United States

Securities and Exchange Commission

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended ~~June 30, 2008~~

March 31, 2009

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 No. 0-22088

MONARCH CASINO & RESORT, INC.

(Exact name of registrant as specified in its charter)

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


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

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

(775) 335-4600

~~Registrant's~~

Registrant’s telephone number, including area code:

~~___________________~~

Table of Contents

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes xNo ¨o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”~~, “non-accelerated filer”~~ and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer¨	o	Accelerated Filer x	x
Non-Accelerated Filer¨	o	Smaller Reporting Company¨	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ oNo x

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock, as of the latest practicable date.

Common stock, $0.01 par value		16,122,048 shares
~~Class~~ Class		Outstanding at ~~July 22, 2008~~May 5, 2009

Table of Contents

TABLE OF CONTENTS

Item		Page Number

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
~~Item 1.~~	~~Financial Statements~~

	Condensed Consolidated Statements of Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2009 and 2008 ~~and 2007~~ (unaudited)		4

	Condensed Consolidated Balance Sheets at ~~June 30, 2008~~March 31, 2009 (unaudited) and December 31, ~~2007~~2008		5

	Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2009 and 2008 ~~and 2007~~ (unaudited)		6

	Notes to Condensed Consolidated Financial Statements (unaudited)		7

Item 2.	~~Management's~~ Management’s Discussion and Analysis of Financial Condition and Results of Operations	15	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24	20

Item 4.	Controls and Procedures	24	20


PART II - OTHER INFORMATION			21

Item 1.	Legal Proceedings	25	21

Item 1A.	Risk Factors	25	21

Item 4.6. Exhibits	~~Submission of Matters to a Vote of Security Holders~~	26 22

~~Item 6.~~ Signatures	~~Exhibits~~	26


	~~Signatures~~	27

	~~Exhibit 31.1 Certification of John Farahi pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~	28

	~~Exhibit 31.2 Certification of Ronald Rowan pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~	29

	~~Exhibit 32.1 Certification of John Farahi pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~	30

	~~Exhibit 32.2 Certification of Ronald Rowan pursuant to SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002~~	31 22

Table of Contents

~~PART~~

Part I. ~~FINANCIAL INFORMATION~~

Financial Information

ITEM 1. FINANCIAL STATEMENTS

~~Monarch Casino~~

MONARCH CASINO & ~~Resort, Inc.~~

RESORT, INC.

Condensed Consolidated Statements of Income

(Unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Revenues
Casino $ 25,672,907 $ 29,277,718 $ 49,428,857 $ 54,575,990
Food and beverage 9,547,395 10,568,173 19,308,615 21,072,388
Hotel 5,545,006 7,027,156 11,375,701 13,855,123
Other 1,185,503 1,285,828 2,417,572 2,474,451
Gross revenues 41,950,811 48,158,875 82,530,745 91,977,952
Less promotional allowances (6,607,046 ) (6,597,555 ) (12,913,587 ) (12,635,041 )
Net revenues 35,343,765 41,561,320 69,617,158 79,342,911
Operating expenses
Casino 9,266,916 9,268,084 18,013,416 17,737,421
Food and beverage 4,606,282 4,866,969 9,295,647 9,835,686
Hotel 1,967,720 2,111,765 4,073,093 4,255,105
Other 312,997 377,437 659,651 741,057
Selling, general and administrative 12,877,513 12,792,008 25,981,613 24,322,811
Depreciation and amortization 1,893,237 2,064,970 3,899,794 4,140,416
Total operating expenses 30,924,665 31,481,233 61,923,214 61,032,496
Income from operations 4,419,100 10,080,087 7,693,944 18,310,415
Other (expense) income
Interest income 46,238 473,537 297,582 817,421
Interest expense (131,335 ) (3,174 ) (135,492 ) (152,274 )
Total other (expense) income (85,097 ) 470,363 162,090 665,147
Income before income taxes 4,334,003 10,550,450 7,856,034 18,975,562
Provision for income taxes (1,531,100 ) (3,650,000 ) (2,751,100 ) (6,580,000 )
Net income $ 2,802,903 $ 6,900,450 $ 5,104,934 $ 12,395,562

Earnings per share of common stock
Net income
Basic $ 0.16 $ 0.36 $ 0.29 $ 0.65
Diluted $ 0.16 $ 0.36 $ 0.29 $ 0.64

Weighted average number of common shares and potential common shares outstanding
Basic 17,189,200 19,091,756 17,802,518 19,081,173
Diluted 17,253,109 19,366,442 17,899,384 19,345,213

	Three Months Ended
	March, 31
	2009		2008
Revenues
Casino	$	22,804,499	$	23,755,950
Food and beverage	9,593,068		9,761,220
Hotel	5,379,742		5,830,695
Other	1,133,450		1,232,069
Gross revenues	38,910,759		40,579,934
Less promotional allowances	(6,331,575)		(6,306,541)
Net revenues	32,579,184		34,273,393
Operating expenses
Casino	8,906,892		8,746,500
Food and beverage	4,635,397		4,689,365
Hotel	2,005,920		2,105,373
Other	296,771		346,654
Selling, general and administrative	11,619,722		13,104,100
Depreciation and amortization	3,180,955		2,006,557
Total operating expenses	30,645,657		30,998,549
Income from operations	1,933,527		3,274,844
Other (expense) income
Interest income	35,418		251,344
Interest expense	(550,210)		(4,157)
Total other (expense) income	(514,792)		247,187
Income before income taxes	1,418,735		3,522,031
Provision for income taxes	(496,575)		(1,220,000)
Net income	$	922,160	$	2,302,031

Earnings per share of common stock
Net income
Basic	$	0.06	$	0.13
Diluted	$	0.06	$	0.12

Weighted average number of common shares and potential common shares outstanding
Basic	16,122,048		18,415,836
Diluted	16,148,037		18,545,964

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

Table of Contents

~~Monarch Casino~~

MONARCH CASINO & ~~Resort, Inc.~~

RESORT, INC.

Condensed Consolidated Balance Sheets

June 30, December 31,
2008 2007
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 11,672,748 $ 38,835,820
Receivables, net 3,679,824 4,134,099
Federal income tax refund receivable - 998,123
Inventories 1,471,347 1,496,046
Prepaid expenses 3,040,123 3,144,374
Deferred income taxes 582,407 1,084,284
Total current assets 20,446,449 49,692,746
Property and equipment
Land 12,162,522 10,339,530
Land improvements 3,511,484 3,166,107
Buildings 80,655,538 78,955,538
Building improvements 10,435,062 10,435,062
Furniture and equipment 73,328,364 72,511,165
Leasehold improvements 1,346,965 1,346,965
181,439,935 176,754,367
Less accumulated depreciation and amortization (96,011,025 ) (92,215,149 )
85,428,910 84,539,218
Construction in progress 53,494,393 17,236,062
Net property and equipment 138,923,303 101,775,280
Other assets, net 2,817,842 2,817,842
Total assets $ 162,187,594 $ 154,285,868

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Borrowings under credit facility $ 34,000,000 $ -
Accounts payable 12,788,488 10,840,318
Construction payable 3,330,226 1,971,022
Accrued expenses 9,193,030 9,230,157
Federal income taxes payable 51,100 -
Total current liabilities 59,362,844 22,041,497
Deferred income taxes 2,825,433 2,825,433
Total Liabilities 62,188,277 24,866,930
Stockholders' equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued - -
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 16,122,048 outstanding at 6/30/08 18,566,540 outstanding at 12/31/07 190,963 190,963
Additional paid-in capital 26,891,871 25,741,972
Treasury stock, 2,974,252 shares at 6/30/08 529,760 shares at 12/31/07, at cost (48,943,359 ) (13,268,905 )
Retained earnings 121,859,842 116,754,908
Total stockholders' equity 99,999,317 129,418,938
Total liabilities and stockholder's equity $ 162,187,594 $ 154,285,868

	March 31,		December 31,
	2009		2008
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	11,428,243	$	11,756,900
Receivables, net	3,488,296		3,344,441
Inventories	1,418,374		1,564,347
Prepaid expenses	2,969,024		2,851,872
Deferred income taxes	429,300		429,300
Total current assets	19,733,237		19,946,860
Property and equipment
Land	12,162,522		12,162,522
Land improvements	3,511,484		3,511,484
Buildings	133,674,917		133,332,232
Building improvements	10,435,062		10,435,062
Furniture and equipment	102,377,493		96,767,076
Leasehold improvements	1,346,965		1,346,965
	263,508,443		257,555,341
Less accumulated depreciation and amortization	(104,218,052)		(101,825,190)
	159,290,391		155,730,151
Construction in progress	-		4,026,536
Net property and equipment	159,290,391		159,756,687
Other assets, net	3,498,240		2,797,949
Total assets	$	182,521,868	$	182,501,496
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Borrowings under credit facility	$	900,000	$	2,500,000
Accounts payable	6,317,908		10,213,418
Construction payable	1,468,452		5,404,372
Accrued expenses	9,292,872		8,940,110
Federal income taxes payable	390,311		233,736
Total current liabilities	18,369,543		27,291,636
Long-term debt, less current maturities	55,000,000		47,500,000
Deferred income taxes	2,115,371		2,115,371
Total liabilities	75,484,914		76,907,007
Stockholders’ equity
Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued	-		-
Common stock, $.01 par value, 30,000,000 shares authorized; 19,096,300 shares issued; 16,122,048 outstanding at 3/31/09 16,122,048 outstanding at 12/31/08	190,963		190,963
Additional paid-in capital	28,571,314		28,051,009
Treasury stock, 2,974,252 shares at 3/31/09 2,974,252 shares at 12/31/08, at cost	(48,943,359)		(48,943,359)
Retained earnings	127,218,036		126,295,876
Total stockholders’ equity	107,036,954		105,594,489
Total liabilities and stockholder’s equity	$	182,521,868	$	182,501,496

