United
States


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





Form
10-K





(MARK
ONE)





[X]  ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007





OR





[
]  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.
      EmployerIncorporation
      or Organization)
            Identification
      No.)3800
      S. Virginia StreetReno,
      Nevada
            89502(Address
      of Principal Executive Offices)
            (ZIP
      Code)(Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last
      Report)





Registrant's
telephone number, including area code:(775)  335-4600





___________________








SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:





Name of
each exchange


Title of each
class on
which registered


None                                    None





SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:





COMMON
STOCK, $0.01 PAR VALUE


(Title of
Class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. YES [ ]  NO [X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. YES [ ]  NO [X]





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 [X]  NO [ ]





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]





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 the definitions of “accelerated filer”, “large
accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):





Large
accelerated filer [ ]  Accelerated Filer
[X]  Non-accelerated Filer [ ]  Smaller reporting company [
]





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). YES [ ]  NO [X]





The
aggregate market value of voting and non-voting common equity held by
nonaffiliates as of June 30, 2007, based on the closing price as reported on The
Nasdaq Stock Market (SM) of $26.85 per share, was approximately
$383,215,793.





As of
March 4, 2008, Registrant had 18,377,788 shares of Common Stock
outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE





Portions
of the Proxy Statement for Registrant's 2008 Annual Meeting of Stockholders,
which Proxy Statement shall be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this report, are incorporated by
reference into Part III.





STATEMENTS
IN THIS ANNUAL REPORT ON FORM 10-K WHICH EXPRESS THE "BELIEF", "ANTICIPATION",
"INTENTION", "EXPECTATION", OR "SCHEDULES" AS WELL AS
OTHER  STATEMENTS WHICH ARE NOT HISTORICAL FACT, AND STATEMENTS AS TO
BUSINESS OPPORTUNITIES, MARKET CONDITIONS, COST ESTIMATIONS AND OPERATING
PERFORMANCE INSOFAR AS THEY MAY APPLY PROSPECTIVELY, ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 AND INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
PROJECTED.








PART I





ITEM 1.
BUSINESS





Monarch
Casino & Resort, Inc. (the "Company" or "we"), through its wholly-owned
subsidiary, Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the
tropically-themed Atlantis Casino Resort Spa, a hotel/casino facility in Reno,
Nevada (the "Atlantis"). Unless otherwise indicated, "Monarch" or the "Company"
refers to Monarch Casino & Resort, Inc. and its Golden Road subsidiary.
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
principal executive offices are located at 3800 S. Virginia Street; Reno,
Nevada 89502; telephone (775) 335-4600.








AVAILABLE
INFORMATION





Our
website address is www.monarchcasino.com.  We make available free of
charge on or through our internet website our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, as soon as reasonably practicable
after we electronically file such material with, or furnish it to, the
Securities and Exchange Commission.








THE
ATLANTIS CASINO RESORT SPA





Through
Golden Road, we own and operate the tropically-themed Atlantis Casino Resort
Spa, which is located approximately three miles south of downtown in the
generally more affluent and rapidly growing south area of Reno,
Nevada.  The Atlantis features approximately 51,000 square feet of
casino space interspersed with waterfalls, giant artificial palm trees,
thatched-roof huts, and other tropical decor; a hotel and a motor lodge with 969
guest rooms; nine food outlets; an enclosed year-round pool with waterfall; an
outdoor pool; a health spa; two retail outlets offering clothing and traditional
gift shop merchandise; a full service salon for men and women; an 8,000
square-foot family entertainment center; and approximately 25,000 square feet of
banquet, convention and meeting room space.







In June
2007, we announced the groundbreaking on an expansion project with completion
expected in the second quarter of 2008.  New space will be 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
will be expanded by over 10,000 square feet, or approximately
20%.  The first floor casino plans include a redesigned, updated and
expanded race and sports book of approximately 4,000 square feet and an enlarged
poker room.   The expansion will also include a New York-style
deli restaurant.  The second floor expansion will create additional
ballroom and convention space of approximately 27,000 square feet, doubling the
existing facilities.  The spa and fitness center will be remodeled and
expanded to create an ultra-modern spa and fitness center
facility.  We also plan to add 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 December
31, 2007, the Company has paid approximately $17.2 million of the estimated
expansion and skybridge cost.




The
Reno-Sparks Convention Center is located across the street from the
Atlantis, the only hotel-casino within easy walking distance. The
Reno-Sparks Convention Center offers approximately 570,000 square feet of
exhibition, meeting room, ballroom, and lobby space.








ATLANTIS
      CASINO





The
Atlantis Casino offers approximately 1,450 slot and video poker machines;
approximately 38 table games, including blackjack, craps, roulette and others; a
sports book (which is operated by a third party pursuant to a lease
arrangement); Keno; and a poker room.





In
January 2008, we filed an application with the Nevada Gaming Commission to be
licensed to operate the race and sports book at the Atlantis, currently operated
by a third party tenant.  We anticipate a decision on this application
in the second quarter of 2008.





The
Atlantis offers what we believe are higher than average payout rates on slot
machines relative to other northern Nevada casinos and has adopted liberal rules
for its blackjack games, including the use of single decks of cards at some
tables.  We seek to attract high-end players through high quality
amenities and services and by extension of gaming credit after a careful credit
history evaluation.








HOTEL
      AND MOTOR LODGE





The
Atlantis includes three contiguous high-rise hotel towers with 820 rooms and
suites, and a low-rise motor lodge with another 149 rooms, for a total of 969
guest rooms. The first of the three hotel towers, which was completed in April
1991, contains 160 rooms and suites in 13 stories. The 19-story second hotel
tower was completed in September 1994 and contains 278 rooms and suites. The
third tower was completed in June 1999 and contains 382 rooms and suites in 28
stories. The rooms on the top seven floors in the third tower are nearly 20%
larger than the standard guest rooms and offer key card elevator access, upscale
accommodations and a private concierge service.





The
Atlantis hotel rooms feature upbeat, colorful interior decorations and
furnishings consistent with the Atlantis' tropical theme, as well as nine-foot
ceilings (most standard hotel rooms have eight-foot ceilings), which create an
open and spacious feel. The newest hotel tower features a four-story waterfall
with an adjacent year-round swimming pool in a climate controlled, five-story
glass enclosure, which shares an outdoor third floor pool deck with a seasonal
outdoor swimming pool and year round whirlpool. A full service salon (the "Salon
at Atlantis") overlooks the third floor sundeck and outdoor seasonal swimming
pool and offers salon-grade products and treatments for hair, nails, skincare
and body services for both men and women. A health spa is located adjacent to
the swimming areas. The hotel also features glass elevators rising the full 19
and 28 stories, respectively, of the two taller hotel towers, providing
panoramic views of the Reno area and the Sierra Nevada mountain range separating
Nevada from California.





The
149-room motor lodge is a two-story structure located adjacent to the hotel. The
motor lodge rooms, which are also decorated and furnished in a manner consistent
with the Atlantis' tropical theme, are smaller than the tower hotel rooms and
have standard eight-foot ceilings. We believe the motor lodge rooms appeal to
value conscious travelers who still want to enjoy the experience and amenities
of a first-class hotel-casino resort.





The
average occupancy rate and average daily room rate at the Atlantis for the
following periods were:


Years ended December 31,2007
            
            
            2006
            
            
            2005Occupancy
      rate
            
            
            93.80
            %
            
            
            93.30
            %
            
            
            93.00
            %Average
      daily room rate
            
            $
            74.04
            
            
            $
            69.87
            
            
            $
            63.24





We continually monitor and
adjust hotel room rates based upon demand and other competitive factors. Our
average daily room rate has also been impacted by rooms sold at discounted rates
to select wholesale operators for tour and travel packages.








RESTAURANTS
      AND DINING





The
Atlantis has seven restaurants, one snack bar and one gourmet coffee bar, as
described below.





·
            The
      600-seat Toucan Charlie's Buffet & Grill, which offers a wide variety
      of standard hot food selections, salads and seafood, specialty substations
      featuring made-to-order items such as Mongolian barbecue, fresh Southwest
      and Asian specialties, meats roasted in wood-fired rotisserie ovens, two
      salad stations, and a wide variety of freshly made
    desserts.


·
            The
      135-seat, aquatic-themed Atlantis Seafood Steakhouse gourmet
      restaurant.


·
            The
      200-seat, upscale MonteVigna Italian Ristorante, featuring a centrally
      located wine cellar.


·
            The
      Oyster Bar restaurant in the Sky Terrace offering fresh seafood, soups and
      bisques made to order.


·
            The
      Sushi Bar, also in the Sky Terrace, offering a variety of fresh raw and
      cooked sushi specialties, including all-you-can-eat lunch and dinner
      selections. Combined, the Oyster Bar and Sushi Bar can accommodate up to
      139 guests.


·
            The
      178-seat 24-hour Purple Parrot coffee
shop.


·
            The 122-seat
      Cafe ́ Alfresco restaurant serving pizzas prepared in a wood-fired, brick
      oven and a variety of gelato
deserts.


·
            A
      gourmet coffee bar, offering specialty coffee drinks, pastries and
      desserts made fresh daily in the Atlantis
  bakery.


·
            A
      snack bar and soda fountain serving ice cream and arcade-style
      refreshments.








THE
      SKY TERRACE





The Sky
Terrace is a unique structure with a diamond-shaped, blue glass body suspended
approximately 55 feet above street level and spanning 160 feet across South
Virginia Street.  The Sky Terrace connects the Atlantis with
additional parking on a 16-acre site owned by us across South Virginia Street
from the Atlantis. The structure rests at each end on two 100-foot tall Grecian
columns with no intermediate support pillars. The tropically-themed interior of
the Sky Terrace contains the Oyster Bar, a video poker bar, banks of slot
machines, a lounge area with oversized leather sofas and chairs and the Sushi
Bar.





Operations
at the Atlantis are conducted 24 hours a day, every day of the year. The
Atlantis' business is seasonal in nature, with higher revenues during the summer
months and lower revenues during the winter months.





ATLANTIS
IMPROVEMENTS





We
have continuously invested in upgrading the Atlantis.  Our capital
expenditures at the Atlantis were $17.3 million in 2007, $5.8 million in 2006
and $6.1 million in 2005.





During
2007, capital expenditures primarily consisted of construction costs associated
with the current expansion phase of the Atlantis that commenced in June 2007,
and the acquisition of gaming equipment to upgrade and replace existing gaming
equipment.During
2006, capital expenditures primarily consisted of acquisition of gaming and
computer equipment, the installation of a casino high-definition video display
system, renovation of our Java Coast Gourmet Coffee and pastry bar, initial
design and planning expenditures associated with our Atlantis expansion and
ongoing public area renovations and upgrades.  During 2005, capital
expenditures primarily consisted of the replacement of and upgrade to our
ventilation and cooling system, acquisition of gaming and computer systems
equipment, and continued renovations to the facility.








ADDITIONAL
      EXPANSION POTENTIAL





LAND
CURRENTLY OWNED: Our expansion potential at the current site is
twofold.  First, we could further expand our existing hotel and
casino, thereby giving us more hotel rooms, amenities and more room for
additional casino space. Second, we could expand by developing the 16-acre
parcel that we own across the street from the Atlantis. This site is connected
to the Atlantis by the Sky Terrace and is currently used for parking and special
events related to the Atlantis.  Our 16-acre parcel meets all current
Reno zoning requirements in the event we decide to build another resort casino
or entertainment facility.





EFFORTS
TO ACQUIRE ADDITIONAL LAND: On May 3, 2006, Monarch notified Ben Farahi, in his
capacity as the manager of Maxum, LLC, the general partner of Biggest Little
Investment L.P. (“BLI”), that the board of directors of Monarch wished to
commence negotiations for purchasing the 18.95 acre shopping center property
(the “Shopping Center”) owned by BLI located adjacent to the
Atlantis.  On July 26, 2006, Monarch submitted a formal offer,
formulated and delivered by a committee comprised of the Company’s independent
directors (the “Committee”), to purchase the Shopping Center.  On
October 16, 2006, the Committee received a letter from counsel to BLI advising
the Company that BLI, through its general partner, Maxum, L.L.C., had “decided
that such offer is not in the best interest of the Partnership’s limited
partners and, therefore, will not be entering into negotiations with
Monarch.”  The Board of Directors continues to consider expansion
alternatives.  While there have been subsequent communications between
BLI and us from time to time regarding our interest in the Shopping Center,
nothing has resulted.





Collectively,
John Farahi, Bob Farahi and Ben Farahi, beneficially own a controlling interest
in BLI through their beneficial ownership interest in Western Real Estate
Investments, LLC.








MARKETING
      STRATEGY





The
Reno/Tahoe region is a major gaming and leisure destination with gaming revenues
of approximately $1 billion.





Our
revenues and operating income are principally dependent on the level of gaming
activity at the Atlantis casino.  Our predominant marketing goal is to
utilize all of the Atlantis facilities to generate additional casino
play.  Our secondary goal is to maximize revenues from our hotel, food
and beverage, cocktail lounges, convention and meeting rooms, retail and other
amenities.





Our
marketing efforts are directed toward three broad consumer
groups:  leisure travelers, conventioneers and northern Nevada
residents.   We believe the Atlantis' location outside of
downtown Reno, near the airport, near major freeway arteries and across the
street from the Reno-Sparks Convention Center makes the facility appealing to
all three groups.





LEISURE TRAVELERS: The Reno/Tahoe
region is a popular gaming and vacation destination that enjoys convenient air
service from cities throughout the United States.  The principal
segments of Reno's leisure traveler market are independent travelers, package
tour and travel guests, guests we reach through the world-wide-web and high-end
players.  We attempt to maximize our gaming revenues and hotel
occupancy through a balanced marketing approach that addresses each market
segment.





Independent travelers make reservations
directly with hotels of their choice or through independent travel
agents.  We strive to attract the middle to upper-middle income strata
of this consumer segment through advertising and direct
marketing.  This segment represents a large portion of the Atlantis'
guests.





The package tour and travel segment
consists of visitors who utilize travel packages offered by wholesale
operators.  We market to this segment through relationships with
select wholesalers, primarily to generate guest visits and supplement mid-week
occupancy.





We welcome domestic and international
reservations on the Atlantis' website www.atlantiscasino.com and are featured on
major package tour and travel websites.





We market to high-end players
selectively through direct sales.  We utilize complimentary rooms,
food and beverage, special events and the extension of gaming credit to attract,
and maintain patronage from, high-end players.





