
	Cash and cash equivalents		$ 44,191,405	$ 36,985,187				175,989,394				176,951,263
Less accumulated depreciation and amortization								(90,245,245	)			(84,325,578	)
	Receivables, net		3,182,040	3,268,970				85,744,149				92,625,685
	Inventories		1,409,531	1,471,667
	Prepaid expenses		3,017,152	2,833,126
	Deferred income taxes		1,139,985	965,025
		Total current assets	52,940,113	45,523,975
Property and equipment
	Land		10,339,530	10,339,530
	Land improvements		3,166,107	3,166,107
	Buildings		78,955,538	78,955,538
	Building improvements		10,435,062	10,435,062
	Furniture and equipment		74,936,335	72,708,061
	Leasehold improvements		1,346,965	1,346,965
			179,179,537	176,951,263
	Less accumulated depreciation and amortization		(86,401,024)	(84,325,578)
		Net property and equipment	92,778,513	92,625,685
Construction in progress								10,968,149				-
Net property and equipment								96,712,298				92,625,685
Other assets, net	Other assets, net		89,648	231,247	Other assets, net			84,822				231,247
	Total assets		$145,808,274	$138,380,907
Total assets							$	160,934,564			$	138,380,907

LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY				LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities	Current liabilities				Current liabilities
	Accounts payable		$ 8,051,155	$ 8,590,669
	Accrued expenses		8,562,964	9,878,851
	Federal income taxes payable		3,187,051	16,457
		Total current liabilities	19,801,170	18,485,977
Accounts payable							$	8,053,256			$	8,590,669
Construction payable								1,525,987				-
Accrued expenses								8,770,601				9,878,851
Federal income taxes payable								1,371,747				16,457
Total current liabilities								19,721,591				18,485,977
Deferred income taxes	Deferred income taxes		4,047,614	4,248,614	Deferred income taxes			3,708,614				4,248,614
Total Liabilities	Total Liabilities		23,848,784	22,734,591	Total Liabilities			23,430,205				22,734,591
Stockholders' equity
	Preferred stock, $.01 par value, 10,000,000		-	-
	shares authorized; none issued
	Common stock, $.01 par value, 30,000,000 shares
	authorized; 19,086,434 shares issued;
	19,086,434 outstanding at 3/31/07
	19,065,968 outstanding at 12/31/06		190,864	190,726
	Additional paid-in capital		23,998,824	23,205,045
	Treasury stock, 0 shares at 3/31/07
	6,582 shares at 12/31/06, at cost		-	(24,145)
	Retained earnings		97,769,802	92,274,690
		Total stockholders' equity	121,959,490	115,646,316
	Total liabilities and stockholder's equity		$145,808,274	$138,380,907
Commitments and contingencies Stockholders' equity					Commitments and contingencies Stockholders' equity
Preferred stock, $.01 par value, 10,000,000								-				-
shares authorized; none issued					shares authorized; none issued
Common stock, $.01 par value, 30,000,000 shares
authorized; 19,096,300 shares issued;
19,067,518 outstanding at 9/30/07
19,065,968 outstanding at 12/31/06								190,963				190,726
Additional paid-in capital								25,285,175				23,205,045
Treasury stock, 28,782 shares at 9/30/07
6,582 shares at 12/31/06, at cost								(678,039	)			(24,145	)
Retained earnings								112,706,260				92,274,690
Total stockholders' equity								137,504,359				115,646,316
Total liabilities and stockholder's equity							$	160,934,564			$	138,380,907

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

Monarch Casino & Resort, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

				Three Months Ended
				March 31,					Nine Months Ended
				2007	2006				September 30,
				(UNAUDITED)	(UNAUDITED)				2007	2006
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
	Net income			$ 5,495,112	$ 4,768,098	Net income			$ 20,431,570	$ 16,961,371
	Adjustments to reconcile net income to net					Adjustments to reconcile net income to net
	cash provided by operating activities:					cash provided by operating activities:
		Depreciation and amortization		2,075,446	2,146,758		Depreciation and amortization		6,122,600	6,430,831
		Amortization of deferred loan costs		148,838	-		Amortization of deferred loan costs		148,838	15,402
		Share-based compensation		499,884	548,366		Share-based compensation		1,663,197	2,748,635
		Provision for bad debts		(83,662)	279,849		Provision for bad debts		242,126	937,762
		(Gain) loss on disposal of assets		(470)	54,685		(Gain) loss on disposal of assets		(6,969)	49,259
		Deferred income taxes		(375,959)	(397,928)		Deferred income taxes		(1,122,118)	(1,142,819)
	Changes in assets and liabilities:					Changes in operating assets and liabilities:
		Receivables		170,591	475,176		Receivables		(1,563,378)	(561,759)
		Inventories		62,136	(1,616)		Inventories		(6,875)	(33,180)
		Prepaid expenses		(184,026)	(135,681)		Prepaid expenses		(739,056)	(653,236)
		Other assets		(7,239)	-		Other assets		(2,413)	-
		Accounts payable		(539,514)	(573,832)		Accounts payable		(537,412)	(252,968)
		Accrued expenses		(1,315,889)	(1,131,613)		Accrued expenses		(1,108,250)	(523,191)
		Federal income taxes payable		3,170,594	2,548,783		Federal income taxes payable		1,355,290	1,338,218
			Net cash provided by operating activities	9,115,842	8,581,045			Net cash provided by operating activities	24,877,150	25,314,325

Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
	Proceeds from sale of assets			470	2,916	Proceeds from sale of assets			6,969	38,280
	Acquisition of property and equipment			(2,228,274)	(1,615,815)	Change in construction payable			1,525,987	-
			Net cash used in investing activities	(2,227,804)	(1,612,899)	Acquisition of property and equipment			(10,209,214)	(4,235,862)
								Net cash used in investing activities	(8,676,258)	(4,197,582)

Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
						Proceeds from exercise of stock options			340,682	2,141,262
	Proceeds from exercise of stock options			230,738	168,138	Tax benefit of stock option exercise			178,904	613,841
	Tax benefit of stock option exercise			87,442	87,385	Principal payments on long-term debt			-	(8,100,000)
	Principal payments on long-term debt			-	(8,100,000)	Purchase of treasury stock			(756,311)	-
			Net cash provided by (used in) financing activities	318,180	(7,844,477)			Net cash used in financing activities	(236,725)	(5,344,897)
			Net increase (decrease) in cash	7,206,218	(876,331)			Net increase in cash	15,964,167	15,771,846
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period			36,985,187	12,886,494	Cash and cash equivalents at beginning of period			36,985,187	12,886,494
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period			$ 44,191,405	$ 12,010,163	Cash and cash equivalents at end of period			$ 52,949,354	$ 28,658,340

Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
	Cash paid for interest			$ 263	$ 66,659	Cash paid for interest			$ 3,437	$ 66,659
	Cash paid for income taxes			$ 47,923	$ -	Cash paid for income taxes			$ 10,447,923	$ 7,900,000

The Notes to the Condensed Consolidated Financial Statements are an integral part of these statements.

MONARCH CASINO & RESORT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation:

Monarch Casino & Resort, Inc. ("Monarch"), a Nevada corporation, was incorporated in 1993. Monarch's wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("Golden Road"), operates the Atlantis Casino Resort (the "Atlantis"), a hotel/casino facility in Reno, Nevada. Unless stated otherwise, the "Company" refers collectively to Monarch and its Golden Road subsidiary.

The condensed consolidated financial statements include the accounts of Monarch and Golden Road. Intercompany balances and transactions are eliminated.

Interim Financial Statements:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management of the Company, all adjustments considered necessary for a fair presentation are included. Operating results for the three months and nine months ended ~~March 31,~~September 30, 2007 are not necessarily indicative of the results that may be expected for the year ending December 31, 2007.

The balance sheet at December 31, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2006.

Use of Estimates:

In preparing these financial statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the respective periods. Actual results could differ from those estimates.

Self-insurance Reserves:

The Company reviews self-insurance reserves at least quarterly. The amount of reserve is determined by reviewing the actual expenditures for the previous twelve-month period and reviewing reports prepared by third party plan administrators for any significant unpaid claims. The reserve is accrued at an amount ~~that approximates amounts~~ needed to pay both reported and unreported claims as of the balance sheet dates, which management believes are adequate.

Inventories:

Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis.

Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation and amortization. Since inception, property and equipment have been depreciated principally on a straight line basis over the estimated service lives as follows:

~~Land improvements: 15-40 years~~

~~Buildings: 30-40 years~~

~~Building improvements: 15-40 years~~

~~Furniture: 5-10 years~~

~~Equipment:~~

Land improvements:		15-40 years
Buildings:		30-40 years
Building improvements:		15-40 years
Furniture:		5-10 years
Equipment:		5-20 years

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, "Accounting for the Impairment and Disposal of Long-Lived Assets," the Company evaluates the carrying value of its long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable from related future undiscounted cash flows. Indicators which could trigger an impairment review include legal and regulatory factors, market conditions and operational performance. Any resulting impairment loss, measured as the difference between the carrying amount and the fair value of the assets, could have a material adverse impact on the Company's financial condition and results of operations.

For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair market value less costs of disposal. Fair market value for ~~assts~~assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

Casino Revenues:

Casino revenues represent the net win from gaming activity, which is the difference between wins and losses. Additionally, net win is reduced by a provision for anticipated payouts on slot participation fees, progressive jackpots and any pre-arranged marker discounts.

Promotional Allowances:

~~Our~~The Company’s frequent player program, Club Paradise, allows members, through the frequency of their play at ~~our~~the casino, to earn and accumulate point values, which may be redeemed for a variety of goods and services at ~~our~~the Atlantis Casino Resort. Point values may be applied toward room stays at ~~our~~the hotel, food and beverage consumption at any of ~~our~~the food outlets, gift shop items as well as goods and services at ~~our~~the spa and beauty salon. Point values earned may also be applied toward off-property events such as concerts, shows and sporting events. Point values may not be redeemed for cash.

Awards under ~~our~~the Company’s frequent player program are recognized as promotional expenses at the time of redemption.

The retail value of hotel, food and beverage services provided to customers without charge is included in gross revenue and deducted as promotional allowances. The cost associated with complimentary food, beverage, rooms and merchandise redeemed under the program is recorded in casino costs and expenses.

Income Taxes:

Income taxes are recorded in accordance with the liability method specified by SFAS No. 109 "Accounting for Income Taxes." Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: ~~(a)~~ a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; ~~(b)~~ a deferred income tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards; ~~(c)~~ the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; ~~(d)~~ the effects of future changes in tax laws or rates are not anticipated; and ~~(e)~~ the measurement of deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized.

Allowance for Doubtful Accounts:

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and due on demand. In addition, the Company also has receivables due from hotel guests, which are primarily secured with a credit card at the time a customer checks in. An allowance for doubtful accounts is set up for all Company receivables based upon the Company’s historical collection and write-off experience, unless situations warrant a specific identification of a necessary reserve related to certain receivables. The Company charges off its uncollectible receivables once all efforts have been made to collect such receivables. The book value of receivables approximates fair value due to the short-term nature of the receivables.

Stock Based Compensation:

On January 1, 2006, the Company adopted the provisions of SFAS 123R requiring the measurement and recognition of all share-based compensation under the fair value method. The Company implemented SFAS 123R using the modified prospective transition method.

Concentrations of Credit Risk:

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables. The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base. The Company believes it is not exposed to any significant credit risk on cash and accounts receivable.

Certain Risks and Uncertainties:

A significant portion of the Company's revenues and operating income are generated from patrons who are residents of northern California. A change in general economic conditions or the extent and nature of casino gaming in California, Washington or Oregon could adversely affect the Company's operating results. On September 10, 1999, California lawmakers approved a constitutional amendment that gave Indian tribes the right to offer slot machines and a range of house-banked card games. On March 7, 2000, California voters approved the constitutional amendment. Several Native American casinos have opened in Northern California since passage of the constitutional amendment. A large Native American casino facility opened in the Sacramento area, one of ~~our~~the Company’s primary feeder markets, in June of 2003. Other new Native American casinos are under construction in the northern California market, as well as other markets the Company currently serves, that could have an impact on the Company's financial position and results of operations. The State of California ~~Legislature is currently considering ratifying~~has approved compacts with primarily Southern California located Native American ~~casinos~~tribes that ~~would result in an approximate 50% increase in~~increases the total number of Native American operated slot machines in the State of ~~California~~California. Opponents to the compacts are working on a referendum to overturn the new gaming compacts to be voted on at the February 5 presidential primaries. Certain tribes in favor of the compacts have sued to block the February referendum, claiming that signatures obtained by ~~July 2007.~~opponents were not gathered within the required time frame.