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

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~~Monarch Casino~~

MONARCH CASINO & ~~Resort, Inc.~~

RESORT, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended June 30,
2008 2007
Cash flows from operating activities:
Net income $ 5,104,934 $ 12,395,562
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 3,899,794 4,140,416
Amortization of deferred loan costs - 148,838
Share based compensation 1,149,899 1,072,018
Provision for bad debts 607,721 22,786
Gain on disposal of assets (10,200 ) (5,770 )
Deferred income taxes 501,877 (740,206 )
Changes in operating assets and liabilities:
Receivables, net 844,677 (379,484 )
Inventories 24,700 (23,254 )
Prepaid expenses 104,251 (174,778 )
Other assets - (4,826 )
Accounts payable 1,948,170 1,794,905
Accrued expenses (37,127 ) 59,915
Federal income taxes payable, net 51,100 930,599
Net cash provided by operating activities 14,189,796 19,236,721

Cash flows from investing activities:
Proceeds from sale of assets 10,200 5,770
Acquisition of property and equipment (41,047,818 ) (5,263,977 )
Changes in construction payable 1,359,204 -
Net cash used in investing activities (39,678,414 ) (5,258,207 )

Cash flows from financing activities:
Proceeds from exercise of stock options - 311,353
Tax benefit of stock option exercise - 141,684
Borrowings under credit facility 34,000,000 -
Purchase of treasury stock (35,674,454 ) -
Net cash (used in) provided by financing activities (1,674,454 ) 453,037
Net (decrease) increase in cash (27,163,072 ) 14,431,551
Cash and cash equivalents at beginning of period 38,835,820 36,985,187
Cash and cash equivalents at end of period $ 11,672,748 $ 51,416,738

Supplemental disclosure of cash flow information:
Cash paid for interest. $ 50,158 $ 3,437
Cash paid for income taxes $ 1,200,000 $ 6,247,923

	Three Months Ended March 31,
	2009		2008

Cash flows from operating activities:
Net income	$	922,160	$	2,302,031
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,180,955		2,006,557
Amortization of deferred loan costs	72,446		-
Share based compensation	520,305		565,071
Provision for bad debts	315,196		436,419
Gain on disposal of assets	(63,948)		(8,000)
Deferred income taxes	-		501,877
Changes in operating assets and liabilities
Receivables, net	(459,051)		927,849
Inventories	145,973		84,451
Prepaid expenses	(117,152)		89,737
Other assets	(772,737)		-
Accounts payable	(3,895,510)		(1,222,723)
Accrued expenses	352,762		230,183
Federal income taxes payable	156,575		-
Net cash provided by operating activities	357,974		5,913,452

Cash flows from investing activities:
Proceeds from sale of assets	83,425		8,000
Acquisition of property and equipment	(2,734,136)		(19,096,073)
Changes in construction payable	(3,935,920)		1,984,031
Net cash used in investing activities	(6,586,631)		(17,104,042)

Cash flows from financing activities:
Borrowings under credit facility	5,900,000		-
Purchase of treasury stock	-		(11,907,153)
Net cash provided by (used in) financing activities	5,900,000		(11,907,153)
Net decrease in cash	(328,657)		(23,097,743)
Cash and cash equivalents at beginning of period	11,756,900		38,835,820
Cash and cash equivalents at end of period	$	11,428,243	$	15,738,077

Supplemental disclosure of cash flow information:
Cash paid for interest	$	560,500	$	4,157
Cash paid for income taxes	$	340,000	$	-

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

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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"~~(“Monarch”), a Nevada corporation, was incorporated in 1993. ~~Monarch's~~Monarch’s wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("(“Golden ~~Road"~~Road”), operates the Atlantis Casino Resort Spa (the ~~"Atlantis"~~“Atlantis”), a hotel/casino facility in Reno, Nevada. Monarch’s other wholly owned subsidiary, High Desert Sunshine, Inc. (“High Desert”), owns a parcel of land located adjacent to the Atlantis. Unless stated otherwise, the ~~"Company"~~“Company” refers collectively to Monarch and its ~~Golden Road subsidiary.~~

subsidiaries.

The ~~condensed~~ consolidated financial statements include the accounts of Monarch, Golden Road and ~~Golden Road.~~High Desert. 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 ~~(“U.S. GAAP”)~~ 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 ~~U.S. GAAP~~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 six months~~ ended ~~June 30, 2008~~March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2008.~~

2009.

The balance sheet at December 31, ~~2007~~2008 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. ~~GAAP~~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, ~~2007.~~

~~Use of Estimates~~:

In preparing these financial statements in conformity with U.S. GAAP , 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 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.~~

~~Table of Contents~~

~~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:~~	~~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 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~~:

The Company’s frequent player program, Club Paradise, allows members, through the frequency of their play at the casino, to earn and accumulate point values, which may be redeemed for a variety of goods and services at the Atlantis Casino Resort. Point values may be applied toward room stays at the hotel, food and beverage consumption at any of the food outlets, gift shop items as well as goods and services at 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 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; the effects of future changes in tax laws or rates are not anticipated; and (d) 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.

~~Table of Contents~~

The Company also applies the requirements of FIN 48 which prescribes minimum recognition thresholds a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.

~~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 secured primarily 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 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. 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. In February 2008, the voters of the State of California approved compacts with four tribes located in Southern California that increase the limit of Native American operated slot machines in the State of California.

~~Table of Contents~~

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 northern Nevada 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.

2008.

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 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’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 six months ended June 30, 2008 is presented below:~~

Weighted Average
Options Shares Exercise Price Remaining Contractual Term Aggregate Intrinsic Value
Outstanding at beginning of period 1,295,426 $ 19.04 - -
Granted 74,957 17.15 - -
Exercised - - - -
Forfeited (20,000 ) 24.04 - -
Expired - - - -
Outstanding at end of period 1,350,383 $ 18.86 7.5 yrs. $ (9,512,414 )
Exercisable at end of period 542,750 $ 10.20 7.0 yrs. $ (782,787 )

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~~A summary of the status of the Company’s nonvested shares as of June 30, 2008, and for the six months ended June 30, 2008, is presented below:~~

Nonvested Shares Shares
Weighted-Average
Grant Date Fair
Value

Nonvested at January 1, 2008 782,676 $ 10.43
Granted 74,957 6.49
Vested (30,000 ) 6.54
Forfeited (20,000 ) 24.04
Nonvested at June 30, 2008 807,633 $ 10.20

~~Expense Measurement and Recognition~~:

~~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. Accordingly,~~accounts for ~~the six months ended June 30, 2008 and 2007, the Company recognized share-based~~its stock-based compensation for all current award grants and for the unvested portion of previous award grants based on grant date fair values. Prior to fiscal 2006, the Company accounted for share-based awards under the disclosure-only provisions ofin accordance with SFAS No. 123, as amended by SFAS No. 148, but applied APB No. 25 and related interpretations in accounting for the Plans, which resulted in pro-forma compensation expense only for stock option awards. Prior period financial statements have not been adjusted to reflect fair value share-based compensation expense under SFAS 123R. With the adoption of SFAS 123R, the Company changed its method of expense attribution for fair value share-based compensation from the straight-line approach to the accelerated approach for all awards granted. The Company anticipates the accelerated method will provide a more meaningful measure of costs incurred and be most representative of the economic reality associated with unvested stock options outstanding. Unrecognized costs related to all share-based awards outstanding at June 30, 2008 is approximately $3.9 million and is expected to be recognized over a weighted average period of 1.18 years.

~~The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to option exercises and forfeitures.~~

The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during each quarter were as follows:

Three Months
Ended June 30,

2008 2007
Expected volatility 55.1 % 37.8 %
Expected dividends - -
Expected life (in years)
    Directors’ Plan 2.5 2.5
    Executive Plan 4.5 8.3
    Employee Plan 3.1 3.1
Weighted average risk free rate 1.9 % 4.5 %
Weighted average grant date fair value per share of options granted $ 4.77 $ 7.66
Total intrinsic value of options exercised - $ 465,471

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The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company. Upon implementation of SFAS 123R, the Company determined that an implied volatility is more reflective of market conditions and a better indicator of expected volatility.

123(R), “Share-Based Payment”. Reported stock based compensation expense was classified as follows:

	Three Months Ended
	March 31,
	2009		2008
Casino	$	15,303	$	20,480
Food and beverage	15,186		16,767
Hotel	5,891		10,597
Selling, general and administrative	483,925		517,227
Total stock-based compensation, before taxes	520,305		565,071
Tax benefit	(182,107)		(197,775)
Total stock-based compensation, net of tax	$	338,198	$	367,296

Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Casino $ 20,490 $ 21,285 $ 40,970 $ 35,974
Food and beverage 18,816 11,972 35,583 23,591
Hotel 9,520 9,152 20,117 18,058
Selling, general and administrative 536,002 529,725 1,053,229 994,395
Total stock-based compensation, before taxes 584,828 572,134 1,149,899 1,072,018
Tax benefit (204,689 ) (200,247 ) (402,464 ) (375,206 )
Total stock-based compensation, net of tax $ 380,139 $ 371,887 $ 747,435 $ 696,812

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NOTE 3. EARNINGS PER SHARE

The Company reports ~~"basic"~~“basic” earnings per share and ~~"diluted"~~“diluted” earnings per share in accordance with the provisions of SFAS No. 128, ~~"Earnings~~“Earnings Per Share."” Basic earnings per share is computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options. The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations (shares in thousands):

Three Months Ended June 30,
2008 2007
Shares Per Share Amount Shares Per Share Amount
Basic 17,189 $ 0.16 19,092 $ 0.36
Effect of dilutive stock options 64 - 274 -
Diluted 17,253 $ 0.16 19,366 $ 0.36

Six Months Ended June 30,
2008 2007
Shares Per Share Amount Shares Per Share Amount
Basic 17,803 $ 0.29 19,081 $ 0.65
Effect of dilutive stock options 96 - 264 (0.01 )
Diluted 17,899 $ 0.29 19,345 $ 0.64

	Three Months Ended March 31,
	2009		2008
	Shares	Per Share Amount	Shares	Per Share Amount
Basic	16,122	$0.06	18,416	$0.13
Effect of dilutive stock options	26	-	130	(0.01)
Diluted	16,148	$0.06	18,546	$0.12

Excluded from the computation of diluted earnings per share are options where the exercise prices are greater than the market price as their effects would be anti-dilutive in the computation of diluted earnings per share.