CONVENTIONEERS: Convention
business, like package tour and travel business, supplements occupancy during
lower-demand periods.  Conventioneers also typically pay higher
average room rates than non-conventioneers.  We selectively seek
convention and meeting groups that we believe will materially enhance the
Atlantis' occupancy and daily room rates, as well as those we believe will be
more likely to utilize our gaming products.  As the only hotel-casino
within easy walking distance of the Reno-Sparks Convention Center, the Atlantis
is, in our view, uniquely positioned to capitalize on this expanding
segment.  We believe the Reno-Sparks Convention Center has
created, and we expect will continue to create, additional guest traffic for the
Atlantis within this market segment that is presently underserved in the Reno
area.  As described in the “THE ATLANTIS CASINO RESORT SPA” section
above, an enclosed pedestrian skywalk over Peckham Lane that will connect the
Atlantis directly into the Reno-Sparks Convention Center facilities is presently
under construction





We market to all guest segments,
including conventioneers, on the basis of the location, quality and ambiance of
the Atlantis facility, gaming values, friendly, efficient service, and the
quality and relative value of Atlantis rooms, food and beverage offerings,
entertainment and promotions.





Our
frequent player club, "Club Paradise," allows our guests to be eligible to
receive rewards and privileges based on the amount of their play, while allowing
us to track their play through a computerized system. We use this information to
determine appropriate levels of complimentary awards, and for guiding our direct
marketing efforts. We believe that Club Paradise significantly enhances our
ability to build guest loyalty and generate repeat guest visits.





NORTHERN NEVADA
RESIDENTS:  We market to northern Nevada residents (referred to from
time to time as "Locals") on the basis of the Atlantis’ location and
accessibility, convenient surface parking, gaming values, ambiance, friendly,
efficient service, and quality and relative value of food and beverage
offerings, entertainment and promotions.





COMPETITION





Competition
in the Reno area gaming market is intense.  Based on information
obtained from the December 31, 2007 Gaming Revenue Report published by the
Nevada State Gaming Control Board, there are approximately 13 casinos in the
Reno area which generate more than $12.0 million each in annual gaming
revenues.





We
believe that the Atlantis' primary competition for leisure travelers comes from
other large-scale casinos that offer amenities that appeal to middle to
upper-middle income guests.  We compete for leisure travelers on the
basis of the desirability of our location, the quality and ambiance of the
Atlantis facility, friendly, efficient service, the quality and relative value
of its rooms and food and beverage offerings, entertainment offerings,
promotions and gaming values. We believe that our location away from downtown
Reno is appealing to newer and more affluent guests.





We
believe that the Atlantis' primary competition for conventioneers comes from
other large-scale hotel casinos in the Reno area that actively target the
convention market segment, and from other cities in the western United States
with large convention facilities and substantial hotel capacity, including Las
Vegas.  We compete for conventioneers based on the desirability of our
location, the quality and ambiance of the Atlantis facility, meeting and banquet
rooms designed to appeal to conventions and groups, friendly, efficient service,
and the quality and relative value of its rooms and food and beverage
offerings.  We believe that the Atlantis' proximity to the
Reno-Sparks Convention Center affords us a distinct competitive advantage
in attracting conventioneers.





We
believe that the Atlantis' competition for northern Nevada residents comes
primarily from other large-scale casinos located outside of downtown Reno that
offer amenities that appeal to middle to upper-middle income guests, and
secondarily with those casinos located in downtown Reno that offer similar
amenities.  We compete for northern Nevada residents primarily on the
basis of the desirability of our location, the quality and ambiance of the
Atlantis facility, friendly, efficient service, the quality and relative value
of our food and beverage offerings, entertainment offerings, promotions and
gaming values.  We believe the Atlantis' proximity to residential
areas in south Reno and its abundant surface parking provide us an advantage
over the casinos located in downtown Reno in attracting Locals.





Station
Casinos, Inc., a casino operator operating primarily in the Las Vegas market,
has acquired several parcels in the Reno area and has announced plans to build
two casinos, one of which will be located within one mile of our Atlantis Casino
Resort Spa.  Station is a dominant casino operator catering to
tourists and local residents in the Las Vegas market.  Should Station
proceed with its plans to build one or more facilities in Reno, Station will
create additional competition for us and could have a material adverse impact on
our business. We also believe, however, that Station’s plans could create a
“mini strip” concentration of casinos near the Atlantis which could draw gaming
patrons away from the downtown Reno casinos to properties in this “mini strip”
area.





The
Atlantis also competes for gaming guests with hotel casino operations located in
other parts of Nevada, especially Las Vegas and Lake Tahoe, and with hotel
casinos, Indian casinos, and riverboat casinos located elsewhere throughout the
United States and the world.  We believe that the Atlantis also
competes to a lesser extent with state-sponsored lotteries, off-track wagering,
card parlors, and other forms of legalized gaming, particularly in northern
California and the Pacific Northwest.





The
constitutional amendment approved by California voters in 2000 allowing the
expansion of Indian casinos in California has had an adverse 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.  The
extent of this continued impact is difficult to predict, but we believe that the
impact on us will continue to be mitigated to some extent by the revenue
generated from the Reno area residents and our proximity to the
Reno-Sparks Convention Center.  However, if other Reno area
casinos continue to suffer business losses due to increased pressure from
California Indian casinos, they may intensify their marketing efforts to
Reno-area residents as well. However, we believe our numerous amenities, such as
a wide array of restaurants, a video arcade, banquet facilities and surface
parking are key advantages in our ability to attract Locals that competitor
facilities cannot easily match without major capital expenditures.





Certain
experienced Nevada gaming operators have agreements to build and manage Indian
casino facilities near San Francisco, one of Reno's key feeder markets. Once
these facilities receive all the required permits and are built, they could
provide an alternative for drive market guests to Reno area casinos, especially
during certain winter periods when auto travel through the Sierra Nevada
mountain passes is hampered. One major facility near Sacramento has been
operating since June 2003 and has been very successful, adversely impacting many
hotel casinos in Reno.





We also
believe that the legalization of unlimited land-based casino gaming in or near
any major metropolitan area in the Atlantis' feeder markets, such as San
Francisco or Sacramento, could have a material adverse impact on our
business.





In June 2004, five California Indian
tribes signed compacts with the state that allow the tribes to increase the
number of slot machines beyond the previous 2,000-per-tribe limit in exchange
for higher fees from each of the five tribes.  In February 2008, the
voters of the State of California approved compacts with four tribes located in
Southern California that increases the limit of Native American operated slot
machines in the State of California.








REGULATION
      AND LICENSING





The
ownership and operation of casino gaming facilities in Nevada are subject to the
Nevada Gaming Control Act and the regulations promulgated thereunder, referred
to as the Nevada Act, and various local regulations.  Our gaming
operations are subject to the licensing and regulatory control of the Nevada
Gaming Commission, the Nevada State Gaming Control Board, and the Reno City
Council, referred to collectively as the Nevada Gaming Authorities.





The laws,
regulations and supervisory procedures of the Nevada Gaming Authorities are
based upon declarations of public policy that are concerned with, among other
things:





·
            the
      prevention of unsavory or unsuitable persons from having a direct or
      indirect involvement with gaming at any time or in any
      capacity;


·
            the
      establishment and maintenance of responsible accounting practices and
      procedures;


·
            the
      maintenance of effective controls over the financial practices of
      licensees, including the establishment of minimum procedures for internal
      fiscal affairs and the safeguarding of assets and revenues, providing
      reliable record keeping and requiring the filing of periodic reports with
      the Nevada Gaming Authorities;


·
            the
      prevention of cheating and fraudulent practices;
  and


·
            providing
      a source of state and local revenues through taxation and licensing
      fees.





Changes
in such laws, regulations and procedures could have an adverse effect on our
gaming operations.





Golden
Road, our subsidiary which operates the Atlantis, is required to be licensed by
the Nevada Gaming Authorities.  The gaming license requires the
periodic payment of fees and taxes and is not transferable.  We are
registered by the Nevada Gaming Commission as a publicly traded, or Registered
Corporation.  As such, we are required periodically to submit detailed
financial and operating reports to the Nevada Gaming Commission and furnish any
other information that the Nevada Gaming Commission may require.  No
person may become a stockholder of, or receive any percentage of profits from,
Golden Road without first obtaining licenses and approvals from the Nevada
Gaming Authorities.  Golden Road and Monarch have obtained from the
Nevada Gaming Authorities the various registrations, approvals, permits and
licenses required in order to engage in gaming activities in
Nevada.





The
Nevada Gaming Authorities may investigate any individual who has a material
relationship to, or material involvement with, Golden Road or Monarch in order
to determine whether that individual is suitable or should be licensed as a
business associate of a gaming licensee. Officers, directors and key employees
of Golden Road must file applications with the Nevada Gaming Authorities and may
be required to be licensed or found suitable by the Nevada Gaming
Authorities.  Our officers, directors and key employees who are
actively and directly involved in gaming activities of Golden Road may be
required to be licensed or found suitable by the Nevada Gaming
Authorities.  The Nevada Gaming Authorities may deny an application
for licensing for any cause that they deem reasonable. A finding of suitability
is comparable to licensing, and both require submission of detailed personal and
financial information followed by a thorough
investigation.  Applicants for licensing or a finding of suitability
must pay all costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities. In addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities also have jurisdiction to disapprove a change in a corporate
position.





If the
Nevada Gaming Authorities were to find an officer, director or key employee
unsuitable for licensing or unsuitable to continue having a relationship with
Golden Road or us, the companies involved would have to sever all relationships
with that person.  In addition, the Nevada Gaming Commission may
require that we terminate the employment of any person who refuses to file
appropriate applications.  Determinations of suitability or of
questions pertaining to licensing are not subject to judicial review in
Nevada.





We are
required to submit detailed financial and operating reports to the Nevada Gaming
Commission.  Substantially all material loans, leases, sales of
securities and similar financing transactions by us must be reported to, or
approved by, the Nevada Gaming Commission.





If it
were determined that we violated the Nevada Act, our gaming licenses and
registrations with the Nevada Gaming Commission could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures.  In addition, we and the persons involved could
be subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Nevada Commission.  Further, the Nevada Gaming
Commission could appoint a supervisor to operate our gaming properties and,
under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of our gaming properties)
could be forfeited to the State of Nevada.  The limitation,
conditioning or suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would) materially
adversely affect our gaming operations.





Any
beneficial holder of our voting securities, regardless of the number of shares
owned, may be required to file an application, be investigated, and have his
suitability as a beneficial holder of our voting securities determined if the
Nevada Gaming Commission has reason to believe that such ownership would
otherwise be inconsistent with the declared policies of the State of
Nevada.  The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.





The
Nevada Gaming Act requires any person who acquires more than 5% of Monarch’s
voting securities to report the acquisition to the Nevada Gaming
Commission.  The Nevada Act requires that beneficial owners of more
than 10% of our voting securities apply to the Nevada Gaming Commission for a
finding of suitability within 30 days after the Chairman of the Nevada Gaming
Control Board mails the written notice requiring such filing.  Under
certain circumstances, an "institutional investor," as defined in the Nevada
Act, which acquires more than 10%, but not more than 15%, of our voting
securities may apply to the Nevada Gaming Commission for a waiver of such
finding of suitability if the institutional investor holds the voting securities
for investment purposes only.  An institutional investor is not deemed
to hold voting securities for investment purposes unless they were acquired and
are held in the ordinary course of business as an institutional investor and not
for the purpose of causing, directly or indirectly, the election of a majority
of the members of our board of directors, any change in our corporate charter,
bylaws, management, policies or operations, or any of our gaming affiliates, or
any other action that the Nevada Gaming Commission finds to be inconsistent with
holding our voting securities for investment purposes
only.  Activities that are not deemed to be inconsistent with holding
voting securities for investment purposes only include:





·
            voting
      on all matters voted on by
stockholders;


·
            making
      financial and other inquiries of management of the type normally made by
      securities analysts for informational purposes and not to cause a change
      in its management, policies or operations;
and


·
            such
      other activities as the Nevada Gaming Commission may determine to be
      consistent with such investment
intent.





If the
beneficial holder of voting securities who must be found suitable is a
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners.  The
applicant is required to pay all costs of investigation.





Any
person who fails or refuses to apply for a finding of suitability or a license
within 30 days after being ordered to do so by the Nevada Gaming Commission or
the Chairman of the Nevada State Gaming Control Board may be found
unsuitable.  The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial
owner.  Any stockholder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the common stock of a Registered
Corporation beyond such period of time as may be prescribed by the Nevada Gaming
Commission may be guilty of a criminal offense.  We are subject to
disciplinary action if, after we receive notice that a person is unsuitable to
be a stockholder or to have any other relationship with us, we:





·
            pay
      that person any dividend or interest upon voting
    securities,


·
            allow
      that person to exercise, directly or indirectly, any voting right
      conferred through securities held by that
  person,


·
            pay
      remuneration in any form to that person for services rendered or
      otherwise, or


·
            fail
      to pursue all lawful efforts to require such unsuitable person to
      relinquish his voting securities for cash at fair market
      value.





The
Nevada Gaming Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered
Corporation.  If the Nevada Gaming Commission determines that a person
is unsuitable to own such security, then pursuant to the Nevada Act, the
Registered Corporation can be sanctioned, including the loss of its approvals
if, without the prior approval of the Nevada Gaming Commission, it:





·
            pays
      to the unsuitable person any dividend, interest, or any
      distribution;


·
            recognizes
      any voting right by such unsuitable person in connection with such
      securities;


·
            pays
      the unsuitable person remuneration in any form;
  or


·
            makes
      any payment to the unsuitable person by way of principal, redemption,
      conversion, exchange, liquidation or similar
  transaction.





We
are required to maintain a current stock ledger in Nevada, and the Nevada Gaming
Authorities may examine the ledger at any time.  If any securities are
held in trust by an agent or a nominee, the record holder may be required to
disclose the identity of the beneficial owner to the Nevada Gaming
Authorities.  A failure to make such disclosure may be grounds for
finding the record holder unsuitable.  We are also required to render
maximum assistance in determining the identity of the beneficial
owner.  The Nevada Gaming Commission has the power to require our
stock certificates to bear a legend indicating that the securities are subject
to the Nevada Act.





We
may not make a public offering of our securities without the prior approval of
the Nevada Gaming Commission if the securities or proceeds there from are
intended to be used to construct, acquire or finance gaming facilities in
Nevada, or to retire or extend obligations incurred for purposes of
constructing, acquiring or financing gaming facilities.  Any approval,
if granted, does not constitute a finding, recommendation or approval by the
Nevada Gaming Commission or the Nevada Gaming Control Board as to the accuracy
or adequacy of the prospectus or the investment merits of the securities
offered.  Any representation to the contrary is unlawful.





Changes
in our control through merger, consolidation, stock or asset acquisitions,
management or consulting agreements, or any act or conduct by a person whereby
that person obtains control (including foreclosure on the pledged shares), may
not occur without the prior approval of the Nevada Gaming
Commission.  Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada State Gaming Control Board and Nevada Gaming
Commission in a variety of stringent standards prior to assuming control of such
Registered Corporation.  The Nevada Gaming Commission may also require
controlling stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval process
relating to the transaction.