In addition, the Company relies on non-conventioneer visitors partially comprised of individuals flying into the Reno area. The threat of terrorist attacks could have an adverse effect on the Company's revenues from this segment. The terrorist attacks that took place in the United States on September 11, 2001, were unprecedented events that created economic and business uncertainties, especially for the travel and tourism industry. The potential for future terrorist attacks, the national and international

responses, and other acts of war or hostility including the ongoing situation in Iraq, have created economic and political uncertainties that could materially adversely affect our business, results of operations, and financial condition in ways we cannot predict.

A change in regulations on land use requirements with regard to development of new hotel casinos in the proximity of the Atlantis could have an adverse impact on our business, results of operations, and financial condition.

The Company also markets to Reno-area residents. A major casino-hotel operator that successfully focuses on local resident business in Las Vegas announced plans to develop hotel-casino properties in Reno. The competition for this market segment is likely to increase and could impact the Company’s business.

NOTE 2. STOCK-BASED COMPENSATION

The Company’s three stock option plans, consisting of the Directors' Stock Option Plan, the Executive Long-term Incentive Plan, and the Employee Stock Option Plan (the "Plans"), collectively provide for the granting of options to purchase up to ~~2,250,000~~3,250,000 common shares. The exercise price of stock options granted under the Plans is established by the respective plan committees, but the exercise price may not be less than the market price of the Company's common stock on the date the option is granted. The ~~Company~~Company’s stock options typically vest on a graded schedule, typically in equal, one-third increments, although the respective stock option committees have the discretion to impose different vesting periods or modify existing vesting periods. Options expire ten years from the grant date. By their amended terms, the Plans will expire in June 2013 after which no options may be granted.

A summary of the current year stock option activity as of and for the ~~three~~nine months ended ~~March 31,~~September 30, 2007 is presented below:

		Weighted Average				Weighted Average
Options	Shares	Exercise Price	Remaining Contractual Term	Aggregate Intrinsic Value	Shares	Exercise Price	Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of period	1,121,199	$16.49	-	-	1,121,199	$16.49	-	-
Granted	3,330	25.53	-	-	59,963	25.78	-	-
Exercised	(20,466)	11.27	-	-	(33,662)	10.12	-	-
Forfeited	-	-	-	-	(20,000)	18.53	-	-
Expired	-	-	-	-	-	-	-	-
Outstanding at end of period	1,104,063	$16.54	8.3 yrs.	$8,079,512	1,127,500	$17.14	7.9 yrs.	$12,753,150
Exercisable at end of period	339,733	$10.91	6.2 yrs.	$3,745,193	329,867	$12.95	7.2 yrs.	$ 5,114,026

In February 2007, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) 159, “The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement 115” that provides companies with an option to report certain financial assets and liabilities in their entirety at fair value. This statement is effective for fiscal years beginning after November 15, 2007. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. A business entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. We are evaluating our options provided for under this statement and their potential impact on its financial statements when implemented. SFAS 159 is being reviewed in conjunction with the requirements of SFAS 157 discussed below.

In September 2006, the FASB issued SFAS 157, “Fair Value Measurements”. This statement defines fair value, establishes a framework for measuring fair value for both assets and liabilities through a fair value hierarchy and expands disclosure requirements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. We are evaluating SFAS 157 and have not yet determined the impact adoption will have on the consolidated financial statements.

NOTE 5. RELATED PARTY TRANSACTIONS

On July 26, 2006, the Company submitted a formal offer to Biggest Little Investments, L.P. (“BLI”), formulated and delivered by a committee comprised of the Company’s independent directors (the “Committee”), to purchase the ~~18.95 acre~~18.95-acre shopping center (the “Shopping Center”) adjacent to the Atlantis Casino Resort Spa. On October 16, 2006, the Committee received a letter from counsel to BLI advising the Company that BLI, through its general partner, Maxum, L.L.C., had “decided that such offer is not in the best interest of the Partnership’s limited partners and, therefore, will not be entering into negotiations with Monarch.” The Board of Directors continues to consider expansion alternatives.

John Farahi, Bob Farahi and Ben Farahi, beneficially own a controlling interest in BLI through their beneficial ownership interest in Western Real Estate Investments, ~~LLC .~~LLC. John Farahi is Co-Chairman of the Board, Chief Executive Officer, Chief Operating Officer and a Director of Monarch. Bob Farahi is Co-Chairman of the Board, President, ~~Interim Treasurer, Interim~~ Secretary and a Director of Monarch. Ben Farahi formerly was the Co-Chairman of the Board, Secretary, Treasurer, Chief Financial Officer and a Director of Monarch. Monarch’s board of directors accepted Ben Farahi’s resignation from these positions on May 23, 2006.

The Company currently rents various spaces ~~totaling approximately 13,000 square feet~~ in the Shopping Center which it uses as office, storage and ~~storage~~parking lot space and paid rent of approximately ~~$29,700~~$101,200 and $162,600 plus common area expenses for the three and nine months ended ~~March 31,~~September 30, 2007, respectively, and approximately ~~$23,600~~$21,800 and $67,800 plus common area expenses for the three and nine months ended ~~March 31, 2006.~~September 30, 2006, respectively.