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NOTE 4. RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the Financial Accounting Standards Board ~~(the “FASB”~~(“FASB”) issued ~~SFAS~~Statement of Financial Accounting Standards No. 157, Fair Value ~~Measurements.~~ Measurements (“SFAS No. 157”). SFAS No. 157 ~~defines~~provides enhanced guidance for using fair value to measure assets and liabilities. SFAS No. 157 clarifies the principle that fair value should be based on the assumptions market participants would use when pricing assets or liabilities and establishes a ~~framework~~hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. On February 12, 2008, the FASB delayed the effective date of SFAS No. 157 for ~~measuring fair value in U.S. GAAP~~nonfinancial assets and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements, accordingly, this statement does not require any new fair value measurements. However, for some entities, the application of this statement will change current practice. This statement is effective for financial statements issued fornonfinancial liabilities until fiscal years beginning after November 15, ~~2007, and interim periods within those fiscal years. In February~~ 2008, ~~the FASB issued FASB Staff Position FAS 157-2, which defers the effective date of SFAS 157~~except for ~~non-financial assets and liabilities~~items that are recognized or disclosed at fair value in the ~~entity’s~~ financial statements on a recurring basis ~~to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We are evaluating SFAS 157 as it relates to non-financial assets and have not yet determined~~(at least annually). The Company implemented the ~~impact the adoption will have on the consolidated financial statements. The adoption~~provisions of SFAS No. 157 as of January 1, 2008 for ~~financial~~those assets and liabilities not subject to the deferral described above. The implementation of SFAS No. 157 as of January 1, 2009 for assets and liabilities previously subject to the deferral described above did not have a material impact on the Company’s ~~financial position,~~ results of operations, financial position or cash ~~flows~~

flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115.” SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with unrealized gains and losses related to these financial instruments reported in earnings at each subsequent reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption ~~of SFAS No. 159~~ did not have a material impact on ~~the Company’s~~our financial position or results of ~~operations or cash flows.~~operations.

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In December 2007, the FASB issued SFAS No. 141 (revised 2007) (SFAS 141(R)), “Business Combinations,” which is a revision of SFAS 141, “Business Combinations.” The primary requirements of SFAS 141(R) are as follows: (i.) Upon initially obtaining control, the acquiring entity in a business combination must recognize 100% of the fair values of the acquired assets, including goodwill, and assumed liabilities, with only limited exceptions even if the acquirer has not acquired 100% of its target. As a consequence, the current step acquisition model will be eliminated. (ii.) Contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the purchase price consideration. The concept of recognizing contingent consideration at a later date when the amount of that consideration is determinable beyond a reasonable doubt, will no longer be applicable. (iii.) All transaction costs will be expensed as incurred. Implementation of SFAS No. 141 (revised) establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, noncontrolling interest in the acquiree and the goodwill acquired. The revision is intended to simplify existing guidance and converge rulemaking under U.S. GAAP with international accounting rules. This statement applies141(R) would have required treatment prospectively to business combinations ~~where the acquisition date is~~completed on or after January 1, 2009. Because the ~~beginning~~Company had no business combinations during that time, the adoption did not have a material impact on our financial position or results of the first annual reporting period beginning on or after December 15, 2008. We will adopt FAS 141 (revised) in the first quarter of 2009. The adoption of SFAS No. 141 (revised) is prospective and early adoption is not permitted.

operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51.” This statement establishes accounting and reporting standards for ownership interest in subsidiaries held by parties other than the parent and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at amounts that include the amount attributable to both the parent and the noncontrolling interests. The statement also establishes reporting requirements that provide sufficient disclosure that clearly identify and distinguish between the interest of the parent and those of the noncontrolling owners. This statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 160 isdid not ~~expected to~~ have a material impact on the Company’s financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities –-- an amendment of FASB Statement No. 133”. SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. Under SFAS 161, entities are required to provide enhanced disclosures about how and why they use derivative instruments, how derivative instruments and related hedged items are accounted for and the affect of derivative instruments on the entity’s financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. ~~We will adopt SFAS 161 in the first quarter of 2009.~~ The adoption of SFAS No. 161 isdid not ~~expected to~~ have a material impact on the Company’s financial position, results of operations or cash flows.

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In May 2008, the FASB issued SFAS 162, “The Hierarchy of Generally Accepted Accounting Principles”, which identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS 162 will become effective sixty days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of the provisions of SFAS 162 is not anticipated to ~~materially~~have a material impact on the Company’s financial position, results of operations or cash flows.

In October 2008, the FASB issued FASB Staff Position No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active (FSP 157-3 or the FSP). FSP 157-3 clarifies the application of SFAS No. 157, Fair Value Measurements (Statement 157), in a market that is not active. The FSP amends Statement 157 to include an example that illustrates key considerations

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when applying the principles in Statement 157 to financial assets when the market for these instruments is not active. FSP 157-3 is not anticipated to have a material impact on the Company’s financial position, results of operations or cash flows.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which amends the accounting in SFAS 141(R) for assets and liabilities arising from contingencies in a business combination. The FSP is effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, the FSP requires measurement based on the recognition and measurement criteria of SFAS 5, Accounting for Contingencies. The adoption of the provisions of FSP 141(R)-1 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In January 2009, the FASB issued FASB Staff Position on EITF Issue No. 99-20, “Amendments to the Impairment Guidance of EITF Issue No. 99-20” (FSP EITF 99-20-1). FSP EITF 99-20-1 aligns the impairment guidance in EITF Issue No. 99-20 with that in Statement of Financial Accounting Standards No. 115 (SFAS 115), “Accounting for Certain Investments in Debt and Equity Securities.” It changes how companies determine whether an other-than-temporary impairment exists for certain beneficial interests by allowing management to exercise more judgment. We will adopt this new accounting standard effective April 1, 2009. We do not expect that the adoption of FSP EITF 99-20-1 will have a material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FASB Staff Position on FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (FSP FAS 107-1 and APB 28-1). This FSP requires that the fair value disclosures required by SFAS 107 “Disclosures about Fair Value of Financial Instruments” be included for interim reporting periods. We will adopt this new accounting standard effective April 1, 2009. We do not expect that the adoption of FSP FAS 107-1 and APB 28-1 will have a material impact on our financial position, results of operations or cash flows.

In April 2009, the FASB issued FASB Staff Position on FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (FSP FAS 115-2 and FAS 124-2). This FSP amends the impairment guidance relating to certain debt securities and will require a company to assess the likelihood of selling the security prior to recovering its cost basis. Additionally, when a company meets the criteria for impairment, the impairment charges related to credit losses would be recognized in earnings, while non-credit losses would be reflected in other comprehensive income. We will adopt this new accounting standard effective April 1, 2009. We do not expect that the adoption of FSP FAS 115-2 and FAS 124-2 will have a material impact on our financial position, results of operations or cash flows.

FSP FAS 157-4 – In April 2009, the FASB issued FASB Staff Position on FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS 157-4). FSP FAS 157-4 provides guidance on determining when the trading volume and activity for an asset or liability has significantly decreased, which may indicate an inactive market, and on measuring the fair value of an asset or liability in inactive markets. We will adopt this new accounting standard effective April 1, 2009. We do not expect that the adoption of FSP FAS 157-4 will have a material impact on our financial position, results of operations or cash flows.

FSP FAS 141R-1 – In April 2009, the FASB issued FASB Staff Position on FAS 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (FSP FAS 141R-1). FSP FAS 141R-1 requires that an acquirer recognize at fair value, at

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 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. (“Maxum”), 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.” While there have been subsequent communications between BLI and the Company from time to time regarding ~~the Company’s~~our interest in the Shopping Center, nothing has resulted. The Board of Directors continues to consider expansion alternatives.

~~Although there is currently a dispute as to how the units are held, collectively,~~

John Farahi and Bob Farahi each individually own non-controlling interests in BLI and ~~Ben Farahi own a controlling interest in BLI.~~Maxim. 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, 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 in the Shopping Center which it uses as office, ~~and~~ storage space and guest parking and paid rent of approximately ~~$67,900~~$21,800 and ~~$168,600~~$100,700 plus common area expenses ~~for~~in during the first three months of 2009 and ~~six months ended June 30,~~ 2008, ~~respectively, and approximately $31,700 and $61,400 plus common area expenses for the three and six months ended June 30, 2007,~~ 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~~3 five-year terms, and at the end of the extension periods, the Company has the option to purchase the leased driveway 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 each of the three months ended March 31, 2009 and 2008 for its leased driveway space at the Shopping ~~Center during each of the three months ended June 30, 2008 and 2007.~~

Center.

The Company ~~is currently leasing~~leasesd sign space from the Shopping ~~Center.~~Center through July 2008. The lease took effect in March 2005 for a monthly cost of $1. The lease was renewed for another year ~~for~~with a monthly lease of $1,000 effective January 1, ~~2006, and subsequently renewed on June 15, 2007 for a monthly lease of $1,060.~~2006. The Company paid ~~$3,200 and $6,400 for the leased sign at the Shopping Center~~$3,000 for the three ~~and six~~ months ended ~~June 30, 2008, respectively, and paid $3,060 and $6,060 for the three and six months ended June 30, 2007, respectively.~~March 31, 2008.