The
Nevada legislature has declared that some corporate acquisitions opposed by
management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming.  The Nevada Gaming Commission has established a
regulatory scheme to ameliorate the potentially adverse effects of these
business practices upon Nevada's gaming industry and to further Nevada's policy
to:





·
            assure
      the financial stability of corporate gaming operators and their
      affiliates;


·
            preserve
      the beneficial aspects of conducting business in the corporate form;
      and


·
            promote
      a neutral environment for the orderly governance of corporate
      affairs.





We are,
in certain circumstances, required to receive approval from the Nevada Gaming
Commission before we can make exceptional repurchases of voting securities above
their current market price and before we can consummate a corporate acquisition
opposed by management.  The Nevada Act also requires prior approval of
a plan of recapitalization proposed by our board of directors in response to a
tender offer made directly to a Registered Corporation's stockholders for the
purposes of acquiring control of the Registered Corporation.





Licensee
fees and taxes, computed in various ways depending on the type of gaming or
activity involved, are payable to the State of Nevada and to the counties and
cities in which the Nevada licensee's respective operations are
conducted.  Depending upon the particular fee or tax involved, these
fees and taxes are payable monthly, quarterly or annually and are based upon
either:





·
            a
      percentage of the gross revenues
received;


·
            the
      number of gaming devices operated;
or


·
            the
      number of table games operated.





A live
entertainment tax is also paid where entertainment is furnished in connection
with the selling of food or refreshments.  Nevada licensees that hold
a license as an operator of a slot route, a manufacturer or a distributor also
pay certain fees and taxes to the State of Nevada.





Any
person who is licensed, required to be licensed, registered, required to be
registered, or is under common control with such persons, referred to as
Licensees, and who is or proposes to become involved in a gaming venture outside
of Nevada is required to deposit with the Nevada State Gaming Control Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada State Gaming Control Board of their
participation in foreign gaming.  The revolving fund is subject to
increase or decrease in the discretion of the Nevada Gaming
Commission.  Thereafter, Licensees are required to comply with certain
reporting requirements imposed by the Nevada Act.  Licensees are also
subject to disciplinary action by the Nevada Gaming Commission if they knowingly
violate any laws of the foreign jurisdiction pertaining to the foreign gaming
operation, fail to conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming operations, engage
in activities that are harmful to the State of Nevada or its ability to collect
gaming taxes and fees, or employ a person in the foreign operation who has been
denied a license or finding of suitability in Nevada on the ground of personal
unsuitability.





In
January 2008, we filed an application with the Nevada Gaming Commission to be
licensed to operate the race and sports book at the Atlantis, currently operated
by a third party tenant.  We anticipate a decision on this application
in the second quarter of 2008.








EMPLOYEES





As
of February 14, 2008, we had approximately 1,850 employees.  None of
our employees are covered by collective bargaining agreements.  We
believe that our relationship with our employees is good.








ITEM 1A. RISK
FACTORS





Our
business prospects are subject to various risks and uncertainties that impact
our business. You should carefully consider the following discussion of risks,
and the other information provided in this annual report on Form 10-K. The risks
described below are not the only ones facing us. Additional risks that are
presently unknown to us or that we currently deem immaterial may also impact our
business.





RECENT INSTABILITY IN THE FINANCIAL
MARKETS MAY HAVE AN IMPACT ON OUR BUSINESS




Recently,
the residential real estate market in Reno and the U.S. has experienced a
significant downturn due to declining real estate values, substantially reducing
mortgage loan originations and securitizations, and precipitating more
generalized credit market dislocations and a significant contraction in
available liquidity globally. These factors, combined with rising oil prices,
declining business and consumer confidence and increased unemployment, have
precipitated an economic slowdown and fears of a possible recession. Individual
consumers are experiencing higher delinquency rates on various consumer loans
and defaults on indebtedness of all kinds have increased. Further declines in
real estate values in Reno and the U.S. or elsewhere and continuing credit and
liquidity concerns could have an adverse affect on our results of
operations.







CONSTRUCTION
RELATED DISRUPTIONS TO OUR BUSINESS COULD IMPACT OUR BUSINESS
OPERATIONS





As discussed above in “Item 1. Business
- The Atlantis Casino Resort Spa” we commenced construction on an expansion
project to the Atlantis in the second quarter of 2007. The expected construction
period of twelve months will continue into the second quarter of
2008.  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
GAMING INDUSTRY IS HIGHLY COMPETITIVE AND INCREASED COMPETITION COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR FUTURE OPERATIONS





The
gaming industry is highly competitive.  As competitive pressures from
California Native American casinos increase, other Reno area casinos may
intensify their targeting of the Reno area resident market, which is one of our
key markets.  Increased competitive pressures in the local market
could adversely impact our ability to continue to attract local residents to the
Atlantis or require us to use more expensive and therefore less profitable
promotions to compete more efficiently.





Several
Native American casinos have opened in Northern California since passage of the
2000 constitutional amendment. Certain experienced Nevada gaming operators
manage Indian casino facilities near Sacramento, one of Reno's key feeder
markets.  One major facility near Sacramento has been operating since
June 2003 and has been very successful, adversely impacting many hotel casinos
in Reno. Central and Northern California gaming facilities could provide an
alternative to Reno area casinos, especially during certain winter periods when
auto travel through the Sierra Nevada mountain passes is hampered. This loss of
California drive-in guests could adversely affect our operations.





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





In June 2004, five California Indian
tribes signed compacts with the state that allow the tribes to increase the
number of slot machines beyond the previous 2,000-per-tribe limit in exchange
for higher fees from each of the five tribes.  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.





Other
states are also considering legislation that would enable the development and
operation of casinos or casino-like operations.





In
addition, Native American gaming facilities in California and other
jurisdictions in some instances operate under regulatory requirements less
stringent than those imposed on Nevada licensed casinos, which could provide
them a competitive advantage in our markets.  Moreover, increases in
the popularity of, and competition from, Internet and other account wagering
gaming services, which allow their guests to wager on a wide variety of sporting
events and play Las Vegas-style casino games from home, could have a material
adverse effect on our business, financial condition, operating results and
prospects.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED BY THE ENTRY OF STATION CASINOS IN THE RENO
MARKET





Station
Casinos, Inc., a casino operator operating primarily in the Las Vegas market and
catering mainly to Las Vegas area residents, has acquired several parcels in the
Reno area and has announced plans to build two casinos, one of which will be
located within one mile of our Atlantis Casino Resort Spa. Station Casinos is
the dominant casino operator catering to local residents in the Las Vegas
market. Should Station Casinos proceed with its plans, it will create additional
competition for us in the Reno area resident, conventioneer and tour and travel
markets and could have a material adverse impact on our business.





COST
OVERRUNS AND DELAYS ON EXPANSION PROJECTS COULD ADVERSELY AFFECT OUR
BUSINESS





We began
construction in the second quarter of 2007 on the next expansion phase of the
Atlantis. A variety of factors outside our control, such as weather and
difficulties in obtaining permits or other regulatory approvals, as well as the
performance by third party contractors, may result in increased costs or delays
in construction. Cost overruns or delays in completing a project could have an
adverse effect on our results of operations and cash flows.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED IF THE RENO ECONOMY DECLINES





We market
to and rely upon business from Reno area residents.  In recent years,
Reno has enjoyed robust business growth and has attracted a number of
technology, product distribution and marketing companies.  These
businesses have created jobs and helped fuel residential development, including
the southwest Reno metropolitan area near the Atlantis.  Should there
be adverse changes in the business and employment conditions in Reno, our
business could be adversely impacted.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED BY EXPANDED NATIVE AMERICAN GAMING OPERATIONS
IN CALIFORNIA AND THE PACIFIC NORTHWEST





A large
source of leisure traveler guests is California and the Pacific Northwest,
including a large number who drive to Reno from the San Francisco and Sacramento
metropolitan areas.  Several large-scale Native American-owned casino
facilities have commenced operations in that state, some of which are located
close to our key markets. The increased competition from these facilities could
have a material adverse impact on our business.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED IF WE ARE UNABLE TO ADEQUATELY STAFF OUR
OPERATIONS





The robust business growth Reno has
enjoyed in recent years has increased the competition for
employees.  The new and growing businesses in the area have created
job opportunities that at times have exceeded the area’s supply of qualified
employees.  The unemployment rate in the Reno area has been
significantly lower than the national average over the last several
years.  If we are unable to attract and retain qualified employees, or
if competition for employees results in materially increased wages, our ability
to maintain and grow our business could be adversely impacted.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED BY WEAKENED ECONOMIC CONDITIONS IN CALIFORNIA
AND THE PACIFIC NORTHWEST





Because
California and the Pacific Northwest are significant markets for our leisure
traveler and conventioneer guests, our business may be adversely impacted in the
event of weakened economic conditions in those geographical
markets.





OUR
BUSINESS MAY BE ADVERSELY IMPACTED BY DOMESTIC AND INTERNATIONAL
EVENTS





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 conflict 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.





AN
OUTBREAK OF HIGHLY INFECTIOUS DISEASE COULD ADVERSELY AFFECT THE NUMBER OF
VISITORS TO OUR FACILITIES AND DISRUPT OUR OPERATIONS, RESULTING IN A MATERIAL
ADVERSE EFFECT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH
FLOWS





There
have been recent fears concerning the spread of an “avian flu” and cruise ships
have reported other highly infectious virus outbreaks. Potential future
outbreaks of highly infectious diseases may adversely affect the number of
visitors to our property and our business and prospects. Furthermore, an
outbreak might disrupt our ability to adequately staff our business and could
generally disrupt our operations. If any of our guests or employees is suspected
of having contracted certain highly contagious diseases, we may be required to
quarantine these customrs or employees or the affected areas of our facilities
and temporarily suspend part or all of our operations at affected facilities.
Any new outbreak of such a highly infectious disease could have a material
adverse effect on our financial condition, results of operations and cash
flows.





FAILURE
OF THE RENO-SPARKS CONVENTION CENTER TO BOOK AND ATTRACT CONVENTION BUSINESS
COULD ADVERSELY IMPACT OUR BUSINESS





The
Atlantis is the closest hotel-casino to the Reno-Sparks Convention Center. If
the Reno-Sparks Convention Center does not succeed in booking the anticipated
level of conventions, our future results of operations could be adversely
impacted.





BECAUSE
WE ARE CURRENTLY DEPENDENT UPON A SINGLE PROPERTY IN A SINGLE MARKET FOR ALL OF
OUR CASH FLOW, WE ARE SUBJECT TO GREATER RISKS THAN A GAMING COMPANY WITH MORE
OPERATING PROPERTIES OR THAT OPERATES IN MORE MARKETS





We
currently do not have material assets or operations other than the Atlantis. As
a result, we are entirely dependent upon the Atlantis property for all of our
cash flow until we develop other properties.





OUR
ABILITY TO INCREASE REVENUES IS LIMITED UNTIL MATERIAL EXPANSION OF OUR
OPERATIONS OCCURS





We are solely dependent on our single
operation, the Atlantis.  Our ability to materially increase revenues
and other operating results is limited by capacity constraints at the
Atlantis.  While an expansion is currently underway, our ability to
produce material increases in revenues is relatively limited, unless we complete
a material expansion of the Atlantis, open or acquire another hotel-casino, or
acquire or combine with another hotel-casino company.





OUR
BUSINESS IS SUBJECT TO RESTRICTIONS AND LIMITATIONS IMPOSED BY GAMING REGULATORY
AUTHORITIES THAT COULD ADVERSELY AFFECT US





The
ownership and operation of casino gaming facilities are subject to extensive
state and local regulation.  The State of Nevada and the applicable
local authorities require various licenses, registrations, permits and approvals
to be held by us and our subsidiary.  The Nevada Gaming Commission
may, among other things, limit, condition, suspend, revoke or decline to renew a
license or approval to own the stock of our Nevada subsidiary for any cause
deemed reasonable by such licensing authority.  If we violate gaming
laws or regulations, substantial fines could be levied against us, our
subsidiary and the persons involved, and we could be forced to forfeit a portion
of our assets.  The suspension, revocation or non-renewal of any of
our licenses or the levy on us of substantial fines or forfeiture of assets
would have a material adverse effect on our business, financial condition and
results of operations.





To date,
we have obtained all governmental licenses, findings of suitability,
registrations, permits and approvals necessary for the operation of our current
gaming activities.  However, gaming licenses and related approvals are
deemed to be privileges under Nevada law.  We cannot assure you that
our existing licenses, permits and approvals will be maintained or
extended.





OUR
INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COVER ALL POSSIBLE LOSSES THAT OUR
PROPERTY COULD SUFFER.  IN ADDITION, OUR INSURANCE COSTS MAY INCREASE
AND WE MAY NOT BE ABLE TO OBTAIN THE SAME INSURANCE COVERAGE IN THE
FUTURE





Although
we have general property insurance covering damage caused by a casualty loss
(such as fire and natural disasters), each such policy has certain exclusions.
In addition, our property insurance is in an amount that may be less than the
expected replacement cost of rebuilding the complex if there was a total loss.
Our level of insurance coverage may not be adequate to cover all losses in the
event of a major casualty. In addition, certain casualty events, such as labor
strikes, nuclear events, acts of war, loss of income due to cancellation of room
reservations or conventions due to fear of terrorism, deterioration or
corrosion, insect or animal damage and pollution, might not be covered at all
under our policies. Therefore, certain acts could expose us to heavy, uninsured
losses.





In
addition, although we currently have insurance coverage for occurrences of
terrorist acts and for certain losses that could result from these acts, our
terrorism coverage is subject to the same risks and deficiencies as those
described above for our general property coverage. The lack of sufficient
insurance for these types of acts could expose us to heavy losses in the event
that any damages occur, directly or indirectly, as a result of terrorist attacks
or otherwise, which could have a significant negative impact on our
operations.





In
addition to the damage caused to our property by a casualty loss (such as fire,
natural disasters, acts of war or terrorism), we may suffer business disruption
as a result of these events or be subject to claims by third parties injured or
harmed. While we carry business interruption insurance and general liability
insurance, this insurance may not be adequate to cover all losses in such
event.





We renew
our insurance policies on an annual basis. The cost of coverage may become so
high that we may need to reduce our policy limits or agree to certain exclusions
from our coverage. Among other factors, it is possible that the situation in
Iraq, homeland security concerns, other catastrophic events or any change in
government legislation governing insurance coverage for acts of terrorism could
materially adversely affect available insurance coverage and result in increased
premiums on available coverage (which may cause us to elect to reduce our policy
limits) and additional exclusions from coverage. Among other potential future
adverse changes, in the future we may elect not to, or may not be able to,
obtain any coverage for losses due to acts of terrorism.





Our debt
instruments and other material agreements require us to maintain a certain
minimum level of insurance. Failure to satisfy these requirements could result
in an event of default under these debt instruments or material agreements,
which would have a material adverse effect on our financial condition, results
of operations or cash flows.