In addition, a driveway that is being shared between the Atlantis and the Shopping Center was completed on September 30, 2004. As part of this project, in January 2004, the Company leased a 37,368 square-foot corner section of the Shopping Center for a minimum lease term of 15 years at an annual rent of $300,000, subject to increase every 60 months based on the Consumer Price Index. The Company began paying rent to the Shopping Center on September 30, 2004. The Company also uses part of the common area of the Shopping Center and pays its proportional share of the common area expense of the Shopping Center. The Company has the option to renew the lease for three five-year terms, and, at the end of the extension periods, the Company has the option to purchase the leased section of the Shopping Center at a price to be determined based on an MAI Appraisal. The leased space is being used by the Company for pedestrian and vehicle access to the Atlantis, and the Company may use a portion of the parking spaces at the Shopping Center. The total cost of the project was $2.0 million; the Company was responsible for two thirds of the total cost, or $1.35 million. The cost of the new driveway is being depreciated over the initial 15-year lease term; some components of the new driveway are being depreciated over a shorter period of time. The Company paid approximately $75,000 plus common area maintenance charges for its leased driveway space at the Shopping Center during each of the three months ended ~~March 31,~~September 30, 2007 and 2006.

The Company is currently leasing sign space from the Shopping Center. The lease took effect in March 2005 for a monthly cost of $1. The lease was renewed for another year for a monthly lease of $1,000 effective January 1, ~~2006.~~2006, and subsequently renewed on June 15, 2007 for a monthly lease of $1,060. The Company paid ~~$3,000~~$3,180 and $9,240 for the leased sign at the Shopping Center for ~~each of~~ the three and nine months ended ~~March 31,~~September 30, 2007, respectively, and ~~2006.~~paid $3,000 and $9,000 for the three and nine months ended September 30, 2006, respectively.

The Company is currently leasing billboard advertising space from affiliates of its controlling stockholders and paid ~~nothing~~$17,500 and $38,500 for the three and nine months ended ~~March 31,~~September 30, 2007, respectively. The Company paid $0 and ~~$17,500~~$21,000 for the three and nine months ended ~~March 31, 2006.~~September 30, 2006, respectively.

Until December 2006, the Company rented office and storage space from a company affiliated with Monarch’s principal ~~stockholders~~stockholders. The Company expensed $7,000 and ~~expensed zero and $7,000~~$21,000 for ~~these spaces for each of~~ the three and nine months ended ~~March 31, 2007 and 2006.~~September 30, 2006, respectively. Effective December 2006, Monarch’s principal stockholders sold this building and, through April 15, 2007, the Company ~~continues~~continued to rent space from the new owner who is not a related party to Monarch.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Monarch Casino & Resort, Inc., through its wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the tropically-themed Atlantis Casino Resort, a hotel/casino facility in Reno, Nevada (the "Atlantis"). Monarch was incorporated in 1993 under Nevada law for the purpose of acquiring all of the stock of Golden Road. The principal asset of Monarch is the stock of Golden Road, which holds all of the assets of the Atlantis.

Our sole operating asset, the Atlantis, is a hotel/casino resort located in Reno, Nevada. Our business strategy is to maximize the Atlantis' revenues, operating income and cash flow primarily through our casino, our food and beverage operations and our hotel operations. We derive our revenues by appealing to tourists, conventioneers and middle to upper-middle income Reno residents, ~~tourists and conventioneers,~~ emphasizing slot machine play in our casino. We capitalize on the Atlantis' location for locals, tour and travel visitors and conventioneers by offering exceptional service, value and an appealing theme to our guests. Our hands-on management style focuses on customer service and cost efficiencies.

Unless otherwise indicated, "Monarch," "Company," "we," "our" and "us" refer to Monarch Casino & Resort, Inc. and its Golden Road subsidiary.

OPERATING RESULTS SUMMARY

During the ~~first quarter of~~three months ended September 30, 2007, we exceeded all previously reported Company ~~first~~third quarter casino revenues, ~~hotel~~food and beverage revenues, net revenues, net income and earnings per share.

Amounts in millions, except per share amounts	Amounts in millions, except per share amounts			Amounts in millions, except per share amounts


	Three Months		Percentage	Three Months
	Ended March 31,		Increase/(Decrease)	Ended September 30,		Percentage
	2007	2006	07 vs 06	2007	2006	Increase/(Decrease)
Casino revenues	$25.3	$24.1	5.0	$29.9	$27.7	7.9
Food and beverage revenues	10.5	9.7	8.2	11.0	10.9	0.9
Hotel revenues	6.8	6.0	13.3	8.0	8.1	(1.2)
Other revenues	1.2	1.1	9.1	1.2	1.3	(7.7)
Net revenues	37.8	35.6	6.2	43.6	41.7	4.6
Sales, general and admin exp	11.5	10.8	6.5	12.7	11.7	8.5
Income from operations	8.2	7.4	10.8	11.7	11.2	4.5

Net Income	5.5	4.8	14.6	8.0	7.4	8.1

Earnings per share - diluted	0.28	0.25	12.0	0.41	0.38	7.9

Operating margin	21.8%	20.6%	5.8	26.9%	26.8%	0.1 pts.

	Nine Months
	Ended September 30,		Percentage
	2007	2006	Increase
Casino revenues	$84.5	$77.6	8.9
Food and beverage revenues	32.1	30.8	4.2
Hotel revenues	21.9	20.6	6.3
Other revenues	3.7	3.6	2.8
Net revenues	123.0	115.0	7.0
Sales, general and admin exp	37.1	35.2	5.4
Income from operations	30.1	25.8	16.7

Net Income	20.4	17.0	20.0

Earnings per share - diluted	1.06	0.88	20.5

Operating margin	24.4%	22.5%	1.9 pts.

Some significant items that affected our ~~first~~third quarter results in 2007 are listed below. These items are discussed in greater detail elsewhere in our discussion of operating results and in the Liquidity and Capital Resources section.

Increases ~~in all our revenue centers including 5.0%~~of 7.9% and 0.9% in our casino ~~8.2% in our~~and food and beverage ~~13.3%~~revenues, respectively, partially offset by decreases of 1.2% and 7.7% in our hotel and ~~9.1% in our~~ other ~~revenue centers,~~revenues, led to an increase of ~~6.9%~~4.6% in ~~our gross revenues. This increase, partially offset by an increase in promotional allowances as a percentage of gross revenues, led to a 6.2% increase in our~~ net revenues.

·	Our operating margin remained relatively unchanged as compared to the same period last year.