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The Company ~~is currently leasing~~occasionally leases billboard advertising space from affiliates of its controlling stockholders and paid ~~$21,000 for each of the three and six months ended June 30, 2008, and paid $21,000~~$10,500 for the three ~~and six~~ months ended ~~June 30, 2007, respectively.~~

March 31, 2009 and did not pay anything for the three months ended March 31, 2008.

On December 24, 2007, the Company entered into a lease with Triple “J” Plus, LLC (“Triple J”) for the use of a facility on 2.3 acres of land (jointly the “Property”) across Virginia Street from the Atlantis that the Company ~~currently utilizes~~plans to utilize for ~~storage.~~administrative staff offices. The managing partner of Triple J is a first-cousin of John and Bob Farahi, the Company’s Chief Executive Officer and President, respectively. The term of the lease is two years requiring monthly rental payments of $20,256. Commensurate with execution of the lease, the Company entered into an agreement that provides the Company with a purchase option on the Property at the expiration of the lease period while also providing Triple J with a put option to cause the Company to purchase the Property during the lease period. The purchase price of the Property has been established by a third party appraisal company. Lastly, as a condition of the lease and purchase option, the Company entered into a promissory note (the “Note”) with Triple J whereby the Company advanced a $2.7 million loan to Triple J. The Note requires interest only payments at 5.25% and matures on the earlier of i) the date the Company acquires the Property or ii) January 1, 2010.

In September 2006, the FASB issued statement No. 157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with ~~U.S. GAAP ,~~accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. The Company has adopted the provisions of SFAS 157 as of January 1, 2008, for financial instruments. Although the adoption of SFAS 157 did not materially impact its financial condition, results of operations, or cash flow, the Company is now required to provide additional disclosures as part of its financial statements.

SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of ~~June 30, 2008,~~March 31, 2009, the Company had no assets or liabilities that are required to be measured at fair value on a recurring basis.

ITEM 2. MANAGEMENT'S 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"~~Road”), owns and operates the tropically-themed Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada (the ~~"Atlantis"~~“Atlantis”). Monarch’s other wholly owned subsidiary, High Desert Sunshine, Inc., owns a parcel of land located adjacent to 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'~~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 middle to upper-middle income Reno residents, tourists and conventioneers, emphasizing slot machine play in our casino. We~~ capitalize on the ~~Atlantis'~~ Atlantis’

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location for ~~locals,~~ tour and travel visitors, conventioneers and ~~conventioneers~~local residents 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"~~“Monarch,” “Company,” “we,” “our” and ~~"us"~~“us” refer to Monarch Casino & Resort, Inc. and its Golden Road ~~subsidiary.~~

and High Desert Sunshine, Inc subsidiaries.

OPERATING RESULTS SUMMARY

Below is a summary of our ~~second~~first quarter results for ~~2008~~2009 and ~~2007:~~

Amounts in millions, except per share amounts

Three Months
Ended June 30, Percentage
2008 2007 (Decrease)/Increase
Casino revenues $ 25.7 $ 29.3 (12.3 )
Food and beverage revenues 9.6 10.6 (9.4 )
Hotel revenues 5.6 7.0 (20.0 )
Other revenues 1.2 1.3 (7.7 )
Net revenues 35.3 41.6 (15.1 )
Sales, general and admin expense 12.9 12.8 0.8
Income from operations 4.4 10.1 (56.4 )

Net Income 2.8 6.9 (59.4 )

Earnings per share - diluted 0.16 0.36 (55.6 )

Operating margin 12.5 % 24.3 % (11.8 ) pts.

Six Months
Ended June 30, Percentage
2008 2007 (Decrease)/Increase
Casino revenues $ 49.4 $ 54.6 (9.5 )
Food and beverage revenues 19.3 21.1 (8.5 )
Hotel revenues 11.4 13.9 (18.0 )
Other revenues 2.4 2.5 (4.0 )
Net revenues 69.6 79.3 (12.2 )
Sales, general and admin expense 26.0 24.3 7.0
Income from operations 7.7 18.3 (57.9 )

Net Income 5.1 12.4 (58.9 )

Earnings per share - diluted 0.29 0.64 (54.7 )

Operating margin 11.1 % 23.1 % (12.0 ) pts.

~~Our results~~2008:

Amounts in millions, except per share amounts

	Three Months			Percentage
		Ended March 31,		Increase/(Decrease)
	2009		2008	09 vs 08
Casino revenues	$22.8		$23.8	(4.2)
Food and beverage revenues	9.6		9.8	(2.0)
Hotel revenues	5.4		5.8	(6.9)
Other revenues	1.1		1.2	(8.3)
Net revenues	32.6		34.3	(5.0)
Sales, general and administrative expense	11.6		13.1	(11.5)
Income from operations	1.9		3.3	(42.4)

Net Income	0.9		2.3	(60.9)

Earnings per share - diluted	0.06		0.12	(50.0)

Operating margin	5.9%		9.6%	(3.7) points

The decline in revenues for the three months ended ~~June 30, 2008~~March 31, 2009 compared to the same period of the prior year reflect the effects of ~~the~~a challenging operating ~~environment that we also experienced in the three month periods ended December 31, 2007 and March 31, 2008.~~environment. As in many other areas around the country, the economic slowdown in ~~northern Nevada~~Reno in the fourth quarter of 2007 ~~accelerated in~~deepened throughout 2008 and into the first ~~and second quarters of 2008. Other factors causing negative financial impact that continued from the fourth~~ quarter of ~~2007 were disruption from construction related to our $50 million expansion project (see “COMMITMENTS AND CONTINGENCIES” below) and~~2009. Additionally, aggressive marketing programs by our ~~competitors. Consistent with the fourth quarter of 2007 and~~competitors in 2008 continued through the first quarter of ~~2008, we increased marketing~~2009. Income from operations was impacted by an increase in depreciation expense of $1.2 million for the quarter ended March 31, 2009 compared to the same prior year period. This increase in depreciation expense was due to the completion of our expansion, remodel and ~~promotional expenditures~~Atlantis Convention Center Skybridge capital projects (see “CAPITAL SPENDING AND DEVELOPMENT” below). These adverse effects were mitigated somewhat by our ability to ~~attract~~reduce sales, general and ~~retain guests in response to these challenges. We also had higher legal expenses associated with the ongoing and previously disclosed Kerzner litigation (see “LEGAL PROCEEDINGS” below).~~administrative expense. We anticipate that downward pressure on ~~profits~~revenue will persist as long as we continue to experience the adverse effects of the negative macroeconomic environment ~~construction disruption,~~and the aggressive marketing programs of our ~~competitors and the legal defense costs associated with the Kerzner lawsuit.~~

competitors.

These factors were the primary drivers of:

·Decreases of 4.2%, 2.0% and 6.9% in our casino, food and beverage and hotel revenues, respectively, resulting in a net revenue decrease of 5.0%;

~~Decreases of 12.3%, 9.4% and 20.0% in our casino, food and beverage and hotel revenues, respectively, resulting in a net revenue decrease of 15.1%.~~

~~A decrease in our second quarter 2008 operating margin by 11.8 points or 48.6%.~~

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·A decrease in income from operations and diluted earnings per share of 42.4% and 50.0%, respectively;

·A decrease in our operating margin by 3.7 points or 38.5%.

CAPITAL SPENDING AND DEVELOPMENT

We seek to continuously upgrade and maintain the Atlantis facility in order to present a fresh, high quality product to our guests.

In June 2007, we broke ground on an expansion project several phases of which we completed and opened in the second half of 2008. New space was added to the first floor casino level, the second and third floors and the basement level totaling approximately 116,000 square feet. The existing casino floor was expanded by over 10,000 square feet, or approximately 20%. The first floor casino expansion included a redesigned, updated and expanded race and sports book of approximately 4,000 square feet and an enlarged poker room. The expansion also included the new Manhattan deli, a New York deli-style restaurant. The second floor expansion created additional ballroom and convention space of approximately 27,000 square feet, doubling the existing facilities. We constructed and opened a pedestrian skywalk over Peckham Lane that connects the Reno-Sparks Convention Center directly to the Atlantis. In January 2009, we opened the final phase of the expansion project, the new Spa Atlantis featuring an atmosphere, amenities and treatments that are unique from any other offering in our market. Additionally, many of the pre-expansion areas of the Atlantis were remodeled to be consistent with the upgraded look and feel of the new facilities. The total cost of these capital projects (the “Capital Projects”) was approximately $73 million.

With the opening of the new skywalk the Atlantis became the only hotel-casino to be physically connected to the Reno-Sparks Convention Center. The Reno-Sparks Convention Center offers approximately 500,000 square feet of leasable exhibition, meeting room, ballroom and lobby space.

Capital expenditures at the Atlantis totaled approximately ~~$41.1~~$2.7 and ~~$5.3~~$19.1 million during the first ~~six~~three months of ~~2008~~2009 and ~~2007,~~2008, respectively. During the ~~six months~~three month periods ended ~~June 30,~~March 31, 2009 and 2008, our capital expenditures consisted primarily of construction costs associated with ~~our $50 million expansion project and~~ the ~~Atlantis Convention Center Skybridge project (see additional discussion of these projects under “COMMITMENTS AND CONTINGENCIES” below). Additional capital expenditures during~~Capital Projects, the ~~six months ended June 30, 2008 were for acquisition of land to be used for administrative offices,~~ acquisition of gaming equipment to upgrade and replace existing equipment and continued renovation and upgrades to the Atlantis facility. ~~During the six months ended June 30, 2007, our~~Additional capital expenditures ~~consisted primarily of construction costs associated with~~during the ~~current expansion phase of the Atlantis that commenced in June 2007 and the~~quarter ended March 31, 2008 were for acquisition of ~~gaming equipment~~land to be used for administrative offices.