IF
THE STATE OF NEVADA OR THE CITY OF RENO INCREASES GAMING TAXES AND FEES, OUR
RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED





State and
local authorities raise a significant amount of revenue through taxes and fees
on gaming activities. From time to time, legislators and officials have proposed
changes in tax laws, or in the administration of such laws, affecting the gaming
industry. In addition, worsening economic conditions could intensify the efforts
of state and local governments to raise revenues through increases in gaming
taxes.  If the State of Nevada or the City of Reno were to increase
gaming taxes and fees, our results of operations could be adversely
affected.  There are several gaming tax increase proposals currently
circulating in Nevada.  These proposals would take the form of voter
referendum.  If successfully implemented, such an increase would have
a material adverse effect on our financial condition, results of operations or
cash flows.





IF
WE LOSE OUR KEY PERSONNEL, OUR BUSINESS COULD BE MATERIALLY ADVERSELY
AFFECTED





We depend
on the continued performances of John Farahi and Bob Farahi, our Chief Executive
Officer and our President, respectively, and their management
team.  If we lose the services of the Farahi brothers, or other senior
Atlantis management personnel, and cannot replace such persons in a timely
manner, our business could be materially adversely affected.





ADVERSE
WINTER WEATHER CONDITIONS IN THE SIERRA NEVADA MOUNTAINS AND RENO-LAKE TAHOE
AREA COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND
FINANCIAL CONDITION





Adverse
winter weather conditions, particularly snowfall, can prevent customers from
traveling or make it difficult for them to drive to the
Atlantis.  Adverse winter weather would most significantly affect our
drive-in customers from northern California and the Pacific
Northwest.  If the Reno area itself were to experience prolonged
adverse winter weather conditions, our results of operations and financial
condition could also be materially adversely affected.





CLAIMS
HAVE BEEN BROUGHT AGAINST US AND OUR SUBSIDIARY IN VARIOUS LEGAL PROCEEDINGS,
AND ADDITIONAL LEGAL AND TAX CLAIMS ARISE FROM TIME TO TIME





It is
possible that our cash flows and results of operations could be affected by the
resolution of legal and other claims. We believe that the ultimate disposition
of current matters will not have a material impact on our financial condition or
results of operations. Please see the further discussion under “Legal
Proceedings” in Item 3 of this Form 10-K.





ENERGY
PRICE INCREASES MAY ADVERSELY AFFECT OUR COST OF OPERATIONS AND OUR
REVENUES





Our
facility uses significant amounts of electricity, natural gas and other forms of
energy. While no shortages of energy or fuel have been experienced to date,
substantial increases in energy and fuel prices in the United States have
negatively affected and may continue to negatively affect, our operating
results. The extent of the impact is subject to the magnitude and duration of
the energy and fuel price increases, but this impact could be material. In
addition, energy and gasoline price increases in cities that constitute a
significant source of customers for our properties could result in a decline in
disposable income of potential customers and a corresponding decrease in
visitation and spending at our properties, which would negatively impact
revenues.





CHANGES
IN REGULATIONS ON LAND USE REQUIREMENTS COULD ADVERSELY IMPACT OUR
BUSINESS





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.  A
relaxation in such regulations could make it easier for competitors to enter our
immediate market.  A tightening of such regulations could adversely
impact our future expansion opportunities.





OUR
RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY HIGH-END PLAYERS'
WINNINGS





Although
not the major focus of our marketing efforts, we have selectively targeted
high-end players since opening our newest tower in 1999. Should one or more of
these high-end players win large sums in our casino, or should a material amount
of credit extended to such players not be repaid, our results of operations
could be adversely impacted.





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





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





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





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





ITEM 1B. UNRESOLVED STAFF
COMMENTS





There
were no unresolved comments from the SEC staff at the time of filing this Form
10-K.





ITEM 2.
PROPERTIES





Our
properties consist of:





(a)  An
approximate 13-acre site in Reno, Nevada on which the Atlantis is situated,
including the hotel towers, casino, restaurant facilities and surrounding
parking.





(b)  An
approximately 16-acre site, adjacent to the Atlantis and connected to the
Atlantis by the Sky Terrace, which includes approximately 11 acres of paved
parking used for customer, employee and valet parking.  The remainder
of the site is undeveloped.  This site is compliant with all casino
zoning requirements and is suitable and available for future expansion of the
Atlantis facilities, parking, or complementary resort casino and/or
entertainment amenities.  We have not determined the ultimate use of
this site.





(c)  An
approximate 2.6-acre site across Virginia Street from the Atlantis which is
expected to be utilized as administrative offices (“the Administrative Site”)
for Atlantis staff.





(d)  Leased
land consisting of 37,368 square-feet next door to the Atlantis serving as a
driveway entrance to the Atlantis.





(e)
Leased land consisting of approximately 2.3 acres adjacent to the Administrative
Site utilized for storage and administrative offices.





Our
credit facility is secured by liens on all of our real property.





ITEM 3.
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" in
connection with offering casino services other than at Monarch's Atlantis Casino
Resort Spa located in Reno, Nevada, and particularly prohibiting Monarch from
using the "Atlantis" name in connection with offering casino services in Las
Vegas, Nevada; injunctive relief enforcing the same; unspecified compensatory
and punitive damages; and other relief. Monarch believes Kerzner's claims to be
entirely without merit and is defending vigorously against the suit. Further,
Monarch has filed a counterclaim against Kerzner seeking to enforce the license
agreement granting Monarch the exclusive right to use the Atlantis name in
association with lodging throughout the state of Nevada; to cancel Kerzner's
registration of the Atlantis mark for casino services on the basis that the mark
was fraudulently obtained by Kerzner; and to obtain declaratory relief on these
issues.  Litigation is in the discovery phase.





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





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





There
were no matters submitted to a vote of our security holders during the fourth
quarter of 2007.











PART II








ITEM 5. MARKET FOR
REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES





(a)  Our common stock trades
on The NASDAQ Stock Market under the symbol MCRI. The following table sets forth
the high and low bid prices of our common stock, as reported by The NASDAQ Stock
Market, during the periods indicated.





2007
            
            
            2006High
            
            
            Low
            
            
            High
            
            
            LowFirst
      quarter
            
            $
            27.32
            
            
            $
            23.18
            
            
            $
            29.85
            
            
            $
            22.44Second
      quarter
            
            $
            28.93
            
            
            $
            24.59
            
            
            $
            32.97
            
            
            $
            25.14Third
      quarter
            
            $
            31.20
            
            
            $
            22.00
            
            
            $
            28.50
            
            
            $
            17.50Fourth
      quarter
            
            $
            31.39
            
            
            $
            23.50
            
            
            $
            25.74
            
            
            $
            19.45








As of
March 5, 2008, there were approximately 87 holders of record of our common
stock, and approximately 2,819 beneficial stockholders.





We have
never paid dividends. We presently intend to retain earnings and use free cash
flow to finance our operating activities, for maintenance and for expansion
capital expenditures. We do not anticipate declaring cash dividends in the
foreseeable future. Our bank loan agreement also contains provisions that
require the achievement of certain financial ratios before we can pay or declare
dividends to our stockholders. See Item 8, "FINANCIAL STATEMENTS, Notes to
Consolidated Financial Statements, Note 5."





Securities
Authorized for Issuance Under Equity Compensation Plans.  See Part
III, Item 12 - Security Ownership of Certain Beneficial Owners and
Management.








STOCK
PERFORMANCE GRAPH





The
following chart reflects the cumulative total return (change in stock price plus
reinvested dividends) of a $100 investment in the Company’s Common Stock from
the five-year period from January 1, 2002 through December 31, 2007, in
comparison to the Standard & Poor’s 500 Composite Stock Index and an
industry peer group index. The comparisons are not intended to forecast or be
indicative of possible future performance of the Company’s Common
Stock.












Peer Group Companies:
The companies included in the peer group are as follows: Ameristar Casinos, Inc;
Boyd Gaming Corp.; Harrahs Entertainment, Inc.; Isle of Capri Casinos, Inc.; Las
Vegas Sands Corp.; MGM Mirage; Nevada Gold & Casinos, Inc.; Penn National
Gaming, Inc.; Pinnacle Entertainment, Inc.; Riviera Holdings Corp.; Station
Casinos, Inc. and Wynn Resorts, Ltd.





(b)  Not
applicable.





(c)  On
September 28, 2006, the Company’s Board of Directors authorized a stock
repurchase plan that superseded an older plan adopted in 2003 (the “Repurchase
Plan”).  Under the Repurchase Plan, the Board of Directors authorized
a program to repurchase up to 1,000,000 shares of the Company’s common stock in
the open market or in privately negotiated transactions from time to time, in
compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject
to market conditions, applicable legal requirements and other
factors.  The Repurchase Plan does not obligate the Company to acquire
any particular amount of common stock and the plan may be suspended at any time
at the Company’s discretion.




The following table summarizes the
repurchases made during the three month period ended December 31,
2007.  All repurchases were made in the open market.




(c)
            
            
            (d)Total
      number of
            
            
            Maximum
      number of(a)
            
            
            (b)
            
            
            shares
      purchased as
            
            
            shares
      that may yetTotal
      number of
            
            
            Average
      price
            
            
            part
      of publicly
            
            
            be
      purchased underPeriod
            
            shares purchased
            
            
            paid per share
            
            
            announced plans
            
            
            the plansOctober
      1, 2007 through October 31, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -November
      1, 2007 through November 30, 2007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -December
      3, 2007 through December 31, 2007
            
            
            523,396
            (1)
            
            $
            25.03
            
            
            
            523,396
            
            
            
            444,492








(1) All
shares were purchased pursuant to the Repurchase Plan discussed
above.








ITEM 6. SELECTED FINANCIAL
DATA











Years
ended December 31,


Amounts in thousands, except
per share amounts


2007
            
            2006
            
            2005
            
            2004
            
            2003OPERATING RESULTSCasino
      revenues
            $
      110,259
            
            $
      103,333
            
            $  94,501
            
            $  84,132
            
            $   74,956Other
      revenues
            75,117
            
            72,329
            
            67,165
            
            65,545
            
            59,741Gross
      revenues
            185,376
            
            175,662
            
            161,666
            
            149,677
            
            134,697Promotional
      allowances
            (25,519)
            
            (23,693)
            
            (21,881)
            
            (20,220)
            
            (18,746)Net
      revenues
            159,856
            
            151,969
            
            139,785
            
            129,457
            
            115,951Income
      from operations
            35,688
            (F1)
            33,492
            (F2)
            33,069
            (F3)
            26,274
            (F4)
            17,209
            (F5)Income
      before income tax
            37,464
            
            33,860
            
            32,056
            
            24,689
            
            14,572Net
      income
            $  24,480
            
            $  22,080
            
            $  21,035
            
            $  16,526
            
            $     9,606INCOME PER SHARE OF COMMON STOCK
      (F6)Net
      income per shareBasic
            $     1.28
            
            $     1.16
            
            $      1.12
            
            $      0.88
            
            $       0.51Diluted
            $     1.27
            
            $     1.15
            
            $      1.10
            
            $      0.88
            
            $       0.51Weighted
      average number of common shares and potential common shares
      outstandingBasic
            19,058
            
            18,990
            
            18,849
            
            18,756
            
            18,759Diluted
            19,329
            
            19,275
            
            19,094
            
            18,815
            
            18,825OTHER DATADepreciation
      and amortization
            $   8,138
            
            $   8,559
            
            $    8,379
            
            $    9,628
            
            $   10,797Other
      income (expense)
            $   1,776
            
            $      368
            
            $
      (1,013)
            
            $
      (1,584)
            
            $  (2,638)Capital
      expenditures (F7)
            $
      17,287
            
            $5,795
            
            $    6,113
            
            $    9,710
            
            $     8,406BALANCE SHEET DATATotal
      assets
            $154,286
            
            $138,381
            
            $117,670
            
            $118,339
            
            $115,877Current
      maturities of long-term debt
            $            -
            
            $            -
            
            $            -
            
            $            -
            
            $    6,060Long-term
      debt, less current maturities
            $            -
            
            $            -
            
            $    8,100
            
            $  32,400
            
            $  41,125Stockholders'
      equity (F8)
            $129,419
            
            $115,646
            
            $  87,559
            
            $  65,763
            
            $  48,723




















Footnotes to Selected
Financial Data:


(F1)
2007 includes a $7 thousand gain on disposal of fixed assets


(F2)
2006 includes a $55 thousand loss on disposal of fixed assets


(F3)
2005 includes a $42 thousand gain on disposal of fixed assets.


(F4)
2004 includes a $173 thousand loss on disposal of fixed assets.


(F5)
2003 includes a $133 thousand gain on disposal of fixed assets.


(F6)
Per share data and shares outstanding prior to 2005 are adjusted to reflect a
2-for-1 stock split


effective
March 31, 2005.


(F7)
Includes amounts financed with debt or capitalized lease
obligations.


(F8)
We paid no dividends during the five year period ended December 31,
2007.














ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS





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





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





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








OPERATING
RESULTS SUMMARY





During
2007, we exceeded all previously reported Company annual casino revenues, food
and beverage revenues, hotel revenues, net revenues, net income and earnings per
share.





Amounts in millions, except per share
      amounts
            
            PercentageIncrease / (Decrease)2007
            2006
            2005
            07 vs 06
            06 vs 05Casino
      revenues
            $110.3
            $103.3
            $
      94.5
            6.8%
            9.3%Food
      and beverage revenues
            42.4
            41.0
            38.6
            3.4%
            6.2%Hotel
      revenues
            27.9
            26.4
            23.9
            5.7%
            10.5%Other
      revenues
            4.9
            4.9
            4.7
            -
            4.3%Net
      revenues
            159.9
            152.0
            139.8
            5.2%
            8.7%Sales,
      general and admin exp
            50.0
            46.3
            38.1
            8.0%
            21.5%Income
      from operations
            35.7
            33.5
            33.1
            6.6%
            1.2%Net
      income
            24.5
            22.1
            21.0
            10.9%
            5.2%Earnings
      per share - diluted
            1.27
            1.15
            1.10
            10.4%
            4.5%Operating
      margin
            22.3%
            22.0%
            23.7%
            0.3
      pts
            (1.7)
      pts








We
attribute our improved results to our experienced management team, the superb
location of the Atlantis in the more affluent and growing south part of Reno,
the quality of our product that drives repeat business, and our ability to
attract leisure travelers.





In 2007,
our income from operations increased 6.6% over 2006, while our net income and
earnings per diluted share increased 10.9% and 10.4%,
respectively.  Significant factors that affected our 2007 results are
listed below.  These items are discussed in greater detail elsewhere
in our discussion of operating results and in the Liquidity and Capital
Resources section.





·
            Net
      revenues in 2007 increased 5.2% over 2006 due to increases in our casino,
      food and beverage and hotel revenue segments, which increased 6.8%, 3.4%
      and 5.7%, respectively, over 2006.