·	Our selling, general and administrative (“SG&A”) expenses increased ~~6.5%~~by 8.5%, primarily due to increased ~~marketing and promotional expenditures, increased~~ legal expense, ~~and increased~~ payroll and benefit costs ~~partially offset by lower bad debt expense.~~and marketing costs.

Comparison of Operating Results for the Nine-Month Periods Ended September 30, 2007 and 2006.

For the nine months ended September 30, 2007, our net income was $20.4 million, or $1.06 per diluted share, on net revenues of $123.0 million, an increase from net income of $17.0 million, or $0.88 per diluted share, on net revenues of $115.0 million during the nine months ended September 30, 2006. Income from operations for the 2007 nine-month period totaled $30.1 million, compared to $25.8 million for the same period in 2006. Net revenues increased 7.0%, and net income increased 20.0% when compared to the nine-month period ended September 30, 2006.

Casino revenues for the nine months ended September 30, 2007 totaled $84.5 million, an 8.9% increase from $77.6 million for the nine months ended September 30, 2006. Casino operating expenses amounted to 31.9% of casino revenues for the nine months ended September 30, 2007, compared to 32.8% for the same period in 2006, primarily due to the increased casino revenue partially offset by increased payroll and benefit expenses and other direct departmental expenses.

Food and beverage revenues totaled $32.1 million for the nine months ended September 30, 2007, an increase of 4.2% from the $30.8 million for the nine months ended September 30, 2006, due to an approximate 4.6% increase in the average revenue per cover while the number of covers served remained virtually unchanged. Food and beverage operating expenses amounted to 47.4% of food and beverage revenues during the 2007 nine-month period, relatively unchanged when compared to 47.6% for the same period in 2006.

Hotel revenues for the nine months ended September 30, 2007 increased 6.3% to $21.9 million from $20.6 million for the nine months ended September 30, 2006, primarily due to increases in the occupancy and ADR at the Atlantis. Hotel revenues for the nine months of 2007 and 2006 include a $3 per occupied room energy surcharge. The Atlantis experienced an increase in the ADR during the 2007 nine-month period to $75.20, compared to $71.20 for the same period in 2006. The occupancy rate increased to 96.8% for the nine-month period in 2007, from 95.4% for the same period in 2006. Hotel operating expenses in the first nine months of 2007 were 29.4% of hotel revenues, an improvement when compared to 30.7% for the same period in 2006. The improved margin was due to the increased occupancy and ADR, which were partially offset by increased payroll and benefit costs.

Promotional allowances increased to $19.2 million in the first nine months of 2007 compared to $17.6 million in the same period of 2006. The increase is attributable to continued efforts to generate additional revenues through promotional efforts. Promotional allowances as a percentage of gross revenues increased slightly to 13.5% for the first nine months of 2007 compared to 13.3% for the same period in 2006.

Other revenues were $3.7 million for the nine months ended September 30, 2007, a 2.8% increase from $3.6 million in the same period in 2006.

Depreciation and amortization expense was $6.1 million in the first nine months of 2007, a decrease of 4.8% compared to $6.4 million in the same period last year. This decrease is primarily attributable to assets that became fully depreciated during the period.

SG&A expenses increased 5.4% to $37.1 million in the first nine months of 2007, compared to $35.2 million in the first nine months of 2006, primarily as a result of increased payroll and benefit costs, increased legal, and increased marketing expense all partially offset by decreased bad debt expense and the elimination of the one-time expense of approximately $1.2 million related to the accelerated vesting of stock options of a former company executive during the second quarter of 2006. As a percentage of net revenue, SG&A expenses decreased to 30.1% in the 2007 nine-month period from 30.6% in the same period in 2006.

Net interest income for the first nine months of 2007 totaled $1.2 million, compared to net interest income of $116,000 for the same period one year earlier. The difference reflects our reduction in debt outstanding (see "THE CREDIT FACILITY" below) and the increase in interest bearing cash and cash equivalents during the first nine months of 2007 as compared to same period in 2006.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our daily hotel and casino activities with net cash provided by operating activities.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2007, net cash provided by operating activities totaled ~~$9.1~~$24.9 million, ~~an increase~~a decrease of ~~6.2%~~1.7% compared to the same period last year. Net cash used in investing activities totaled ~~$2.2~~$8.7 million and ~~$1.6~~$4.2 million in the ~~three~~nine months ended ~~March 31,~~September 30, 2007 and 2006, respectively. During the first ~~three~~nine months of 2007, net cash used in investing activities consisted primarily of construction costs associated with the current expansion phase of the Atlantis that commenced in June 2007, and the acquisition of property and equipment. During the first nine months of 2006, net cash used in investing activities was used primarily in the purchase of property and equipment and continued property renovations and upgrades. Net cash ~~provided by~~used in financing activities totaled ~~$318,000 for~~$236,725for the first ~~three~~nine months of 2007 compared to ~~$7.8~~$5.3 million ~~net cash used by financing activities~~ for the same period in 2006. Net cash used in financing activities for the first ~~three~~nine months of ~~2006~~2007 was ~~primarily for debt reduction.~~due to our purchase of Monarch common stock pursuant to the Repurchase Plan (see below) partially offset by proceeds from the exercise of stock options and the tax benefits associated with such stock option exercises. During the first ~~three~~nine months of 2006, we paid off the $8.1 million December 31, 2005 bank debt balance and began investing our surplus cash in stable, short-term investments, such as certificates of deposit. ~~These investments may be subject to market risk.~~ At ~~March 31,~~September 30, 2007, ~~the Company~~we had a cash balance of ~~$44.2~~$52.9 million compared to $37.0 million at December 31, 2006.

~~The Company has~~We have a reducing revolving credit facility (see "THE CREDIT FACILITY" below). At ~~March 31,~~September 30, 2007, ~~the Company~~we had no balance outstanding on the Credit Facility (as defined below) and had $5 million available to be drawn under the Credit Facility.