In addition to the expenditures incurred to complete Capital Projects during the first quarter of 2009, we anticipate spending approximately $5 to $12 million on capital expenditures in 2009 to upgrade and replace ~~existing gaming~~ equipment,

~~Future cash needed~~ continue our renovation and upgrading of the Atlantis facility and to ~~finance~~acquire the property subject to the Triple J lease (see NOTE 5. to the financial statements “RELATED PARTY TRANSACTIONS”). The timing of these capital expenditures may accelerate or be deferred altogether based on our ongoing ~~maintenance capital spending is expected to be made available from~~assessment of operating cash flow, available borrowing capacity under our Credit Facility (see “THE CREDIT FACILITY” below) and the competitive environment in our market, among other factors.

We believe that our existing cash balances, cash flow from operations and borrowings available under the Credit Facility ~~(see "THE CREDIT FACILITY" below)~~will provide us with sufficient resources to fund our operations, meet our debt obligations, and ~~if necessary,~~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,

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such as reducing, delaying or eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional ~~borrowings.~~

equity capital.

STATEMENT ON FORWARD-LOOKING INFORMATION

When used in this report and elsewhere by management from time to time, the words “believes”, “anticipates” and “expects” and similar expressions are intended to identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansion, development activities, legal proceedings and employee matters. Certain important factors, including but not limited to, ~~national, regional and local economic conditions,~~ competition from other gaming operations, factors affecting our ability to compete, acquisitions of gaming properties, leverage, construction risks, the inherent uncertainty and costs associated with litigation and governmental and regulatory investigations, and licensing and other regulatory risks, could cause our actual results to differ materially from those expressed in our forward-looking statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, ~~the~~our expansion, development activities, legal proceedings and employee matters are included in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statement to reflect events or circumstances after the date hereof.

RESULTS OF OPERATIONS

Comparison of Operating Results for the Three-Month Periods Ended ~~June 30,~~March 31, 2009 and 2008 ~~and 2007~~

For the ~~three-month period~~three months ended ~~June 30, 2008,~~March 31, 2009, our net income was ~~$2.8 million,~~$922 thousand, or ~~$0.16~~$0.06 per diluted share, on net revenues of ~~$35.3~~$32.6 million, a decrease from net income of ~~$6.9~~$2.3 million, or ~~$0.36~~$0.12 per diluted share, on net revenues of ~~$41.6~~$34.3 million for the three months ended ~~June 30, 2007.~~March 31, 2008. Income from operations for the three months ended ~~June 30, 2008~~March 31, 2009 totaled ~~$4.4~~$1.9 million, a ~~56.4%~~42.4% decrease when compared to ~~$10.1~~$3.3 million for the same period in ~~2007.~~2008. Net revenues ~~decreased 15.1%,~~ and net income decreased ~~59.4%~~5.0% and 60.9%, respectively, when compared to last ~~year's second~~year’s first quarter.

Casino revenues totaled ~~$25.7~~$22.8 million in the ~~second~~first quarter of ~~2008,~~2009, a ~~12.3%~~4.2% decrease from ~~$29.3~~$23.8 million in the ~~second~~first quarter of ~~2007,~~2008, which was primarily due to ~~decreases in~~decreased slot ~~table games, poker and keno~~ revenues. Casino operating expenses amounted to ~~36.1%~~39.1% of casino revenues in the ~~second~~first quarter of ~~2008,~~2009, compared to ~~31.7%~~36.8% in the ~~second~~first quarter of ~~2007;~~2008; the increase was ~~due~~ primarily due to the decreased casino ~~revenue.~~

revenue combined with the cost of increased complimentary food, beverages and other services provided to casino patrons.

Food and beverage revenues totaled $9.6 million in the ~~second~~first quarter of ~~2008,~~2009, a ~~9.4%~~2.0% decrease from ~~$10.6~~$9.8 million in the ~~second~~first quarter of ~~2007,~~2008, due primarily to a ~~15.4% decrease in covers served partially offset by a 6.5%~~0.4% increase in the average revenue per ~~cover.~~food cover partially offset by an 3.9% decrease in the number of covers served. Food and beverage operating expenses amounted to 48.3% of food and beverage revenues during the ~~second~~first quarter of ~~2008~~2009 as compared to ~~46.1%~~48.0% for the ~~second~~first quarter of ~~2007. This increase was primarily the result of the lower revenue combined with increased food commodity and labor costs.~~

2008.

Hotel revenues were ~~$5.6~~$5.4 million for the ~~second~~first quarter of ~~2008,~~2009, a decrease of ~~20.0%~~6.9% from the ~~$7.0~~$5.8 million reported in the ~~2007 second~~2008 first quarter. This decrease was the result of ~~decreases~~lower hotel occupancy and a decrease in ~~both~~ the average daily room rate (“ADR”). Both 2009 and ~~hotel occupancy. Both second quarters'~~ 2008 ~~and 2007~~first quarter revenues ~~also~~ included a $3 per occupied room energy surcharge. During the ~~second~~first quarter of ~~2008,~~2009, the Atlantis experienced ~~an 86.5%~~a 76.9% occupancy rate, as compared to ~~97.0%~~85.7% during the same period in ~~2007.~~2008. The ~~Atlantis'~~Atlantis’ ADR was ~~$64.08~~ $66.89in the ~~second~~first quarter of ~~2008~~2009 compared to ~~$72.47~~$68.55 in the ~~second~~first quarter of ~~2007.~~2008. Hotel operating

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expenses as a percent of hotel revenues increased to ~~35.5% in~~37.3% for the ~~2008 second~~first quarter ~~compared to 30.1% in~~of 2009 from 36.1% for the ~~2007 second quarter. The lower margin is~~first quarter of 2008 primarily due to the ~~decreases~~decreased revenue partially offset by a $99 thousand decrease in ~~occupancy and ADR combined with higher payroll and benefit expenses and higher direct~~costs in the hotel operating ~~costs.~~

unit.

Promotional allowances ~~were $6.6~~remained flat at $6.3 million infor both the ~~second quarter~~first quarters of ~~2008~~2009 and ~~the second quarter of 2007.~~2008. Promotional allowances as a percentage of gross revenues increased to ~~15.7%~~16.3% during the ~~second~~first quarter of ~~2008 from 13.7%~~2009 as compared to 15.5% in the ~~second~~first quarter of ~~2007. This~~2008. The increase ~~was primarily~~is attributable to continued promotional efforts to attract guests and generate revenues.

Other revenues remained relatively flat at $1.1 million in the ~~result~~2009 first quarter as compared to $1.2 million for the first quarter of ~~increased promotional and discount programs in response to the challenging economic environment and ongoing competitor promotional and discount programs.~~

2008.

Depreciation and amortization expense was ~~$1.9~~$3.2 million in the ~~second~~first quarter of 2009 as compared to $2.0 million in the first quarter of 2008, ~~as compared to $2.1~~an increase of $1.2 million ~~for the second quarter of 2007. This decrease is primarily attributable to assets that became fully depreciated during the period.~~

SG&A expense totaled $12.9 million in the second quarter of 2008, a .8% increase from $12.8 million in the second quarter of 2007. The slight increase was primarily due to increased rental expense partially offset by decreased payroll and benefits expense. SG&A expense as a percentage of net revenues increased to 36.4% for the second quarter of 2008 as compared to 30.8% in the second quarter of 2007.or 60.0%. This increase is the result of the ~~decrease~~completion of our Capital Projects (see further discussion of the Capital Projects in ~~net revenue.~~

~~Through June 30, 2008, we drew $34~~the “CAPITAL SPENDING AND DEVELOPMENT” section above).

SG&A expenses were $11.6 million ~~from our $50 million credit facility to pay for share repurchases and to fund ongoing capital projects. As a result of this borrowing activity, we incurred interest expense of $131 thousand during~~in the ~~quarter, an increase of $128 thousand when compared to the same~~first quarter of ~~the prior year. We used our invested cash reserves during the quarter to fund the $50~~2009, an 11.5% decrease from $13.1 million ~~expansion project and share repurchases resulting in a decrease in interest income from the $474 thousand reported~~ in the ~~second~~first quarter of ~~2007 to $46 thousand in the current quarter.~~

~~Comparison of Operating Results for the Six-Month Periods Ended June 30, 2008 and 2007.~~

~~For the six months ended June 30, 2008, our net income was $5.1 million, or $0.29 per diluted share, on net revenues of $69.6 million, a~~2008. The decrease from net income of $12.4 million, or $0.64 per diluted share, on net revenues of $79.3 million during the six months ended June 30, 2007. Income from operations for the 2008 six-month period totaled $7.7 million, compared to $18.3 million for the same period in 2007. Net revenues decreased 12.2%, and net income decreased 58.9% when compared to the six-month period ended June 30, 2007.

Casino revenues for the first six months of 2008 totaled $49.4 million, a 9.5% decrease from $54.6 million for the first six months of 2007. Casino operating expenses amounted to 36.4% of casino revenues for the six months ended June 30, 2008, compared to 32.5% for the same period in 2007, the increase was primarily due to ~~the decreased casino revenue combined with decreased~~reductions in payroll and ~~benefit~~benefits expense of approximately $780 thousand, $530 thousand of which represents lower bonus expense; lower marketing and promotional expense of approximately $360 thousand; lower legal expense of approximately $180 thousand; lower bad debt expense of approximately $125 thousand and lower other general expenses ~~offset by increased direct departmental expenses.~~

~~Food and beverage revenues totaled $19.3 million for the six months ended June 30, 2008, a decrease~~ of ~~8.5% from the $21.1 million for the six months ended June 30, 2007, due to an approximate 13.5% decrease in the number of covers served~~approximately $230 thousand all partially offset by ~~a 6.2% increase~~higher electricity expense of approximately $190 thousand driven primarily by our expanded facilities (see further discussion of the Capital Projects in the average revenue per cover. Food and beverage operating expenses amounted to 48.1% of food and beverage revenues during the 2008 six-month period, an increase when compared to 46.7% for the same period in 2007. This increase was primarily the result of the lower revenue combined with increased food commodity and labor costs.