·
            Sales,
      general and administrative expenses increased 8.0% over 2006 primarily
      driven by:





o
            higher
      legal expense principally related to the ongoing Kerzner litigation (see
      ITEM 3. LEGAL PROCEEDINGS above)


o
            higher
      marketing and promotional expense primarily related to our efforts to
      mitigate the negative effects of disruption our guests experienced related
      to construction of our expansion project (see additional discussion below
      under Capital Spending and Development), aggressive marketing programs by
      our nearest competitor to promote the grand opening of its major expansion
      project and negative macroeconomic trends experienced in the Reno, our
      feeder markets and the nation as a
whole


o
            higher
      payroll and benefits expense primarily related to increased headcount
      related to our expansion project (see additional discussion below under
      Capital Spending and Development), higher health care benefits expense and
      an increase in the minimum wage


o
            all
      partially offset by the impact of a $1.2 million non-cash charge in the
      second quarter of 2006, which did not recur in 2007, related to early
      vesting of stock options for the Company’s former Co-Chairman and Chief
      Financial Officer who resigned in
2006.





·
            Departmental
      expenses related to casino, food and beverage and other revenue segments
      increased in 2007 over 2006 by 5.3%, 3.8% and 2.4%, respectively,
      primarily driven by an overall increase in commodity and supply costs
      combined with an increase in the minimum wage.  Expenses for the
      hotel segment remained flat in 2007 as compared to
      2006.  Margins for the casino and hotel segments improved, while
      margins for food and beverage and other decreased in 2007 as compared to
      2006.








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.





Capital
expenditures at the Atlantis (including non-cash capital expenditures) totaled
approximately $17.3 million, $5.8 million and $6.1 million in 2007, 2006 and
2005, respectively. During 2007 capital expenditures at the Atlantis consisted
of construction costs associated with the current expansion phase of the
Atlantis that commenced in June 2007, and the acquisition of gaming equipment to
upgrade and replace existing gaming equipment.During 2006, capital
expenditures primarily consisted of acquisition of gaming and computer
equipment, the installation of a casino high-definition video display system,
renovation of our Java Coast Gourmet Coffee and pastry bar, initial design and
planning expenditures associated with our Atlantis expansion and ongoing
property public area renovations and upgrades.  During 2005, capital
expenditures consisted primarily of the replacement of and upgrade to our
ventilation and cooling system, acquisition of gaming and computer systems
equipment, and continued renovations to the facility.





Future
cash needed to finance ongoing capital expenditures is expected to be available
from cash on-hand and operating cash flow, the Credit Facility (see Item 8,
"FINANCIAL STATEMENTS, Notes to Consolidated Financial Statements, Note 5.")
and, if necessary, additional borrowings.





In June
2007, we announced the groundbreaking on an expansion project with completion
expected in the second quarter of 2008.  New space will be 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
will be expanded by over 10,000 square feet, or approximately
20%.   The first floor casino plans include a redesigned, updated
and expanded race and sports book of approximately 4,000 square feet and an
enlarged poker room.   The expansion will also include a New
York-style deli restaurant.  The second floor expansion will create
additional ballroom and convention space of approximately 27,000 square feet,
doubling the existing facilities.  The spa and fitness center will be
remodeled and expanded to create an ultra-modern spa and fitness center
facility.  We also plan to add 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 December
31, 2007, the Company has paid approximately $17.2 million of the estimated
expansion and skybridge cost.






CRITICAL
ACCOUNTING POLICIES AND ESTIMATES





We
prepare our consolidated financial statements in conformity with principles
generally accepted in the United States.  Certain of our policies,
including the estimated lives assigned to our assets, the determination of bad
debt reserves, self insurance reserves, concentration of credit risk, and the
calculation of income tax liabilities, require that we apply significant
judgment in defining the appropriate assumptions for calculating financial
estimates.  By their nature, these judgments are subject to an
inherent degree of uncertainty.  Our judgments are based on historical
experience, terms of existing contracts, observations of trends in the industry,
information provided by customers and information available from other outside
sources, as appropriate.  There can be no assurance that actual
results will not differ from our estimates.  To provide an
understanding of the methodologies applied, our significant accounting policies
are discussed where appropriate in this discussion and analysis and in the Notes
to Consolidated Financial Statements.





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





Self-insurance
Reserves





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








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
retail value of hotel, food and beverage services provided to customers without
charge is included in gross revenue and deducted as promotional
allowances.





Income
Taxes





Income
taxes are recorded in accordance with the liability method specified by
Statement of Financial Accounting Standards ("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.





The
Company also applies the requirements of Financial Interpretation No. 48
“Accounting for Uncertainty in Income Taxes” (“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.  Implementation has resulted
in no material impact on the Company’s financial position or results of
operations.








RESULTS
OF OPERATIONS





2007 Compared with
2006





For the
year ended December 31, 2007, we earned net income of $24.5 million, or $1.27
per diluted share, on net revenues of $159.9 million, compared to net income of
$22.1 million, or $1.15 per diluted share, on net revenues of $152.0 million for
the year ended December 31, 2006.  Net revenue for 2007 is the highest
in Company history.  Income from operations totaled $35.7 million for
2007, a 6.6% increase when compared to $33.5 million for 2006. Net income for
the year 2007 represents a record high for our Company. We believe that for much
of 2007, the Atlantis continued to benefit from the increasing popularity of the
Atlantis with visitors to the Reno area, from our commitment to ongoing property
upgrades and renovations and from the rapid growth occurring in the residential
and commercial areas south of the Atlantis in Reno.





Casino
revenues totaled $110.3 million in 2007, up 6.8% from $103.3 million in 2006,
driven by increases in slot, table games, poker and Keno win.  Revenue
from slot and video poker machines ("slot machines") increased approximately
7.3% in 2007 compared to 2006. We believe that increased slot machine play was
due to continued effective marketing and continuous upgrade of facilities and
equipment. Table game win increased approximately 2.4% in 2007 compared to 2006.
Keno and poker room revenues combined increased approximately 11.0% in 2007 over
2006 due to continued effective marketing and the quality of the product and
service offering at the Atlantis. Casino operating expenses were 32.6% of casino
revenues in 2007, a slight improvement from 33.0% in 2006.





Food and
beverage revenues increased 3.4% to $42.4 million in 2007 from $41.0 million in
2006, primarily due to a 3.5% increase in average revenue per cover. Food and
beverage operating expenses as a percentage of food and beverage revenue
increased slightly to 47.9% in 2007 from to 47.6% in 2006.





Hotel
revenues totaled $27.9 million in 2007, an increase of 5.7% from $26.4 million
in 2006. The increase reflects an increase in both the average daily room rate
(“ADR”) and occupancy rate during the twelve month period of 2007 compared to
the same period in 2006.  The Atlantis' ADR was $74.04 in 2007,
compared to $69.87 in 2006.  The average occupancy rate at the
Atlantis was 93.8% in 2007 compared to 93.3% in 2006.  Hotel operating
expenses decreased slightly to 30.0% of hotel revenues in 2007, compared to
31.7% in 2006.  This decrease in operating expenses as a percentage of
hotel revenues resulted primarily from the revenue impact of the increased ADR
partially offset by increased direct hotel operating expenses.





Promotional
allowances increased to $25.5 million in 2007 compared to $23.7 million in
2006.  As a percentage of gross revenue, the amount in 2007 increased
slightly to 13.8% as compared to 13.5% for 2006.  The dollar increase
is attributable to continued efforts to generate additional revenues and
reflects efforts to ensure that promotional costs are directed toward gaming
guests.





Other
revenues in 2007 remained flat at $4.9 million when compared to
2006.  Other operating expenses were 30.5% of other revenues in 2007,
an increase from 29.7% in 2006.





Selling,
general and administrative ("SG&A") expenses totaled $50.0 million, or 31.3%
of net revenues, in 2007 compared to $46.3 million, or 30.5% of net revenues, in
2006 for a year over year increase of $3.7 million or 8.0%.  The
primary drivers of this increase are: i) higher legal expense related to the
ongoing Kerzner litigation (see ITEM 3. LEGAL PROCEEDINGS above); ii) higher
marketing and promotional expense primarily related to our efforts to mitigate
the negative effects of disruption our guests experienced related to
construction of our expansion project (see additional discussion below under
Capital Spending and Development), aggressive marketing programs by our nearest
competitor to promote the grand opening of its major expansion project and
negative macroeconomic trends experienced in the Reno, our feeder markets and
the nation as a whole and iii) higher payroll and benefits expense primarily
related to increased headcount related to our expansion project (see additional
discussion below under Capital Spending and Development), higher health care
benefits expense and an increase in the minimum wage all partially offset by the
impact of a $1.2 million non-cash charge in the second quarter of 2006, which
did not recur in 2007, related to early vesting of stock options for the
Company’s former Co-Chairman and Chief Financial Officer who resigned in
2006.





Depreciation
and amortization expense was $8.1 million in 2007, a decrease of 5.8% compared
to $8.6 million in 2006.





Interest
expense, reflecting amortization of various one-time fees and other loan costs
required to open our credit facility (see THE CREDIT FACILITY below), totaled
$152,000 in 2007 as compared to $98,000 in 2006.  Interest income
derived from investment of surplus cash in short-term, interest bearing
instruments was $1.9 million in 2007 compared to $466,000 in
2006.  This increase was driven primarily by higher average surplus
cash invested in 2007 as compared to 2006.





2006 Compared with
2005





For the
year ended December 31, 2006, we earned net income of $22.1 million, or $1.15
per diluted share, on net revenues of $152.0 million, compared to net income of
$21.0 million, or $1.10 per diluted share, on net revenues of $139.8 million for
the year ended December 31, 2005.  Net revenue for 2006 represented
the highest in Company history before being topped by 2007
results.  Income from operations totaled $33.5 million for 2006, a
1.2% increase when compared to $33.1 million for 2005. Net income for the year
2006 also represented a record high for our Company before reporting the 2007
results. We believe the Atlantis continued to benefit in 2006 from increasing
popularity of the Atlantis with visitors to the Reno area, from our commitment
to ongoing property upgrades and renovations and from the rapid growth occurring
in the residential and commercial areas south of the Atlantis in
Reno.





Casino
revenues totaled $103.3 million in 2006, up 9.3% from $94.5 million in 2005,
driven by increases in slot, table games, poker and Keno win.  Revenue
from slot and video poker machines ("slot machines") increased approximately
9.6% in 2006 compared to 2005. We believe that increased slot machine play was
due to continued effective marketing and continuous upgrade of facilities and
equipment. Table game win increased approximately 6.2% in 2006 compared to 2005
due to a higher win percentage partially offset by a decrease in drop. Keno and
poker room revenues combined increased approximately 21.7% in 2006 over 2005.
Keno write increased approximately 15.1% in 2006 compared to 2005 while poker
revenue increased approximately 32.6% compared to 2005 due to continued
effective marketing. Casino operating expenses were 33.0% of casino revenues in
2006, a slight improvement from 33.9% in 2005.





Food and
beverage revenues increased 6.2% to $41.0 million in 2006 from $38.6 million in
2005, primarily due to a 5.6% increase in average revenue per cover. Food and
beverage operating expenses decreased to 47.6% of food and beverage revenues in
2006 compared to 48.7% in 2005, due to increased revenue per cover partially
offset by a slight increase in cost of sales per cover and higher operating
expenses.





Hotel
revenues totaled $26.4 million in 2006, an increase of 10.5% from $23.9 million
in 2005. The increase reflects an increase in both the average daily room rate
(“ADR”) and occupancy rate during the twelve month period of 2006 compared to
the same period in 2005.  The Atlantis' ADR was $69.87 in 2006,
compared to $63.24 in 2005.  The average occupancy rate at the
Atlantis was 93.3% in 2006 compared to 93.0% in 2005.  Hotel operating
expenses decreased slightly to 31.7% of hotel revenues in 2006, compared to
32.2% in 2005.  This decrease in operating expenses as a percentage of
hotel revenues resulted primarily from the revenue impact of the increased ADR
partially offset by increased direct hotel operating expenses.





Promotional
allowances increased to $23.7 million in 2006 compared to $21.9 million in
2005.  As a percentage of gross revenue, both 2006 and 2005 represent
13.5%. The dollar increase is attributable to continued efforts to generate
additional revenues and reflects efforts to ensure that promotional costs are
directed toward gaming guests.





Other
revenues increased 4.3% in 2006 to $4.9 million from $4.7 million in 2005. The
overall increase was primarily driven by a 10.5% increase in gift and sundries
retail shops revenue.  Other operating expenses were 29.7% of other
revenues in 2006, an increase from 28.6% in 2005.





Selling,
general and administrative ("SG&A") expenses totaled $46.3 million, or 30.5%
of net revenues, in 2006 compared to $38.1 million, or 27.2% of net revenues, in
2005 for a year over year increase of $8.2 million or
21.5%.   Effective January 1, 2006, we began recognizing expense
related to the issuance of stock options in accordance with SFAS
123R.  For the year, we recorded $3.3 million of stock option expense
(pre-tax), $3.1 million of which was reported as SG&A expense with the
balance reported as operating expense in the appropriate revenue center expense
line consistent with the assignment of the respective employee receiving the
stock options benefit.  No similar expense is reflected in the
financial statements for periods prior to 2006.  Of the $3.3 million
of stock option expense recorded in 2006, $1.2 million related to a one-time,
non-cash charge related to early vesting of stock options for the Company’s
former Co-Chairman and Chief Financial Officer who resigned in the second
quarter of 2006.  In addition to stock option expense, significant
drivers of this increase in SG&A were increased marketing and promotional
expense, higher energy and utilities expense, higher professional fees and
higher bad debt expense.





Depreciation
and amortization expense was $8.6 million in 2006, an increase of 2.4% compared
to $8.4 million in 2005.





Interest
expense for 2006 totaled $98,000 compared to $1,013,000 in 2005, a decrease of
$915,000, as a result of the repayment of all of our bank related debt in the
first quarter of 2006.  In that same quarter, we began investing
surplus cash in short-term, interest bearing instruments which drove an increase
in interest income in 2006 compared to 2005 of $466,000.






LIQUIDITY
AND CAPITAL RESOURCES





We have
historically funded our daily hotel and casino activities with net cash provided
by operating activities.  For the years 2007, 2006 and 2005, net cash
provided by operating activities totaled $30.1 million, $35.2 million and $31.0
million, respectively.  During each of the three years, net cash
provided by operating activities was sufficient to fund our day-to-day operating
expenses.





Net cash
used in investing activities, which consisted of acquisitions of property and
equipment, totaled $15.3 million,$5.8 million and $6.1
million in 2007, 2006 and 2005, respectively.  Total capital
expenditures, including amounts financed, were $17.3 million,$5.8 million and $6.1
million in 2007, 2006 and 2005, respectively.