OFF BALANCE SHEET ARRANGEMENTS

A driveway was completed and opened on September 30, 2004, that is being shared between the Atlantis and a shopping center (the “Shopping Center”) directly adjacent to the Atlantis. The Shopping Center is controlled by an entity whose owners include our controlling stockholders. As part of this project, in January 2004, ~~the Company~~we leased a 37,368 square-foot corner section of the Shopping Center for a minimum lease term of 15 years at an annual rent of $300,000, subject to increase every 60 months based on the Consumer Price Index. ~~The Company~~We also ~~uses~~use part of the common area of the Shopping Center and ~~pays its~~pay our proportional share of the common area expense of the Shopping Center. ~~The Company has~~We have the option to renew the lease for three five-year terms, and at the end of the extension periods, ~~the Company has~~we have the option to purchase the leased section of the Shopping Center at a price to be determined based on an MAI Appraisal. The leased space is being used by ~~the Company~~us for pedestrian and vehicle access to the Atlantis, and ~~the Company~~we may use a portion of the parking spaces at the Shopping Center. The total cost of the project was $2.0 million; we were responsible for two thirds of the total cost, or $1.35 million. The cost of the new driveway is being depreciated over the initial 15-year lease term; some components of the new driveway are being depreciated over a shorter period of time. ~~The Company~~We paid approximately ~~$75,000~~$225,000 in lease payments for ~~its~~the leased driveway space at the Shopping Center during the ~~three~~nine months ended ~~March 31,~~September 30, 2007.

Critical Accounting Policies

A description of our critical accounting policies and estimates can be found in Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2006 (“2006 Form 10-K”). For a more extensive discussion of our accounting policies, see Note 1, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements in our 2006 Form 10-K filed on March 14, 2007.

OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS

The constitutional amendment approved by California voters in 1999 allowing the expansion of Indian casinos in California has had an impact on casino revenues in Nevada in general, and many analysts have continued to predict the impact will be more significant on the Reno-Lake Tahoe market. If other Reno-area casinos continue to suffer business losses due to increased pressure from California Indian casinos, they may intensify their marketing efforts to Reno-area residents as well.

~~The Company~~We also ~~believes~~believe that unlimited land-based casino gaming in or near any major metropolitan area in the Atlantis' key non-Reno marketing areas, such as San Francisco or Sacramento, could have a material adverse effect on ~~its~~our business.

In June 2004, five California Indian tribes signed compacts with the state that allow the tribes to increase the number of slot machines beyond the previous 2,000-per-tribe limit in exchange for higher fees from each of the five tribes. The State of California ~~Legislature is currently considering ratifying~~has approved compacts with primarily Southern California located Native American ~~casinos~~tribes that ~~would result in an approximate 50% increase in~~increases the total number of Native American operated slot machines in the State of ~~California~~California. Opponents to the compacts are working on a referendum to overturn the new gaming compacts to be voted on at the February 5 presidential primaries. Certain tribes in favor of the compacts have sued to block the February referendum, claiming that signatures obtained by ~~July 2007. The State of California hopes to sign similar compacts with more Indian tribes.~~opponents were not gathered within the required time frame.

The economy in Reno and our feeder markets, like many other areas around the country, are experiencing the effects of several negative macroeconomic trends, including higher fuel prices, home mortgage defaults, higher mortgage interest rates and declining residential real estate values. These negative trends could adversely impact discretionary incomes of our target customers which, in turn could adversely impact our business. Management continues to monitor these trends and intends, as appropriate, to adopt operating strategies to attempt to mitigate the effects of such adverse conditions. We can make no assurances that such strategies will be effective.

Other factors that may impact current and future results are set forth in detail in Part II - Item 1A “Risk Factors” of this Form 10-Q and in Item 1A “Risk Factors” of the 2006 Form 10-K.

COMMITMENTS AND CONTINGENCIES

Our contractual cash obligations as of ~~March 31,~~September 30, 2007 and the next five years and thereafter are as follow:

Contractual Cash Payments Due by Period
Obligations less than 1 to 3 4 to 5 more than
Total 1 year years years 5 years
Long-Term Debt $ - $ - $ - $ - $ -
Operating Leases (1) 4,625,000 370,000 740,000 740,000 2,775,000
Purchase Obligations (2) 2,594,000 2,594,000 - - -
Total Contractual Cash
Obligations
$7,219,000 $2,964,000 $740,000 $740,000 $2,775,000

	Payments Due by Period
		Less Than	1 to 3	4 to 5	More Than
	Total	1 Year	Years	Years	5 Years
Operating leases (1)	$ 4,440,000	$ 370,000	$740,000	$740,000	$2,590,000
Purchase obligations (2)	31,416,000	31,416,000	-	-	-
Total contractual cash obligations	$35,856,000	$31,786,000	$740,000	$740,000	$2,590,000

(1) Operating leases include $370,000 per year in lease and common area expense payments to the shopping center adjacent to the Atlantis (see Note 5. Related Party Transactions, in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q).

(2) Our open purchase order and construction commitments total approximately ~~$2.6~~$31.4 million. Of the total purchase order and construction commitments, approximately $2.0 million are cancelable by ~~the Company~~us upon providing a 30-day notice.

On March 10, 2003, we announced a plan to repurchase up to 500,000 shares (adjusted for the 2 for 1 stock split effective March 31, 2005), or 2.6%, of our Company’s common stock in open market transactions (the “First Plan”). During 2003, we purchased 360,000 shares (adjusted for the 2 for 1 stock split mentioned above) pursuant to the First Plan and made no subsequent purchases. On September 28, 2006, our Board of Directors ~~terminated the First Plan and~~ authorized a ~~second~~ stock repurchase plan (the ~~“Second~~“Repurchase Plan”).

Under the ~~Second~~Repurchase Plan, ~~the~~our Board of Directors authorized a program to repurchase up to 1,000,000 shares of our common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject to market conditions, applicable legal requirements and other factors. The ~~Second~~Repurchase Plan does not obligate us to acquire any particular amount of common stock and the plan may be suspended at any time at our discretion. ~~As of March 31,~~In August 2007, we ~~made no purchases~~acquired 32,112 shares pursuant to the ~~Second~~Repurchase Plan at an average price of $23.55 per share. No other shares have been purchased pursuant to the Repurchase Plan.