Hotel revenues for the first six months of 2008 decreased 18.0% to $11.4 million from $13.9 million for the first six months of 2007, primarily due to decreases in the occupancy and ADR at the Atlantis. Hotel revenues for the entire first six months of 2008 and 2007 also include a $3 per occupied room energy surcharge. The Atlantis experienced a decrease in the ADR during the 2008 six-month period to $66.29, compared to $72.23 for the same period in 2007. The occupancy rate decreased to 86.1% for the six-month period in 2008, from 96.3% for the same period in 2007. Hotel operating expenses in the first six months of 2008 were 35.8% of hotel revenues, an increase compared to 30.7% for the same period in 2007. The increase was primarily due to the decreased revenues.

Promotional allowances increased to $12.9 million in the first six months of 2008 compared to $12.6 million in the same period of 2007. Promotional allowances as a percentage of gross revenues increased to 15.6% for the first six months of 2008 compared to 13.7% for the same period in 2007. This increase was primarily the result of increased promotional and discount programs in response to the challenging economic environment and ongoing competitor promotional and discount programs.

Depreciation and amortization expense was $3.9 million in the first six months of 2008, a decrease of 4.9% compared to $4.1 million in the same period last year. This decrease is primarily attributable to assets that became fully depreciated during the period.

SG&A expenses increase 7.0% to $26.0 million in the first six months of 2008, compared to $24.3 million in the first six months of 2007, primarily as a result of increased payroll and benefit costs, increased rental expense and increased bad debt expense.“CAPITAL SPENDING AND DEVELOPMENT” section above). As a percentage of net revenue, SG&A expenses ~~increased~~decreased to ~~37.3%~~35.7% in the ~~2008 six-month period~~first quarter of 2009 from ~~30.7%~~38.2% in ~~the~~t he same period in ~~2007.~~

~~Net~~2008.

Interest income decreased from approximately $251 thousand in the first quarter of 2008 to approximately $35 thousand in the first quarter of 2009. The decrease resulted from our use of excess cash in 2008 for the capital projects and share repurchases. First quarter 2009 interest income ~~for~~represents interest earned on a note receivable.

At March 31, 2009, we had $55.9 million outstanding under our $60 million credit facility (see the “CREDIT FACILITY” section below). The resultant interest expense recognized during the first ~~six months~~quarter of ~~2008 totaled $162,000, compared to $665,000 for~~2009 was approximately $550 thousand, a $546 thousand increase over the ~~same period~~fi rst quarter of the prior ~~year. The difference reflects our reduction in interest bearing cash and cash equivalents, combined with increased~~year when we had no debt outstanding ~~(see "THE CREDIT FACILITY" below), during the first six months of 2008 as compared to same period in 2007.~~

under our credit facility.

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LIQUIDITY AND CAPITAL RESOURCES

For the ~~six~~three months ended ~~June 30, 2008,~~March 31, 2009, net cash provided by operating activities totaled ~~$14.2 million,~~$358 thousand, a decrease of ~~26.2%~~$5.6 million or 93.9% compared to the same period last year. This decrease was primarily related to the timing of the payment of a greater amount of accounts payable during the first quarter of 2009 and the collection of a greater amount accounts receivable during the first quarter of the prior year.

Net cash used in investing activities totaled ~~$39.7~~$6.6 million and ~~$5.3~~$17.1 million in the ~~six~~three months ended ~~June 30,~~March 31, 2009 and 2008, ~~and 2007,~~ respectively. During the first ~~six~~three months of 2009 and 2008, net cash used in investing activities consisted primarily of construction costs associated with the ~~current~~recent expansion phase of the Atlantis ~~that commenced~~(see further discussion of the Capital Projects in ~~June 2007~~the “CAPITAL SPENDING AND

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DEVELOPMENT” section above) and the acquisition of property and equipment. ~~During~~Because the ~~first six months of 2007,~~construction was completed in January 2009, we used $10.5 million, or 61.4%, less net cash ~~used~~ in investing activities ~~consisted primarily of construction costs associated with~~during the ~~current expansion of~~three months ended March 31, 2009 compared same period in the ~~Atlantis and the acquisition of gaming equipment to upgrade and replace existing gaming equipment.~~ prior year.

Net ~~cash used in financing activities totaled $1.7 million for the first six months of 2008 compared to net~~ cash provided by financing activities of ~~$453,037 for~~$5.9 million during the ~~same period in 2007. Net cash~~three months ended March 31, 2009 represents borrowings under our Credit Facility (see “THE CREDIT FACILITY” below). During the three months ended March 31, 2008, we used ~~in financing activities for the first six months of 2008 was due~~$11.9 million to ~~our $35.7 million~~ purchase of Monarch common stock pursuant to a stock repurchase plan that was in place in the ~~Repurchase Plan offset by $34.0 million in credit line draws~~prior year.

We believe that our existing cash balances, cash flow from operations and borrowings available under the Credit Facility ~~(see “COMMITMENTS AND CONTINGENCIES” below). Net~~will provide us with sufficient resources to fund our operations, meet our debt obligations, and fulfill our capital expenditure plans; 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 ~~provided by financing activities for the first six months of 2007 was due~~flow, we could be required to proceeds from the exercise of stock options and the tax benefits associated with such stock option exercises. At June 30, 2008, we had a cash and cash equivalents balance of $11.7 million compared to $38.8 million at December 31, 2007.

We have historically funded our daily hotel and casino activities with net cash provided by operating activities. However, to provide the flexibility to execute the share Repurchase Plan (see Commitments and Contingencies section below) and to provide for other capital needs should they arise, we entered into an agreement to amend our Credit Facility (see "THE CREDIT FACILITY" below) on April 14, 2008. The amendment increased the available borrowings under the facility from $5 million to $50 million and extended the maturity date from February 23, 2009 to April 18, 2009. At June 30, 2008, we had $34 million outstanding on the Credit Facility and had $16 million available to be drawn under the Credit Facility. We plan to amend the Credit Facility to extend its maturity beyond April 18, 2009. Such an amendment will likely result in the amendment of other material provisions of the Credit Facility,adopt one or more alternatives, such as the interest rate charged and other material covenants. In the event that we are not able to come to mutually acceptable terms with the Credit Facility lender, we believe that the strength of our balance sheet, combined with our operating cash flow, will provide the basis for a successful refinancing of the Credit Facility with an alternative lender. However, there is no assurance that we will be able to reach acceptable terms for a Credit Facility amendmentreducing, delaying or ~~refinancing.~~

eliminating planned capital expenditures, selling assets, restructuring debt or obtaining additional equity capital.

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, 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. We also use part of the common area of the Shopping Center and pay our proportional share of the common area expense of the Shopping Center. We have the option to renew the lease for three five-year terms, and at the end of the extension periods, 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 us for pedestrian and vehicle access to the Atlantis, and 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. We paid approximately ~~$150,000~~$75,000 in lease payments for the leased driveway space at the Shopping Center during the ~~six~~three months ended ~~June 30, 2008.~~

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, ~~2007~~2008 (“~~2007~~2008 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 ~~2007~~2008 Form 10-K filed on March ~~17, 2008.~~

13, 2009.

OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS

The economy in northern Nevada and our feeder markets, like many other areas around the country, are experiencing the effects of several negative macroeconomic trends, including a ~~possible~~ broad economic recession, 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. We believe that as recessionary pressures increase or continue for

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an extended period of time, target customers may further curtail discretionary spending for leisure activities and businesses may reduce spending for conventions and meetings, both of which would 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.

As discussed below in “COMMITMENTS AND CONTINGENCIES” we commenced construction on an expansion project to the Atlantis, and skybridge to the Reno-Sparks Convention Center, in the second quarter of 2007. While most of the expansion was completed in July 2008, construction of the spa facilities is expected to continue through the third quarter of 2008, construction of the skybridge is expected to continue through the fourth quarter of 2008 and various remodeling of the pre-expansion facilities are expected to continue into the first half of 2009. During the construction period, there could be disruption to our operations from various construction activities. In addition, the construction activity may make it inconvenient for our patrons to access certain locations and amenities at the Atlantis which may in turn cause certain patrons to patronize other Reno area casinos rather than deal with construction-related inconveniences. As a result, our business and our results of operations may be adversely impacted so long as we are experiencing construction related operational disruption.

The constitutional amendment approved by California voters in 1999 allowing the expansion of ~~Indian~~Native American 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~~Native American casinos, ~~they~~such casinos may intensify their marketing efforts to ~~norther~~northern Nevada residents as ~~well.~~

well, greatly increasing competitive activities for our local customers.

Higher fuel costs may deter California and other drive-in customers from coming to the ~~Atlantis~~

Atlantis.

We also believe that unlimited land-based casino gaming in or near any major metropolitan area in the ~~Atlantis'~~Atlantis’ key feeder market areas, such as San Francisco or Sacramento, could have a material adverse effect on our business.

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 our ~~2007~~2008 Form 10-K.

COMMITMENTS AND CONTINGENCIES

Our contractual cash obligations as of ~~June 30, 2008~~March 31, 2009 and the next five years and thereafter are as follow:

Contractual Cash				Payments Due by Period (4)
Obligations				less than		1 to 3		4 to 5		more than
	Total			1 year		years		years		5 years
Operating Leases(1)	$ 4,067,000			$ 552,000		$ 740,000		$740,000		$2,035,000
Current Maturities of Borrowings Under Credit Facility (2)	55,900,000			900,000		55,000,000		-		-
Purchase Obligations(3)	6,114,000		6,114,000			-		-		-
Total Contractual Cash Obligations		$66,081,000			$7,566,000		$55,740,000		$740,000		$2,035,000

(1) Operating leases include $370,000 per year in lease and common area expense payments to the shopping center adjacent to the Atlantis and $243,000 per year in lease payments to Triple J (see Note 5. Related Party Transactions, in the Notes to the Condensed Consolidated Financial Statements in this Form 10-Q).