Net cash
used in financing activities totaled $13.0 million in 2007,$5.4 million in 2006 and
$23.9 million in 2005. Cash used in financing activities was principally
related to our treasury stock purchases in 2007, and to the paydown of our
outstanding debt in 2006 and 2005.








COMMITMENTS
AND CONTINGENCIES





Our
contractual cash obligations as of December 31, 2007 and the next five years and
thereafter are as follows:





Contractual
      Cash
            
            Payments Due by PeriodObligations
            
            
            
            
            less
      than
            
            
            1
      to 3
            
            
            4
      to 5
            
            
            more
      thanTotal
            
            
            1 year
            
            
            years
            
            
            years
            
            
            5 yearsOperating
      Leases(1)
            
            $
            4,834,000
            
            
            $
            613,000
            
            
            $
            983,000
            
            
            $
            740,000
            
            
            $
            2,498,000Purchase
      Obligations(2)
            
            
            35,645,000
            
            
            
            35,645,000
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
      Contractual Cash Obligations
            
            $
            40,479,000
            
            
            $
            36,258,000
            
            
            $
            983,000
            
            
            $
            740,000
            
            
            $
            2,498,000








(1)
Operating leases include $370,000 per year in lease and common expense payments
to the shopping center adjacent to the Atlantis (see Capital Spending and
Development) and $243,000 per year in lease payments to Triple J (see Note 10 to
the Consolidated Financial Statements).





(2) Our
open purchase order commitments total approximately $35.6 million.  Of
the total purchase order commitments, approximately $2.1 million are cancelable
by the Company upon providing a 30-day notice.





On
September 28, 2006, the Board of Directors authorized a stock repurchase plan
that superseded an older plan adopted in 2003 (the “Repurchase
Plan”).  Under the Repurchase Plan, the Board of Directors authorized
a program to repurchase up to 1,000,000 shares of the company’s common stock in
the open market or in privately negotiated transactions from time to time, in
compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject
to market conditions, applicable legal requirements and other
factors.  The Repurchase Plan does not obligate us to acquire any
particular amount of common stock and the plan may be suspended at any time at
our discretion.  On March 11, 2008, the Board of Directors authorized
a new repurchase plan to repurchase up to 1,000,000 shares of our common stock
in the open market or in privately negotiated transactions from time to time, in
compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject
to market conditions, applicable legal requirements and other
factors.   The Company had purchased the full 1,000,000 shares
under the Repurchase Plan.




In June
2007, we announced the groundbreaking on an expansion project with completion
expected in the second quarter of 2008.  New space will be 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
will be expanded by over 10,000 square feet, or approximately
20%.   The first floor casino plans include a redesigned, updated
and expanded race and sports book of approximately 4,000 square feet and an
enlarged poker room.   The expansion will also include a New
York-style deli restaurant.  The second floor expansion will create
additional ballroom and convention space of approximately 27,000 square feet,
doubling the existing facilities.  The spa and fitness center will be
remodeled and expanded to create an ultra-modern spa and fitness center
facility.  We also plan to add 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 December
31, 2007, the Company has paid approximately $17.2 million of the estimated
expansion and skybridge cost.







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








THE
CREDIT FACILITY





Until
February 20, 2004, we had a reducing revolving term loan credit facility with a
consortium of banks that was to expire on June 30, 2004, (the "Original Credit
Facility").  On February 20, 2004, the Original Credit Facility was
refinanced (the "New Credit Facility") for $50 million, which included the $46
million payoff of the unpaid balance of the Original Credit
Facility.  At December 31, 2007 and 2006, we had no borrowings under
the New Credit Facility; however, our leverage ratio was such that the pricing
for borrowings would have been the Base Rate plus 0.00 percent or LIBOR plus
1.00 percent.





Effective February 2007, in
consideration of our cash balance, cash expected to be generated from operations
and to avoid agency and commitment fees, we elected to permanently reduce the
available borrowings to $5 million.  We may permanently reduce the
maximum principal available under the New Credit Facility at any time so long as
the amount of such reduction is at least $500,000 and a multiple of
$50,000.  In the future we may utilize borrowings from the New Credit
Facility for working capital needs, general corporate purposes and for ongoing
capital expenditure requirements.





Borrowings under the New Credit
Facility would be secured by liens on substantially all of the real and personal
property of the Atlantis and is 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 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 that we maintain certain financial ratios and contains provisions that
restrict cash transfers between Monarch and our affiliates.  The
New Credit Facility also contains provisions requiring the achievement of
certain financial ratios before we can repurchase our common stock. We do not
consider the covenants to restrict operations.





The maturity date of any borrowings
under the New Credit Facility is February 23, 2009.  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 New Credit
Facility may be reborrowed so long as the total borrowings outstanding do not
exceed the maximum principal available.





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








SHORT-TERM
DEBT





At
December 31, 2007, we had no slot purchase contracts or other short-term debt
outstanding.





STATEMENT
ON FORWARD LOOKING INFORMATION





Certain
information included herein contains statements that may be considered
forward-looking, such as statements relating to projections of future results of
operations or financial condition, expectations for our casino, and expectations
of the continued availability of capital resources. Any forward-looking
statement made by us necessarily is based upon a number of estimates and
assumptions that, while considered reasonable by us, is inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control, and are subject to
change.  Actual results of our operations may vary materially from any
forward-looking statement made by us or on our
behalf.  Forward-looking statements should not be regarded as
representation by us or any other person that the forward-looking statements
will be achieved.  Undue reliance should not be placed on any
forward-looking statements.  Some of the contingencies and
uncertainties to which any forward-looking statement contained herein are
subject to include, but are not limited to, those set forth above in the heading
“ITEM 1A. Risk Factors.”








RECENTLY
ISSUED ACCOUNTING STANDARDS





In
June 2006, the Financial Accounting Standards Board (“FASB”) issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FAS 109, Accounting for Income Taxes (FIN 48), to create a
single model to address accounting for uncertainty in tax
positions.  FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold 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.  FIN 48 is effective for fiscal years beginning after
December 15, 2006.  The Company adopted FIN 48 as of January 1, 2007,
as required.  FIN 48 requires that the cumulative effect of adoption
be recorded in retained earnings.  Implementation resulted in no
cumulative effect for the Company nor any material impact on the Company’s
financial position or results of operations.







In
September 2006, the FASB issued SFAS 157, Fair Value
Measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles 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
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years.  The Company is currently evaluating the
provisions of SFAS 157 to determine its impact, if any, on the Company’s
financial position and results of operations.







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 Company is currently
evaluating the impact that the adoption of SFAS No. 159 will have on its
consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.” 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 applies prospectively
to business combinations where the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15,
2008. The adoption of SFAS No. 141 (revised) is not expected to have a
material impact on the Company’s financial position, results of operations or
cash flows.





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 is not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.








ITEM 7A. 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 December
31, 2007 that are subject to market risk.  As of December 31, 2007 and
2006, we had no outstanding debt subject to market risk.

















ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA








REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The
Board of Directors and Stockholders of Monarch Casino & Resort,
Inc.:





We have
audited the accompanying consolidated balance sheets of Monarch Casino &
Resort, Inc. and subsidiaries (the “Company”) as of December 31, 2007 and 2006,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended December 31,
2007.  Our audits also included the financial statements schedule listed in
the index at Item 15(a). These financial statements are the responsibility of
the Company's management.  Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.





In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Monarch Casino &
Resort, Inc. and subsidiaries at December 31, 2007 and 2006, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2007, in conformity with U.S.
generally accepted accounting principles.





As
discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for Share-Based Payments in accordance with
Statement of Financial Accounting Standards No. 123 (revised 2004) on January 1,
2006.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Company’s internal control over
financial reporting as of December 31, 2007, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated March 12, 2008
expressed an unqualified opinion thereon.








/s/Ernst & Young LLP








Las
Vegas, Nevada


March 12,
2008











REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The
Board of Directors and Stockholders’ of Monarch Casino and Resort,
Inc.:





We have
audited Monarch Casino and Resort, Inc. and subsidiaries (the “Company”)
internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). The Company’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control Over Financial
Reporting.  Our responsibility is to express an opinion on the
company’s internal control over financial reporting based on our
audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.





A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.





Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





In our
opinion, the Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007, based on the COSO
criteria.





We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets as of December
31, 2007 and 2006, and the related consolidated statements of income,
stockholders’ equity and cash flows for each of the three years in the period
ended December 31, 2007 of Monarch Casino and Resort, Inc. and Subsidiaries and
our report dated March 12, 2008 expressed an unqualified opinion
thereon.





/s/Ernst
& Young LLP








Las
Vegas, Nevada


March 12,
2008











MONARCH
CASINO & RESORT, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF INCOME





Years
      ended December 31,2007
            
            
            2006
            
            
            2005RevenuesCasino
            
            $
            110,259,104
            
            
            $
            103,332,559
            
            
            $
            94,501,028Food
      and beverage
            
            
            42,364,225
            
            
            
            41,037,321
            
            
            
            38,564,365Hotel
            
            
            27,885,858
            
            
            
            26,412,755
            
            
            
            23,909,915Other
            
            
            4,866,536
            
            
            
            4,878,840
            
            
            
            4,690,105Gross
      revenues
            
            
            185,375,723
            
            
            
            175,661,475
            
            
            
            161,665,413Less
      promotional allowances
            
            
            (25,519,352
            )
            
            
            (23,692,521
            )
            
            
            (21,880,793
            )Net
      revenues
            
            
            159,856,371
            
            
            
            151,968,954
            
            
            
            139,784,620Operating
      expensesCasino
            
            
            35,927,672
            
            
            
            34,134,518
            
            
            
            31,990,758Food
      and beverage
            
            
            20,283,267
            
            
            
            19,533,532
            
            
            
            18,795,268Hotel
            
            
            8,357,541
            
            
            
            8,383,382
            
            
            
            7,696,576Other
            
            
            1,485,550
            
            
            
            1,450,100
            
            
            
            1,340,556Selling,
      general and administrative
            
            
            49,966,276
            
            
            
            46,309,938
            
            
            
            38,073,313Gaming
      development costs
            
            
            10,477
            
            
            
            106,477
            
            
            
            439,984Depreciation
      and amortization
            
            
            8,137,886
            
            
            
            8,559,374
            
            
            
            8,379,033Total
      operating expenses
            
            
            124,168,669
            
            
            
            118,477,321
            
            
            
            106,715,488Income
      from operations
            
            
            35,687,702
            
            
            
            33,491,633
            
            
            
            33,069,132Other
      income (expense)Interest
      income
            
            
            1,928,450
            
            
            
            466,050
            
            
            
            257Interest
      expense
            
            
            (152,274
            )
            
            
            (97,722
            )
            
            
            (1,013,377
            )Total
      other income (expense)
            
            
            1,776,176
            
            
            
            368,328
            
            
            
            (1,013,120
            )Income
      before income taxes
            
            
            37,463,878
            
            
            
            33,859,961
            
            
            
            32,056,012Provision
      for income taxes
            
            
            12,983,660
            
            
            
            11,779,590
            
            
            
            11,020,552Net
      income
            
            $
            24,480,218
            
            
            $
            22,080,371
            
            
            $
            21,035,460Earnings
      per share of common stockNet
      incomeBasic
            
            $
            1.28
            
            
            $
            1.16
            
            
            $
            1.12Diluted
            
            $
            1.27
            
            
            $
            1.15
            
            
            $
            1.10Weighted
      average number ofcommon
      shares and potentialcommon
      shares outstanding:Basic
            
            
            19,057,583
            
            
            
            18,990,331
            
            
            
            18,848,532Diluted
            
            
            19,329,131
            
            
            
            19,274,847
            
            
            
            19,093,777











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














MONARCH
CASINO & RESORT, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS





December
      31,2007
            
            
            2006ASSETSCurrent
      assetsCash
            
            $
            38,835,820
            
            
            $
            36,985,187Receivables,
      net
            
            
            4,134,099
            
            
            
            3,268,970Federal
      income tax refund receivable
            
            
            998,123
            
            
            
            -Inventories
            
            
            1,496,046
            
            
            
            1,471,667Prepaid
      expenses
            
            
            3,144,374
            
            
            
            2,833,126Deferred
      income taxes
            
            
            1,084,284
            
            
            
            965,025Total
      current assets
            
            
            49,692,746
            
            
            
            45,523,975Property
      and equipmentLand
            
            
            10,339,530
            
            
            
            10,339,530Land
      improvements
            
            
            3,166,107
            
            
            
            3,166,107Buildings
            
            
            78,955,538
            
            
            
            78,955,538Building
      improvements
            
            
            10,435,062
            
            
            
            10,435,062Furniture
      and equipment
            
            
            72,511,165
            
            
            
            72,708,061Leasehold
      improvements
            
            
            1,346,965
            
            
            
            1,346,965176,754,367
            
            
            
            176,951,263Less
      accumulated depreciation and amortization
            
            
            (92,215,149
            )
            
            
            (84,325,578
            )84,539,218
            
            
            
            92,625,685Construction
      in progress
            
            
            17,236,062
            
            
            
            -Net
      property and equipment
            
            
            101,775,280
            
            
            
            92,625,685Other
      assets, net
            
            
            2,817,842
            
            
            
            231,247Total
      assets
            
            $
            154,285,868
            
            
            $
            138,380,907



























































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











MONARCH
CASINO & RESORT, INC. AND SUBSIDIARIES


CONSOLIDATED
BALANCE SHEETS








LIABILITIES
      AND STOCKHOLDERS' EQUITY
            
            December
      31,Current
      liabilities
            
            2007
            
            
            2006Accounts
      payable
            
            
            10,840,318
            
            
            
            8,590,669Construction
      accounts payable
            
            
            1,971,022
            
            
            
            -Accrued
      expenses
            
            
            9,230,157
            
            
            
            9,878,851Federal
      income taxes payable
            
            
            -
            
            
            
            16,457Total
      current liabilities
            
            
            22,041,497
            
            
            
            18,485,977Deferred
      income taxes
            
            
            2,825,433
            
            
            
            4,248,614Total
      liabilities
            
            
            24,866,930
            
            
            
            22,734,591Stockholders'
      equityPreferred
      stock, $.01 par value, 10,000,000shares
      authorized; none issued
            
            
            -
            
            
            
            -Common
      stock, $.01 par value, 30,000,000shares
      authorized; 19,096,300 shares issued;18,566,540
      outstanding at 12/31/07 and19,065,968
      outstanding at 12/31/06
            
            
            190,963
            
            
            
            190,726Additional
      paid-in capital
            
            
            25,741,972
            
            
            
            23,205,045Treasury
      stock, 529,760 shares at 12/31/07 and6,582
      shares at 12/31/06, at cost
            
            
            (13,268,905
            )
            
            
            (24,145
            )Retained
      earnings
            
            
            116,754,908
            
            
            