We ~~expect to begin~~began construction in the second quarter of 2007 on the next expansion phase of the Atlantis. New space to be added to the first floor casino level, the second and third floors and the basement level will total approximately 116,000 square feet. Once complete, the existing casino floor will be expanded by over 10,000 square feet, or approximately 20%. The first floor plans include a redesigned, updated and expanded race and sports book of approximately 4,000 square feet and an enlarged poker room. The plans also include a New York-style deli restaurant. The second floor expansion will create additional ballroom and convention space of approximately 27,000 square feet, doubling our existing facilities. The spa and fitness center will be remodeled and expanded to create an ultra-modern spa and fitness center facility. We are working with the Reno-Sparks Convention and Visitors’ Authority to design and build a pedestrian skywalk over Peckham ~~Street~~Lane that will connect the Reno-Sparks Convention Center (RSCVA) directly to the Atlantis. Upon completion of, and agreement on, design plans with the RSCVA, construction is expected to take approximately twelve months and is expected to be funded entirely out of existing cash on hand plus cash flow from operations. Excluding the cost of the skywalk, the expansion is estimated to cost approximately $50 million. Final design plans, and the resultant cost estimate, of the skywalk have not been completed.

We believe that our existing cash balances, cash flow from operations, equipment financing, and borrowings available under the Credit Facility will provide us with sufficient resources to fund our operations, meet our debt obligations, and fulfill our capital expenditure requirements; however, our operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If we are unable to generate sufficient cash flow, we could be required to adopt one or more alternatives, such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital.

THE CREDIT FACILITY

On February 20, 2004, a previous credit facility was refinanced (the "Credit Facility") for $50 million. At our option, borrowings under the Credit Facility ~~will~~would accrue interest at a rate designated by the agent bank at its base rate (the "Base Rate") or at the London Interbank Offered Rate ("LIBOR") for one, two, three or six month periods. The rate of interest ~~includes~~included a margin added to either the Base Rate or to LIBOR ~~that is~~ tied to our ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on our Leverage Ratio, this margin would vary between 0.25 percent and 1.25 percent above the Base Rate, and between 1.50 percent and 2.50 percent above LIBOR. In February 2007, this margin was further reduced to 0.00 percent and 0.75 percent above the Base Rate and between 1.00 percent and 1.75 percent above LIBOR. At ~~March 31,~~September 30, 2007, we had no borrowings under the Credit Facility; however, our leverage ratio was such that the pricing for borrowings would have been the Base Rate plus 0.00 percent or LIBOR plus 1.00 percent.

Subject to our February 2007 decision to reduce the total borrowing availability to $5 million as described below, we may utilize proceeds from the Credit Facility for working capital needs, general corporate purposes and for ongoing capital expenditure requirements at the Atlantis.

The Credit Facility is secured by liens on substantially all of the real and personal property of the Atlantis, and is guaranteed by Monarch.

The Credit Facility contains covenants customary and typical for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of our assets and covenants restricting our ability to merge, transfer ownership of Monarch, incur additional indebtedness, encumber assets and make certain investments. The Credit Facility also contains covenants requiring us to maintain certain financial ratios and contains provisions that restrict cash transfers between Monarch and its affiliates. The Credit Facility also contains provisions requiring the achievement of certain financial ratios before we can repurchase our common stock. We do not consider the covenants to restrict our operations.

The maturity date of the Credit Facility is February 23, 2009. Beginning June 30, 2004, the maximum principal available under the Credit Facility was to be reduced over five years by an aggregate of $30.875 million in equal increments of $1.625 million per quarter with the remaining balance due at the maturity date. We may prepay borrowings under the Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). Amounts prepaid under the Credit Facility may be reborrowed so long as the total borrowings outstanding do not exceed the maximum principal available. At December 31, 2006, our available borrowings were $24.0 million. Effective February 2007, in consideration of our cash balance, cash expected to be generated from operations and to avoid agency and commitment fees, we elected to permanently reduce the available borrowings to $5 million. We may permanently reduce the maximum principal available under the Credit Facility at any time so long as the amount of such reduction is at least $500,000 and a multiple of $50,000.

We paid various one-time fees and other loan costs upon the closing of the refinancing of the Credit Facility that will be amortized over the term of the Credit Facility using the straight-line method.

ITEM ~~3 -~~3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market risks and prices, such as interest rates, foreign currency exchange rates and commodity prices. We do not have any cash or cash equivalents as of ~~March 31,~~September 30, 2007, that are subject to market risks.

A one-point increase in interest rates would have had no impact on interest expense in the ~~first~~third quarter of 2007.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, (the "Evaluation Date"), an evaluation was carried out by our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934). Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.

Management assessed the effectiveness of our internal control over financial reporting as of ~~March 31,~~September 30, 2007. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Based on our assessment we believe that, as of ~~March 31,~~September 30, 2007, the Company’s internal control over financial reporting is effective based on those criteria. No changes were made to our internal control over financial reporting (as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As previously disclosed, litigation was filed against Monarch on January 27, 2006, by Kerzner International Limited (“ Kerzner ") owner of the Atlantis, Paradise Island, Bahamas in the United States District Court, District of Nevada. The case number assigned to the matter is 3:06-cv-00232-ECR (RAM). The complaint seeks declaratory judgment prohibiting Monarch from using the name "Atlantis" in connection with offering casino services other than at Monarch's Atlantis Casino Resort Spa located in Reno, Nevada, and particularly prohibiting Monarch from using the "Atlantis" name in connection with offering casino services in Las Vegas, Nevada; injunctive relief enforcing the same; unspecified compensatory and punitive damages; and other relief. Monarch believes Kerzner's claims to be entirely without merit and is defending vigorously against the suit. Further, Monarch has filed a counterclaim against Kerzner seeking to enforce the license agreement granting Monarch the exclusive right to use the Atlantis name in association with lodging throughout the state of Nevada; to cancel Kerzner's registration of the Atlantis mark for casino services on the basis that the mark was fraudulently obtained by Kerzner; and to obtain declaratory relief on these issues. Litigation is in the discovery phase.

We are party to other claims that arise in the normal course of business. Management believes that the outcomes of such claims will not have a material adverse impact on our financial condition, cash flows or results of operations.