(2) The amount represents outstanding draws against ~~the~~our Credit Facility (see “THE CREDIT FACILITY” below) as of ~~June 30, 2008.~~March 31, 2009.

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(3) ~~Our open purchase order~~Purchase obligations represent approximately $4.1 million of commitments related to capital projects and ~~construction commitments total~~ approximately ~~$27.0 million.~~$2.0 million of materials and supplies used in the normal operation of our business. Of the total purchase order and construction commitments, approximately $2.0 million are cancelable by us upon providing a 30-day notice.

~~On September 28, 2006,~~

(4) Because interest payments under our ~~Board~~Credit Facility are subject to factors that in our judgment vary materially, the amount of ~~Directors (our “Board”) authorized~~future interest payments is not presently determinable. These factors include: 1) future short-term interest rates; 2) our future leverage ratio which varies with EBITDA and our borrowing levels and 3) the speed with which we deploy capital and other spending which in turn impacts the level of future borrowings. The interest rate under our Credit Facility is LIBOR, or a ~~stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, our Board authorized a program to repurchase up to 1,000,000 shares of our common stock~~base rate (as defined in the ~~open market or in privately negotiated transactions~~Credit Facility agreement), plus an interest rate margin ranging from ~~time~~2.00% to ~~time, in compliance with Rule 10b-18~~3.375% depending on our leverage ratio. The interest rate is adjusted quarterly based on our leverage ratio which is calculated using operating results over the previous four quarters and borrowings at the end of the Securities and Exchange Act of 1934, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan did not obligate us to acquire any particular amount of common stock.

Onmost recent quarter. At March ~~11, 2008,~~31, 2009 our ~~Board increased its initial authorization by 1 million shares and on April 22, 2008,~~leverage ratio was such that pricing for borrowings was LIBOR plus 3.125%. At March 31, 2009, the Board increased its authorization a third time by 1 million shares which increased the shares authorized to be repurchased to a total of three million shares. During the second quarter of 2008, we purchased 1,749,096 shares of the Company’s common stock pursuant to the Repurchase Plan at a weighted average purchase price of $13.59 per share, which increased the total number of shares purchased pursuant to the Repurchase Plan to 3,000,000 at a weighted average purchase price of $16.52 per share. As of June 30, 2008, the Company had purchased all shares under the three million share Repurchase Plan authorization.

~~We began construction in the second quarter of 2007 on the next expansion phase of the Atlantis (the “Expansion”)~~one-month LIBOR rate was 0.50%. The Expansion impacts the first floor casino level, the second and third floors and the basement level by adding approximately 116,000 square feet. The project adds over 10,000 square feet to the existing casino, or approximately 20%. The Expansion includes a redesigned, updated and expanded race and sports book of approximately 4,000 square feet, an enlarged poker room and a Manhattan deli restaurant. The second floor expansion creates additional ballroom and convention space of approximately 27,000 square feet. The spa and fitness center will be remodeled and expanded to create an ultra-modern spa and fitness center facility. We opened the Expansion in July 2008 with the exception of the spa facilities which we expect to open in the fourth quarter of 2008. We have also begun construction of a pedestrian skywalk over Peckham Lane that will connect the Reno-Sparks Convention Center directly to the Atlantis. Construction of the skywalk is expected to be completed in the fourth quarter of 2008. The Expansion is estimated to cost approximately $50 million and the Atlantis Convention Center Skybridge project is estimated to cost an additional $12.5 million. Through June 30, 2008, the Company paid approximately $53.5 million of the estimated Expansion and skybridge cost.

We believe that our existing cash balances, cash flow from operations 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.

On March 27, 2008, in the matter captioned Sparks Nugget, Inc. vs. State ex rel. Department of Taxation, the Nevada Supreme Court (the “Court”) ruled that complimentary meals provided to employees and patrons are not subject to Nevada use tax. On April 15, 2008, the Department of Taxation filed a motion for rehearing of the Supreme Court’s decision. On July 17, 2008, the Court denied the petition of the Department of Taxation. The Governor’s office of the State of Nevada has indicated that it intends to work with the Nevada legislature to change the law to require that such meals are subject to Nevada use tax and to prevent the refund of any use tax paid on complimentary meals prior to the effective date of this new law. The Company is evaluating the Court’s ruling and pending action by the Governor’s office. Accordingly, we have not recorded a receivable for a refund for previously paid use tax on complimentary employee and patron meals in the accompanying consolidated balance sheet at June 30, 2008.

Until February 20, 2004, we had a reducing revolving term loan credit facility with a consortium of banks (the “First Credit Facility”). On February 20, 2004, ~~our previous credit facility~~the Original Credit Facility was refinanced (the ~~"Credit Facility"~~“Second Credit Facility”) for $50 million. ~~At our option, borrowings under~~The maturity date of the Second Credit Facility ~~would accrue interest at a rate designated by~~was to be April 18, 2009; however, on January 20, 2009, the ~~agent bank at its base rate~~Second Credit Facility was amended and refinanced (the ~~"Base Rate") or at the London Interbank Offered Rate ("LIBOR"~~“New Credit Facility”) for ~~one, two, three or six month periods.~~$60 million. The rate of interest included a margin added to either the Base Rate or to LIBOR tied to our ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on our Leverage Ratio, this margin would vary between 0.25 percentNew Credit Facility may be utilized by us for working capital needs, general corporate purposes 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. Our leverage ratio during the three months ended June 30, 2008 was such that the pricing for ~~borrowings was the Base Rate plus 0.00 percent or LIBOR plus 1.00 percent. We selected the LIBOR plus 1.00 option for all~~ongoing capital expenditure requirements.

The maturity date of the borrowings during the three months ended June 30, 2008. 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.

~~The~~New Credit Facility is January 20, 2012. Borrowings are secured by liens on substantially all of the real and personal property of the Atlantis and isare guaranteed by Monarch.

The New 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 New Credit Facility ~~also~~ contains covenants requiring ~~us to~~that we maintain certain financial ratios and achieve a minimum level of Earnings-Before-Interest-Taxes-Depreciation and Amortization (EBITDA) on a two-quarter rolling basis. It also contains provisions that restrict cash transfers between Monarch and its ~~affiliates. The Credit Facility also~~affiliates and contains provisions requiring the achievement of certain financial ratios before we can repurchase our common ~~stock. We do~~stock or pay dividends. Management does not consider the covenants to restrict ~~our~~normal functioning of day-to-day operations.

The maximum principal available under the New Credit Facility is reduced by $2.5 million per quarter beginning on December 31, 2009. We may permanently reduce the maximum principal available at any time so long as the amount of such reduction is at least $500,000 and a multiple of $50,000.

We may prepay borrowings under the New 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.

We ~~may reduce~~paid various one-time fees and other loan costs upon the ~~maximum~~closing of the refinancing of the New Credit Facility that will be amortized over the facility’s term using the straight-line method.

At March 31, 2009, we had $55.9 million outstanding under the New Credit Facility, $900 thousand of which was classified as short-term debt which represents the mandatory principal ~~available~~reduction, based on the amount outstanding at March 31, 2009, required under the New Credit Facility on December 31, 2009. The interest rate under our Credit Facility is LIBOR, or a base rate (as defined in the Credit Facility agreement), plus an interest rate margin ranging from 2.00% to 3.375% depending on our leverage ratio. The interest rate is adjusted quarterly based on our leverage ratio calculated using operating results over the previous four quarters and borrowings at ~~any time so long as~~ the ~~amount of such reduction is at least $500,000 and a multiple of $50,000.~~

On April 14, 2008, we entered into an agreement to amend the Credit Facility to increase the available borrowings from $5 million to $50 million and to extend the maturity date from February 23, 2009 to April 18, 2009. At June 30, 2008, $34 million was outstanding on the Credit Facility, and $16 million was available to be drawn under the Credit Facility. We intend to renegotiate or refinance the Credit Facility to extend its maturity behond April 18, 2009, which will likely result in the amendment of other material provisionsend of the ~~Credit Facility,~~most recent quarter. At March 31, 2009 our leverage ratio was such asthat pricing for borrowings was LIBOR plus 3.125%. At March 31, 2009, the ~~interest~~one-month LIBOR rate ~~charged and other material covenants. There is no assurance that we will be able to reach acceptable terms for a Credit Facility amendment or refinancing.~~

was 0.50%.

ITEM 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 ~~June 30, 2008,~~March 31, 2009 that are subject to market ~~risks.~~

~~The~~risk. As of March 31, 2009 we had $55.9 million of outstanding debt under our New Credit Facility that was subject to credit risk. A 1% increase in the interest rate on ~~borrowings~~the balance outstanding under ~~our~~the New Credit Facility at ~~June 30, 2008 is LIBOR plus 1%. A one-point increase~~March 31, 2009 would result in a change in our annual interest ~~rates would have had increased interest expense in the second quarter~~cost of ~~2008 by $32,000.~~

approximately $560,000.

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"~~“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.

~~Changes~~

There was no change in ~~Internal Control over Financial Reporting~~

~~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~~our most recently completed fiscal quarter that has materially affected, or ~~are~~is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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"~~“Atlantis” in connection with offering casino services other than at ~~Monarch's~~Monarch’s Atlantis Casino Resort Spa located in Reno, Nevada, and particularly prohibiting Monarch from using the ~~"Atlantis"~~“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~~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~~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~~Discovery is inconcluded and the ~~discovery phase.~~

period for filing dispositive motions prior to trial is underway. The court has not ruled yet on any motions.

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

A description of our risk factors can be found in Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2007.~~2008. The following information represents material changes to those risk factors during the ~~six~~three months ended ~~June 30, 2008.~~

~~ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS~~

(c) As discussed above in “COMMITMENTS AND CONTINGENCIES”, our Board authorized the Repurchase Plan under which we repurchased three million shares of our common stock. As of June 30, 2008, no shares remain under the three million share Repurchase Plan authorization.cash flows.