            92,274,690Total
      stockholders' equity
            
            
            129,418,938
            
            
            
            115,646,316Total
      liabilities and stockholder's equity
            
            $
            154,285,868
            
            
            $
            138,380,907



























































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














MONARCH
CASINO & RESORT, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY














Common
      Stock
            
            
            AdditionalShares
            
            
            
            
            
            Paid-in
            
            
            Retained
            
            
            TreasuryOutstanding
            
            
            Amount
            
            
            Capital
            
            
            Earnings
            
            
            Stock
            
            
            TotalBalance,
      January 1, 2005
            
            
            18,812,448
            
            
            $
            190,726
            
            
            $
            17,367,909
            
            
            $
            49,158,859
            
            
            $
            (954,152
            )
            
            $
            65,763,342Exercise
      of stock options, including
            
            
            66,862
            
            
            
            -
            
            
            
            514,918
            
            
            
            -
            
            
            
            245,275
            
            
            
            760,193related
      tax benefitNet
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            21,035,460
            
            
            
            -
            
            
            
            21,035,460Balance,
      December 31, 2005
            
            
            18,879,310
            
            
            
            190,726
            
            
            
            17,882,827
            
            
            
            70,194,319
            
            
            
            (708,877
            )
            
            
            87,558,995Exercise
      of stock options, including
            
            
            186,658
            
            
            
            -
            
            
            
            1,528,757
            
            
            
            -
            
            
            
            684,732
            
            
            
            2,213,489related
      tax benefitShare
      based compensation expense
            
            
            -
            
            
            
            -
            
            
            
            3,793,461
            
            
            
            -
            
            
            
            -
            
            
            
            3,793,461Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            22,080,371
            
            
            
            -
            
            
            
            22,080,371Balance,
      December 31, 2006
            
            
            19,065,968
            
            
            
            190,726
            
            
            
            23,205,045
            
            
            
            92,274,690
            
            
            
            (24,145
            )
            
            
            115,646,316Exercise
      of stock options, includingrelated
      tax benefit
            
            
            56,080
            
            
            
            237
            
            
            
            (26,887
            )
            
            
            -
            
            
            
            629,286
            
            
            
            602,636Purchase
      of treasury stock
            
            
            (555,508
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (13,874,046
            )
            
            
            (13,874,046
            )Share
      based compensation expense
            
            
            -
            
            
            
            -
            
            
            
            2,563,814
            
            
            
            -
            
            
            
            -
            
            
            
            2,563,814Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            24,480,218
            
            
            
            -
            
            
            
            24,480,218Balance,
      December 31, 2007
            
            
            18,566,540
            
            
            $
            190,963
            
            
            $
            25,741,972
            
            
            $
            116,754,908
            
            
            $
            (13,268,905
            )
            
            $
            129,418,938







































































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


MONARCH CASINO & RESORT, INC. AND
SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


Years
      ended December 31,2007
            
            2006
            
            2005Cash
      flows from operating activities:Net
      income
            $
      24,480,218
            
            $
      22,080,371
            
            $
      21,035,460Adjustments
      to reconcile net income to netcash
      provided by operating activities:Depreciation
      and amortization
            8,137,886
            
            8,559,374
            
            8,379,033Amortization
      of deferred loan costs
            148,838
            
            38,277
            
            137,096Share
      based compensation
            2,271,057
            
            3,273,708
            
            -Provision
      for bad debts
            554,891
            
            903,426
            
            550,512(Gain)
      loss on disposal of assets
            (6,969)
            
            55,115
            
            (41,636)Deferred
      income taxes
            (1,542,439)
            
            (1,343,380)
            
            (766,817)Changes
      in operating assets and liabilitiesReceivables,
      net
            (2,418,143)
            
            (326,034)
            
            (943,183)Inventories
            (24,379)
            
            (15,214)
            
            (3,756)Prepaid
      expenses
            (311,248)
            
            (431,507)
            
            (55,377)Other
      assets
            (2,735,433)
            
            -
            
            -Accounts
      payable
            2,249,649
            
            1,255,038
            
            1,587,855Accrued
      expenses
            (648,694)
            
            1,156,630
            
            1,134,254Federal
      income taxes payable
            (16,457)
            
            16,457
            
            -Net
      cash provided by operating activities
            30,138,777
            
            35,222,261
            
            31,013,441Cash
      flows from investing activities:Proceeds
      from sale of assets
            6,969
            
            38,280
            
            41,636Change
      in construction payable
            1,971,022
            
            -
            
            -Acquisition
      of property and equipment
            (17,287,483)
            
            (5,795,089)
            
            (6,113,220)Net
      cash used in investing activities
            (15,309,492)
            
            (5,756,809)
            
            (6,071,584)Cash
      flows from financing activities:Proceeds
      from exercise of stock options
            602,636
            
            2,213,489
            
            429,859Deferred
      tax asset write-off
            -
            
            (203,067)
            
            -Tax
      benefit of stock option exercise
            292,757
            
            722,819
            
            -Proceeds
      from long-term borrowings
            -
            
            -
            
            3,000,000Principal
      payments on long-term debt
            -
            
            (8,100,000)
            
            (27,300,000)Purchase
      of treasury stock
            (13,874,045)
            
            -
            
            -Net
      cash used in financing activities
            (12,978,652)
            
            (5,366,759)
            
            (23,870,141)Net
      increase in cash
            1,850,633
            
            24,098,693
            
            1,071,716Cash
      and cash equivalents at beginning of year
            36,985,187
            
            12,886,494
            
            11,814,778Cash
      and cash equivalents at end of year
            $
      38,835,820
            
            $
      36,985,187
            
            $
      12,886,494Supplemental
      disclosure of cash flow information:Cash
      paid for interest
            $          3,437
            
            $        66,659
            
            $      973,314Cash
      paid for income taxes
            $
      15,247,923
            
            $
      12,300,000
            
            $
      11,250,000








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














MONARCH
CASINO & RESORT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS





NOTE 1.  SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES





Basis of
Presentation





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





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





Use of
Estimates





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





Self-insurance
Reserves





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





Capitalized
Interest





The Company capitalizes interest costs
associated with debt incurred in connection with major construction
projects.  When no debt is specifically identified as being incurred
in connection with a construction project, the Company capitalizes interest on
amounts expended on the project at the Company's average cost of borrowed
money.  Interest capitalization is ceased when the project is
substantially complete.  The Company did not record capitalized
interest during the years ended December 31, 2007, 2006 and
2005.





Cash and Cash
Equivalents




Cash and
cash equivalents include cash on hand, as well as investments purchased with an
original maturity of 90 days or less.




Inventories





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




Property and
Equipment





Property
and equipment are stated at cost, less accumulated depreciation and
amortization.  Property and equipment is 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.





Casino
Revenues





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





Promotional
Allowances





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





Awards
under our 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 estimated departmental costs of providing such
promotional allowances are included in casino costs and expenses as
follows:





Years ended December 31,2007
            
            
            2006
            
            
            2005Food
      and beverage
            
            $
            12,735,942
            
            
            $
            11,706,382
            
            
            $
            11,363,365Hotel
            
            
            2,143,988
            
            
            
            2,004,909
            
            
            
            1,820,435Other
            
            
            460,099
            
            
            
            504,945
            
            
            
            436,430$
            15,340,029
            
            
            $
            14,216,236
            
            
            $
            13,620,230







Advertising
Costs





All
advertising costs are expensed as incurred.  Advertising expense,
which is included in selling, general and administrative expense, was
$3,657,712, $3,533,057 and $3,321,653 for 2007, 2006 and 2005,
respectively.





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.





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.  Implementation has resulted
in no material impact on the Company’s financial position or results of
operations.





Allowance for Doubtful
Accounts





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





Stock Based
Compensation





The
Company maintains three stock option plans, which are described more fully in
Note 8.  Prior to January 1, 2006, the Company accounted for these
plans under the recognition and measurement principles of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25")
and related interpretations in accounting for its plans.  For the year
ended December 31, 2005, no stock-based compensation costs are reflected in net
income, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of the
grant.





Effective
January 1, 2006, the Company adopted the fair value recognition provisions of
FASB Statement 123(R), Share-Based Payment, using the modified prospective
transition method. Under that transition method, compensation cost recognized in
the years ended December 31, 2007 and 2006 include: (a) compensation cost for
all share-based payments granted prior to, but not yet vested as of January 1,
2006, based on the grant date fair value estimated in accordance with the
provisions of Statement 123(R), and (b) compensation cost for all share-based
payments granted subsequent to January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of Statement
123(R).  Results for prior periods have not been
restated.





As a
result of adopting Statement 123(R) on January 1, 2006, the Company’s income
before income taxes for the years ended December 31, 2007 and 2006 is $2.3
million and $3.3 million lower, and net income for the years ended December 31,
2007 and 2006 is $1.5 million and $2.2 million lower, respectively, than if it
had continued to account for share based compensation under APB
25.  Basic and diluted earnings per share would have been $1.36 and
$1.34, respectively, for the year ended December 31, 2007 and would have been
$1.28 and $1.26, respectively for the year ended December 31, 2006,
respectively, if the Company had not adopted Statement 123(R).





Prior to
the adoption of Statement 123(R), the Company presented all tax benefits of
deductions resulting from the exercise of stock options as operating cash flows
in the Statement of Cash Flows.  Statement 123(R) requires the cash
flows resulting from the tax benefits resulting from tax deductions in excess of
the compensation cost recognized for those options (excess tax benefits) to be
classified as financing cash flows.  The $292,757 and $722,819 excess
tax benefits for the years ended December 31, 2007 and 2006 classified as
financing cash inflows would have been classified as operating cash inflows if
the Company had not adopted Statement 123(R).





The
following table illustrates the effect on net income and earnings per share if
the Company had applied the fair value recognition provisions of Statement 123
to options granted under the Company’s stock option plans in all periods
presented.  If the Company had elected to recognize compensation cost
on the fair market value at the grant dates for awards under the stock option
plans, consistent with the method prescribed by Statement 123, net income and
income per share for the year ended December 31, 2005 would have been changed to
the pro forma amounts indicated below:








December
      31, 2005Net
      income, as reported
            
            $
            21,035,460Stock
      based employee  compensation expensed determined under the fair value
      based method for all awards, net of related tax effects
            
            
            (1,113,398
            )Pro
      forma net income
            
            $
            19,922,062Basic earnings per shareAs
      reported
            
            $
            1.12Pro
      forma
            
            $
            1.06Diluted earnings per shareAs
      reported
            
            $
            1.10Pro
      forma
            
            $
            1.04





Earnings Per
Share





The
Company reports "basic" earnings per share and "diluted" earnings per share in
accordance with the provisions of SFAS No. 128, "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):








Years
      ended December 31,2007
            
            
            2006
            
            
            2005Shares
            
            
            Per
      Share Amount
            
            
            Shares
            
            
            Per
      Share Amount
            
            
            Shares
            
            
            Per
      Share AmountNet
      incomeBasic
            
            
            19,058
            
            
            $
            1.28
            
            
            
            18,990
            
            
            $
            1.16
            
            
            
            18,849
            
            
            $
            1.12Effect
      of dilutive
              stock
      options
            
            
            271
            
            
            
            (0.01
            )
            
            
            285
            
            
            
            (0.01
            )
            
            
            245
            
            
            
            (0.02
            )Diluted
            
            
            19,329
            
            
            $
            1.27
            
            
            
            19,275
            
            
            $
            1.15
            
            
            
            19,094
            
            
            $
            1.10








The
following options were not included in the computation of diluted earnings per
share because the options' exercise prices were greater than the average market
price of the common shares and their inclusion would be
antidilutive:








Years
      ended December 31,2007
            
            
            2006
            
            
            2005Options
      to purchase shares of
              common
      stock (in thousands)
            
            
            232
            
            
            
            122
            
            
            
            35Exercise
      prices
            
            
            $27.39-$30.07
            
            
            
            $25.89-$28.25
            
            
            
            $19.98-$21.46Expiration
      dates (mo./yr.)
            
            5/16-10/17
            
            
            5/16-6/16
            
            
            4/15-11/15








Fair Value of Financial
Instruments





The
following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107 "Disclosures About Fair
Value of Financial Instruments."  The estimated fair value of the
Company's financial instruments has been determined by the Company, using
available market information and valuation methodologies.  However,
considerable judgment is required to develop the estimates of fair value; thus,
the estimates provided herein are not necessarily indicative of the amounts that
the Company could realize in a current market exchange.





The
carrying amounts of cash, receivables, accounts payable and accrued expenses
approximate fair value because of the short-term nature of these
instruments.





Concentrations of Credit
Risk





Financial
instruments which potentially subject the Company to concentrations of credit
risk consist principally of bank deposits, short term investments of surplus
cash and trade receivables.  The Company maintains its surplus cash in
bank accounts and money market mutual funds 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.





Impact of Recently Issued
Accounting Standards







In
September 2006, the FASB issued SFAS 157, Fair Value
Measurements.  SFAS 157 defines fair value, establishes a framework
for measuring fair value in generally accepted accounting principles 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
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years.  The Company is currently evaluating the
provisions of SFAS 157 to determine its impact, if any, on the Company’s
financial position and results of operations.







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 Company is currently
evaluating the impact that the adoption of SFAS No. 159 will have on its
consolidated financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.” 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 applies prospectively
to business combinations where the acquisition date is on or after the beginning
of the first annual reporting period beginning on or after December 15,
2008. The adoption of SFAS No. 141 (revised) is not expected to have a
material impact on the Company’s financial position, results of operations or
cash flows.





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 is not expected to have a material impact on the Company’s
financial position, results of operations or cash flows.







NOTE 2.  ACCOUNTS
RECEIVABLE





Accounts
receivable consist of the following:


December
      31,2007
            
            
            2006Casino
            
            $
            4,135,884
            
            
            $
            3,338,227Hotel
            
            
            665,079
            
            
            
            1,019,019Other
            
            
            751,255
            
            
            
            165,0215,552,218
            
            
            
            4,522,267Less
       allowance for doubtful accounts
            
            
            (1,418,119
            )
            
            
            (1,253,297
            )$
            4,134,099
            
            
            $
            3,268,970








The
Company recorded bad debt expense of $554,891, $903,426 and $550,512 in 2007,
2006 and 2005, respectively.