ITEM 1A. RISK FACTORS

Our business prospects are subject to various risks and uncertainties that impact our business. You should carefully consider the following discussion of risks, and the other information provided in this quarterly report on Form 10-Q. The risks described below are not the only ones facing us. Other risk factors are disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006. Furthermore, additional risks that are presently unknown to us or that we currently deem immaterial may also impact our business.

WE HAVE THE ABILITY TO ISSUE ADDITIONAL EQUITY SECURITIES, WHICH WOULD LEAD TO DILUTION OF OUR ISSUED AND OUTSTANDING COMMON STOCK

The issuance of additional equity securities or securities convertible into equity securities would result in dilution of our existing stockholders’ equity interests in us. Our Board of Directors has the authority to issue, without vote or action of stockholders, preferred stock in one or more series, and has the ability to fix the rights, preferences, privileges and restrictions of any such series. Any such series of preferred stock could contain dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences or other rights superior to the rights of holders of our common stock. If we issue convertible preferred stock, a subsequent conversion may dilute the current common stockholders’ interest.

WE DO NOT INTEND TO PAY CASH DIVIDENDS. AS A RESULT, STOCKHOLDERS WILL BENEFIT FROM AN INVESTMENT IN OUR COMMON STOCK ONLY IF IT APPRECIATES IN VALUE

We have never paid a cash dividend on our common stock, and we do not plan to pay any cash dividends on our common stock in the foreseeable future. We currently intend to retain any future earnings to finance our operations and further expansion and growth of our business, including acquisitions. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. We cannot guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit No. Description

31.1Certifications pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

31.2Certifications pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

32.1Certification of John Farahi, pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

32.2Certification of Ronald Rowan, pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

~~32.2 Certification of Ben Farahi, pursuant to~~

~~Section 906 of the Sarbanes-Oxley Act of 2002~~

Nevada	88-0300760
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

3800 S. Virginia St.
Reno, Nevada	89502
(Address of Principal Executive Offices)	(ZIP Code)


(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Common stock, $0.01 par value		~~19,090,568~~19,089,686 shares
Class		Outstanding at ~~May 3,~~November 7, 2007

Nonvested Shares	Shares	Weighted-Average Grant Date Fair Value	Shares	Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2007	774,330	$18.14	774,330	$18.14
Granted	3,330	7.70	59,963	7.66
Vested	(13,330)	12.07	(16,660)	4.54
Forfeited	-	-	(20,000)	7.45
Nonvested at March 31, 2007	764,330	$18.21
Nonvested at September 30, 2007			797,633	$ 8.83

	Three Months Ended March 31,
	2007	2006	Three Months Ended September 30,
			2007	2006
Expected volatility	36.9%	44.5%	-	45.5%
Expected dividends	-	-	-	-
Expected life (in years)
Directors’ Plan	2.5	2.5	-	2.5
Executive Plan	4.5	9.0	-	8.4
Employee Plan	3.0	4.1	-	3.2
Weighted average risk free rate	4.7%	4.3%	-	5.1%

Weighted average grant date fair value per share of options granted	$ 7.70	$ 10.52	-	$ 6.59

Total intrinsic value of options exercised	$257,991	$249,640	$105,239	$ 28,286

	Three months ended		Three Months Ended		Nine Months Ended
	March 31,		September 30,		September 30,
	2007	2006	2007	2006	2007	2006
Casino	$ 14,689	$ 21,561	$ 17,865	$ 7,775	$ 53,839	$ 37,553
Food and beverage	11,619	20,167	14,424	7,579	38,015	39,894
Hotel	8,906	17,230	9,676	7,404	27,734	36,742
Selling, general and administrative	464,670	489,408	549,214	465,778	1,543,609	2,634,447
Total stock-based compensation	499,884	548,366
Total stock-based compensation, before taxes			591,179	488,535	1,663,197	2,748,636
Tax benefit	(174,959)	(191,928)	(206,913)	(170,987)	(582,119)	(962,022)
Total stock-based compensation, net of tax	$ 324,925	$ 356,438	$ 384,266	$ 317,548	$ 1,081,078	$1,786,614

Item		Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2007 and 2006 (unaudited)	4
	Condensed Consolidated Balance Sheets at September 30, 2007 (unaudited) and December 31, 2006	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		14

Item 3. Quantitative and Qualitative Disclosures About Market Risk		22

Item 4. Controls and Procedures		22

PART II - OTHER INFORMATION		22
Item 1. Legal Proceedings		23

Item 1A. Risk Factors		23

Item 6. Exhibits		24

Signatures		25
	Exhibit 31.1 Certification of John Farahi pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	26
	Exhibit 31.2 Certification of Ronald Rowan pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	27
	Exhibit 32.1 Certification of John Farahi pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	28
	Exhibit 32.2 Certification of Ronald Rowan pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	29

	Three Months Ended March 31,				Three Months Ended September 30,
	2007		2006		2007		2006
	Shares	Per Share Amount	Shares	Per Share Amount	Shares	Per Share Amount	Shares	Per Share Amount
Basic	19,070	$0.29	18,886	$ 0.25	19,079	$0.42	19,059	$0.39
Effect of dilutive stock options	254	(0.01)	366	-	287	(0.01)	187	(0.01)
Diluted	19,324	$0.28	19,252	$ 0.25	19,366	$0.41	19,246	$0.38

	Nine Months Ended September 30,
	2007		2006
	Shares	Per Share Amount	Shares	Per Share Amount
Basic	19,080	$1.07	18,966	$0.89
Effect of dilutive stock options	272	(0.01)	298	(0.01)
Diluted	19,352	$1.06	19,264	$0.88

Contractual Cash	Payments Due by Period
Obligations		less than	1 to 3		4 to 5	more than
	Total	1 year	years	years			5 years
Long-Term Debt	$ -	$ -	$ -	$ -			$ -
Operating Leases (1)	4,625,000	370,000	740,000	740,000			2,775,000
Purchase Obligations (2)	2,594,000	2,594,000	-	-			-
Total Contractual Cash Obligations	$7,219,000	$2,964,000	$740,000	$740,000			$2,775,000