~~The following table summarizes the repurchases made during the three month period ended June 30, 2008. All repurchases were made in the open market.~~

~~ITEM 4. SUBMISSION~~ ~~OF MATTERS TO A VOTE OF SECURITY HOLDERS~~

~~On June 18, 2008, our Annual Meeting of Stockholders was held. The following directors were re-elected to two-year terms and the votes received were as follows:~~

Director Votes Received Votes Withheld
John Farahi 13,024,965 3,993,925
Charles W. Scharer 14,407,843 2,611,047
Craig F. Sullivan 14,407,841 2,611,049

Abstentions are effectively treated as votes withheld. The following directors were not up for election, but their terms continue until the 2009 Annual Meeting of Stockholders: Bob Farahi and Ronald R. Zideck.

ITEM 6. EXHIBITS

SIGNATURESTable of Contents

By: /s/ RONALD ROWAN

	Payments Due by Period
			Less Than		1 to 3		4 to 5		More Than
	Total		1 Year		Years		Years		5 Years
Operating leases (1)	$	4,527,000	$	613,000	$	862,000	$	740,000	$	2,312,000
Current maturities of borrowings under credit facility (2)		34,000,000		34,000,000		-		-		-
Purchase obligations (3)		27,003,000		27,003,000		-		-		-
Total contractual cash obligations	$	65,530,000	$	61,616,000	$	862,000	$	740,000	$	2,312,000

Period	(a) Total number of shares purchased (1)		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans		(d) Maximum number of shares that may yet be purchased under the plans
April 1, 2008 through April 30, 2008		60,769	$	13.06		60,769		1,688,327
May 1, 2008 through May 31, 2008		951,417	$	13.92		951,417		736,910
June 1, 2008 through June 30, 2008		736,910	$	13.20		736,910		-

Exhibit No		Description
~~10.1~~ 3.1		~~Second Amendment to~~ Bylaws of Monarch Casino & Resort, Inc., as amended.
10.1		Amended and Restated Credit Agreement, ~~and Amendment to Revolving Credit Note,~~ dated as of ~~April 14, 2008, entered into by and~~January 20, 2009, among Golden Road Motor Inn, Inc., as Borrower, Monarch Casino& Resort, Inc., as Guarantor, the Lenders as defined therein, and Wells Fargo Bank, National Association, ~~is incorporated herein by reference to the Company’s Form 8-K filed April 18, 2008, Exhibit 10.1.~~as Swingline Lender, L/C Issuer and Agent Bank.
31.1		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of John Farahi, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Ronald Rowan, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	MONARCH CASINO & RESORT, INC.
	(Registrant)


Date: ~~August 7, 2008~~May 11, 2009	By: /s/ RONALD ROWAN
	Ronald Rowan, Chief Financial Officer
	and Treasurer (Principal Financial
	Officer and Duly Authorized Officer)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Revenues
Casino	$	25,672,907		$	29,277,718		$	49,428,857		$	54,575,990
Food and beverage		9,547,395			10,568,173			19,308,615			21,072,388
Hotel		5,545,006			7,027,156			11,375,701			13,855,123
Other		1,185,503			1,285,828			2,417,572			2,474,451
Gross revenues		41,950,811			48,158,875			82,530,745			91,977,952
Less promotional allowances		(6,607,046	)		(6,597,555	)		(12,913,587	)		(12,635,041	)
Net revenues		35,343,765			41,561,320			69,617,158			79,342,911
Operating expenses
Casino		9,266,916			9,268,084			18,013,416			17,737,421
Food and beverage		4,606,282			4,866,969			9,295,647			9,835,686
Hotel		1,967,720			2,111,765			4,073,093			4,255,105
Other		312,997			377,437			659,651			741,057
Selling, general and administrative		12,877,513			12,792,008			25,981,613			24,322,811
Depreciation and amortization		1,893,237			2,064,970			3,899,794			4,140,416
Total operating expenses		30,924,665			31,481,233			61,923,214			61,032,496
Income from operations		4,419,100			10,080,087			7,693,944			18,310,415
Other (expense) income
Interest income		46,238			473,537			297,582			817,421
Interest expense		(131,335	)		(3,174	)		(135,492	)		(152,274	)
Total other (expense) income		(85,097	)		470,363			162,090			665,147
Income before income taxes		4,334,003			10,550,450			7,856,034			18,975,562
Provision for income taxes		(1,531,100	)		(3,650,000	)		(2,751,100	)		(6,580,000	)
Net income	$	2,802,903		$	6,900,450		$	5,104,934		$	12,395,562

Earnings per share of common stock
Net income
Basic	$	0.16		$	0.36		$	0.29		$	0.65
Diluted	$	0.16		$	0.36		$	0.29		$	0.64

Weighted average number of common shares and potential common shares outstanding
Basic		17,189,200			19,091,756			17,802,518			19,081,173
Diluted		17,253,109			19,366,442			17,899,384			19,345,213

	Six Months Ended June 30,
	2008			2007
Cash flows from operating activities:
Net income	$	5,104,934		$	12,395,562
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		3,899,794			4,140,416
Amortization of deferred loan costs		-			148,838
Share based compensation		1,149,899			1,072,018
Provision for bad debts		607,721			22,786
Gain on disposal of assets		(10,200	)		(5,770	)
Deferred income taxes		501,877			(740,206	)
Changes in operating assets and liabilities:
Receivables, net		844,677			(379,484	)
Inventories		24,700			(23,254	)
Prepaid expenses		104,251			(174,778	)
Other assets		-			(4,826	)
Accounts payable		1,948,170			1,794,905
Accrued expenses		(37,127	)		59,915
Federal income taxes payable, net		51,100			930,599
Net cash provided by operating activities		14,189,796			19,236,721

Cash flows from investing activities:
Proceeds from sale of assets		10,200			5,770
Acquisition of property and equipment		(41,047,818	)		(5,263,977	)
Changes in construction payable		1,359,204			-
Net cash used in investing activities		(39,678,414	)		(5,258,207	)

Cash flows from financing activities:
Proceeds from exercise of stock options		-			311,353
Tax benefit of stock option exercise		-			141,684
Borrowings under credit facility		34,000,000			-
Purchase of treasury stock		(35,674,454	)		-
Net cash (used in) provided by financing activities		(1,674,454	)		453,037
Net (decrease) increase in cash		(27,163,072	)		14,431,551
Cash and cash equivalents at beginning of period		38,835,820			36,985,187
Cash and cash equivalents at end of period	$	11,672,748		$	51,416,738

Supplemental disclosure of cash flow information:
Cash paid for interest.	$	50,158		$	3,437
Cash paid for income taxes	$	1,200,000		$	6,247,923

				Weighted Average
Options	Shares			Exercise Price		Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of period		1,295,426		$	19.04		-		-
Granted		74,957			17.15		-		-
Exercised		-			-		-		-
Forfeited		(20,000	)		24.04		-		-
Expired		-			-		-		-
Outstanding at end of period		1,350,383		$	18.86	7.5 yrs.		$	(9,512,414	)
Exercisable at end of period		542,750		$	10.20	7.0 yrs.		$	(782,787	)

Nonvested Shares	Shares			Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2008		782,676		$	10.43
Granted		74,957			6.49
Vested		(30,000	)		6.54
Forfeited		(20,000	)		24.04
Nonvested at June 30, 2008		807,633		$	10.20

	Three Months Ended June 30,
	2008			2007
Expected volatility		55.1	%		37.8	%
Expected dividends		-			-
Expected life (in years)
Directors’ Plan		2.5			2.5
Executive Plan		4.5			8.3
Employee Plan		3.1			3.1
Weighted average risk free rate		1.9	%		4.5	%
Weighted average grant date fair value per share of options granted	$	4.77		$	7.66
Total intrinsic value of options exercised		-		$	465,471

	Three Months Ended June 30,
	2008				2007
	Shares		Per Share Amount		Shares		Per Share Amount
Basic		17,189	$	0.16		19,092	$	0.36
Effect of dilutive stock options		64		-		274		-
Diluted		17,253	$	0.16		19,366	$	0.36

Amounts in millions, except per share amounts

	Three Months
	Ended June 30,						Percentage
	2008			2007			(Decrease)/Increase
Casino revenues	$	25.7		$	29.3			(12.3	)
Food and beverage revenues		9.6			10.6			(9.4	)
Hotel revenues		5.6			7.0			(20.0	)
Other revenues		1.2			1.3			(7.7	)
Net revenues		35.3			41.6			(15.1	)
Sales, general and admin expense		12.9			12.8			0.8
Income from operations		4.4			10.1			(56.4	)

Net Income		2.8			6.9			(59.4	)

Earnings per share - diluted		0.16			0.36			(55.6	)

Operating margin		12.5	%		24.3	%	(11.8		) pts.

	Six Months
	Ended June 30,						Percentage
	2008			2007			(Decrease)/Increase
Casino revenues	$	49.4		$	54.6			(9.5	)
Food and beverage revenues		19.3			21.1			(8.5	)
Hotel revenues		11.4			13.9			(18.0	)
Other revenues		2.4			2.5			(4.0	)
Net revenues		69.6			79.3			(12.2	)
Sales, general and admin expense		26.0			24.3			7.0
Income from operations		7.7			18.3			(57.9	)

Net Income		5.1			12.4			(58.9	)

Earnings per share - diluted		0.29			0.64			(54.7	)

Operating margin		11.1	%		23.1	%	(12.0		) pts.

Director	Votes Received		Votes Withheld
John Farahi		13,024,965		3,993,925
Charles W. Scharer		14,407,843		2,611,047
Craig F. Sullivan		14,407,841		2,611,049

3800 S. Virginia St.

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets

Condensed Consolidated Statements of Cash Flows

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

SIGNATURESTable of Contents