NOTE 3.  ACCRUED
EXPENSES





Accrued
expenses consist of the following:





December
      31,2007
            
            
            2006Accrued
      salaries, wagesand
      related benefits
            
            $
            4,022,526
            
            
            $
            4,714,956Progressive
      slot machineand
      other gaming accruals
            
            
            2,785,054
            
            
            
            2,539,657Accrued
      gaming taxes
            
            
            374,754
            
            
            
            660,478Accrued
      interest
            
            
            25,534
            
            
            
            25,534Other
      accrued liabilities
            
            
            2,022,289
            
            
            
            1,938,226$
            9,230,157
            
            
            $
            9,878,851





NOTE 4.  LEASE
COMMITMENTS





In 2004,
a driveway was constructed that is being shared between the Atlantis and the
adjacent Sierra Marketplace Shopping Center that is owned and
controlled by affiliates of the Company's principal stockholders (the "Shopping
Center"). A traffic signal was erected at mid-block on South Virginia Street,
serving the driveway.  As part of this project, the Company is leasing
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 is also using
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 3 five-year terms, and at the end of the extension periods,
the Company has the option to purchase the leased section of the Shopping Center
at a price to be determined based on an MAI appraisal. The Company uses the
leased driveway space for pedestrian and vehicle access to the Atlantis, and the
Company has use of 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 project was completed, the
driveway was put into use and the Company began paying rent on September 30,
2004. The cost of the driveway is being depreciated over the initial 15-year
lease term; some components of the driveway are being depreciated over a shorter
period of time.





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 plans to
utilize for administrative office and storage space for Atlantis staff . 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.  At December 31, 2007, the fair value of the loan approximated
book value.





The
Company accounts for its rental expense using the straight-line method over the
original lease term.  Rental increases based on the change in the CPI
are contingent and accounted for prospectively.





Following
is a summary of future minimum payments under operating leases that have initial
or remaining noncancelable lease terms in excess of one year at December 31,
2007:





Operating
              LeasesYear
      ending December 31,2008
            
            $
            613,0002009
            
            
            613,0002010
            
            
            370,0002011
            
            
            370,0002012
            
            
            370,000Thereafter
            
            
            2,498,000Total
      minimum lease payments
            
            $
            4,834,000








Rental
expense for operating leases amounted to $0,$9,085 and $79,383 in
2007, 2006 and 2005, respectively, as reported in selling, general and
administrative expenses in the statements of income.








NOTE 5.  LONG-TERM
DEBT





THE
CREDIT FACILITY





Until
February 20, 2004, the Company had a reducing revolving term loan credit
facility with a consortium of banks that was to expire on June 30, 2004, (the
"Original Credit Facility").  On February 20, 2004, the Original
Credit Facility was refinanced (the "New Credit Facility") for $50 million,
which included the $46 million payoff of the unpaid balance of the Original
Credit Facility.  At December 31, 2007 and 2006, the Company had no
borrowings under the New Credit Facility; however, its leverage ratio was such
that the pricing for borrowings would have been the Base Rate plus 0.00 percent
or LIBOR plus 1.00 percent.





Effective February 2007, in
consideration of the Company’s cash balance, cash expected to be generated from
operations and to avoid agency and commitment fees, the Company elected to
permanently reduce the available borrowings to $5 million.  The
Company may permanently reduce the maximum principal available under the New
Credit Facility at any time so long as the amount of such reduction is at least
$500,000 and a multiple of $50,000.  The Company in the future may
utilize borrowings from the New Credit Facility for working capital needs,
general corporate purposes and for ongoing capital expenditure
requirements.





Borrowings
under the New Credit Facility would be secured by liens on substantially all of
the real and personal property of the Atlantis and is 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 Company assets and covenants restricting the Company’s ability to
merge, transfer ownership of Monarch, incur additional indebtedness, encumber
assets and make certain investments.  The New Credit Facility also
contains covenants requiring the Company to maintain certain financial ratios
and contains provisions that restrict cash transfers between Monarch and its
affiliates.  The New Credit Facility also contains provisions
requiring the achievement of certain financial ratios before the Company can
repurchase its common stock. Management does not consider the covenants to
restrict operations.





The maturity date of any borrowings
under the New Credit Facility is February 23, 2009.  The Company 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 New
Credit Facility may be reborrowed so long as the total borrowings outstanding do
not exceed the maximum principal available.





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








NOTE 6.  INCOME
TAXES





Income
tax provision (benefit) from continuing operations consists of the
following:





Years
      ended December 31,2007
            
            
            2006
            
            
            2005Current
      provision
            
            $
            14,494,634
            
            
            $
            13,157,285
            
            
            $
            11,834,750Deferred
      provision (benefit)
            
            
            (1,510,974
            )
            
            
            (1,377,695
            )
            
            
            (814,198
            )$
            12,983,660
            
            
            $
            11,779,590
            
            
            $
            11,020,552








Income
tax benefits were recognized through stockholders’ equity of $292,757, $519,751
and $330,333 during the years of 2007, 2006 and 2005, respectively, as
compensation expense for tax purposes in excess of amounts recognized for
financial reporting purposes.





The
difference between the Company's provision for federal income taxes as presented
in the accompanying Consolidated Statements of Income, and the provision for
income taxes computed at the statutory rate is comprised of the items shown in
the following table as a percentage of pre-tax earnings.








Years
      ended December 31,2007
            
            
            2006
            
            
            2005Income
      tax at the statutory rate
            
            
            35.00
            %
            
            
            35.00
            %
            
            
            35.00
            %Non-deductible
      expenses and other
            
            
            -
            
            
            
            -
            
            
            
            -Tax
      credits
            
            
            -0.30
            %
            
            
            -0.20
            %
            
            
            -0.60
            %34.70
            %
            
            
            34.80
            %
            
            
            34.40
            %





The
components of the deferred income tax assets and liabilities at December 31,
2007 and 2006, as presented in the Consolidated Balance Sheets, are as
follows:





2007
            
            
            2006DEFERRED
      TAX ASSETSShare
      based compensation
            
            $
            1,375,644
            
            
            $
            659,231Compensation
      and benefits
            
            
            337,275
            
            
            
            393,087Bad
      debt reserves
            
            
            496,342
            
            
            
            438,654Accrued
      gaming liabilities
            
            
            489,910
            
            
            
            353,360Accrued
      interest
            
            
            8,937
            
            
            
            8,937Accrued
      other
            
            
            216,455
            
            
            
            199,499Deferred
      income tax asset
            
            $
            2,924,563
            
            
            $
            2,052,768DEFERRED
      TAX LIABILITIESImpairment
      of assets
            
            $
            (72,260
            )
            
            $
            (72,260
            )Depreciation
            
            
            (4,059,567
            )
            
            
            (4,749,378
            )Land
      basis
            
            
            (285,706
            )
            
            
            (285,706
            )Real
      estate taxes
            
            
            (248,179
            )
            
            
            (229,013
            )Deferred
      income tax liability
            
            $
            (4,665,712
            )
            
            $
            (5,336,357
            )NET
      DEFERRED INCOME TAX LIABILITY
            
            $
            (1,741,149
            )
            
            $
            (3,283,589
            )





The
January 1, 2007 adoption of FASB Interpretation 48, Accounting for Uncertainty
in Income Taxes, did not affect the Company’s financial position.  The
Company is required to file a federal tax return only.  As of December 31,
2007, tax years 2004 through 2007 were subject to examination by the Internal
Revenue Service.  The Company’s accounting policy with respect to interest
and penalties arising from income tax settlements is to recognize them as part
of the provision for income taxes.  The Company does not anticipate that
the amount of unrecognized tax benefits will significantly increase or decrease
through the twelve month period ending December 31, 2008.








NOTE 7.  BENEFIT
PLANS





Savings
Plan - Effective November 1, 1995, the Company adopted a savings plan, which
qualifies under Section 401(k) of the Internal Revenue Code.  Under
the plan, participating employees may defer up to 15% of their pre-tax
compensation, but not more than statutory limits.  For years earlier
than 2007, the Company contributed twenty five cents for each dollar contributed
by a participant, with a maximum contribution of 4% of a participant's
compensation.  Effective January 1, 2007, the Company increased its
contribution to fifty cents for each dollar contributed by a
participant.  The Company's matching contributions were approximately
$238,510, $59,774 and $46,504in 2007, 2006 and 2005,
respectively.







NOTE 8. SHARE-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"), which 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 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 twelve months ended
December 31, 2007 is presented below:





Weighted
      AverageOptions
            
            Shares
            
            
            Exercise
      Price
            
            
            Remaining
      Contractual Term
            
            
            Aggregate
      Intrinsic ValueOutstanding
      at beginning of period
            
            
            1,121,199
            
            
            $
            16.49
            
            
            
            -
            
            
            
            -Granted
            
            
            260,307
            
            
            
            28.20
            
            
            
            -
            
            
            
            -Exercised
            
            
            (56,080
            )
            
            
            10.75
            
            
            
            -
            
            
            
            -Forfeited
            
            
            (30,000
            )
            
            
            19.51
            
            
            
            -
            
            
            
            -Expired
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Outstanding
      at end of period
            
            
            1,295,426
            
            
            $
            19.04
            
            
            8.0
      yrs.
            
            
            $
            6,551,603Exercisable
      at end of period
            
            
            512,750
            
            
            $
            13.12
            
            
            7.0
      yrs.
            
            
            $
            5,621,279








A summary
of the status of the Company’s nonvested shares as of December 31, 2007, and
changes during the year and changes during the year ended December 31, 2007, is
presented below:


Nonvested
      Shares
            
            Shares
            
            
            Weighted-Average
      Grant Date Fair ValueNonvested
      at January 1, 2007
            
            
            774,330
            
            
            $
            18.14Granted
            
            
            260,307
            
            
            
            11.24Vested
            
            
            (221,961
            )
            
            
            6.23Forfeited
            
            
            (30,000
            )
            
            
            8.44Nonvested
      at December 31, 2007
            
            
            782,676
            
            
            $
            10.43







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, for the years ended December 31, 2007 and 2006,
the Company recognized share-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 of 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.  See additional
discussion at  NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.  With the adoption of SFAS 123R, we changed our 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 December 31, 2007 totaled approximately
$5.0 million and is expected to be recognized over a weighted average period of
1.48 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 year were as follows:





Years
      ended December 31,2007
            
            
            2006
            
            
            2005Expected
      volatility
            
            
            50.3
            %
            
            
            38.0
            %
            
            
            46.7
            %Expected
      dividends
            
            
            -
            
            
            
            -
            
            
            
            -Expected
      life (in years)Directors’
      Plan
            
            
            2.5
            
            
            
            2.5
            
            
            
            6.2Executive
      Plan
            
            
            4.5
            
            
            
            6.9
            
            
            
            9.0Employee
      Plan
            
            
            3.1
            
            
            
            2.9
            
            
            
            5.5Weighted
      average risk free rate
            
            
            4.1
            %
            
            
            4.6
            %
            
            
            4.0
            %Weighted
      average grant date fair value per
              share
      of options granted
            
            $
            11.24
            
            
            $
            10.64
            
            
            $
            9.19Total
      intrinsic value of options exercised
            
            $
            747,770
            
            
            $
            2,238,390
            
            
            $
            1,081,274Cash
      received for all stock option exercises
            
            $
            602,636
            
            
            $
            2,213,489
            
            
            $
            429,859Tax
      benefit realized for tax return deductions
            
            $
            292,757
            
            
            $
            519,752
            
            
            $
            330,333








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. In 2006, the Company determined that an implied
volatility is more reflective of market conditions and a better indicator of
expected volatility.




Reported
stock based compensation expense was classified as follows:





For
      the years ended December 31,2007
            
            
            2006Casino
            
            $
            72,509
            
            
            $
            59,685Food
      & beverage
            
            
            53,542
            
            
            
            51,673Hotel
            
            
            38,071
            
            
            
            47,233Selling,
      general and administrative
            
            
            2,106,935
            
            
            
            3,115,117Total
      stock-based compensation,before
      taxes
            
            
            2,271,057
            
            
            
            3,273,708Tax
      benefit
            
            
            (794,870
            )
            
            
            (1,145,797
            )Total
      stock-based compensation,net
      of tax
            
            $
            1,476,187
            
            
            $
            2,127,911








NOTE
9.  COMMITMENTS AND CONTINGENCIES





Self
Insurance - The Company is self-insured for health care claims for eligible
active employees. Benefit plan administrators assist the Company in determining
its liability for self-insured claims, and such claims are not discounted. The
Company is also self-insured for workers’ compensation. Both plans limit the
Company's maximum liability under stop-loss agreements with insurance companies.
The maximum liability for health care claims under the stop-loss agreement is
$85,000 per claim. The maximum liability for workers’ compensation under the
stop-loss agreement is $500,000 per claim.





On
September 28, 2006, the Company’s Board of Directors authorized a stock
repurchase plan that superseded an older plan adopted in 2003 (the “Repurchase
Plan”).  Under the Repurchase Plan, the Board of Directors authorized a
program to repurchase up to 1,000,000 shares of the Company’s common stock in
the open market or in privately negotiated transactions from time to time, in
compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, subject
to market conditions, applicable legal requirements and other factors.  The
Repurchase Plan does not obligate the Company to acquire any particular amount
of common stock and the plan may be suspended at any time at the Company’s
discretion.  Through December 31, 2007, the Company purchased 555,508
shares pursuant to the Repurchase Plan.





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





In June
2007, the Company announced the groundbreaking on an expansion project with
completion expected in the second quarter of 2008.  New space will be
added to the first floor casino level, the second and third floors and the
basement level.  The existing casino floor will be
expanded.   The first floor casino plans include a redesigned,
updated and expanded race and sports book and an enlarged poker
room.   The expansion will also include a New York-style deli
restaurant.  The second floor expansion will create additional
ballroom and convention space doubling the existing facilities.  The
spa and fitness center will be remodeled and expanded to create an ultra-modern
spa and fitness center facility.  The Company also plans to add 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 December 31, 2007, the Company has
paid approximately $17.2 million of the estimated expansion and skybridge
cost.




The
Company is a defendant in various pending legal proceedings. In the opinion of
management, all pending claims in such litigation will not, in the aggregate,
have a material adverse effect on the Company's financial position, cash flows
or results of operations.








NOTE 10.  RELATED
PARTY TRANSACTIONS





On July
26, 2006, the Company submitted a formal offer to Biggest Little Investments,
L.P. (“BLI”), formulated and delivered by a committee comprised of the Company’s
independent directors (the “Committee”), to purchase the 18.95-acre shopping
center (the “Shopping Center”) adjacent to the Atlantis Casino Resort
Spa.  On October 16, 2006, the Committee received a letter from
counsel to BLI advising the Company that BLI, through its general partner,
Maxum, L.L.C., had “decided that such offer is not in the best interest of the
Partnership’s limited partners and, therefore, will not be entering into
negotiations with Monarch.”  While there have been subsequent
communications between BLI and the Company  from time to time
regarding our interest in the Shopping Center, nothing has resulted. The Board
of Directors continues to consider expansion alternatives.





John
Farahi, Bob Farahi and Ben Farahi, beneficially own a controlling interest in
BLI through their beneficial ownership interest in Western Real Estate
Investments, LLC.  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, storage space and guest parking and paid rent of approximately
$262,700plus
common area expenses in 2007. The Company paid rent of approximately $95,520 and
$85,730 plus common area expenses in 2006 and 2005, 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 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 Company paid approximately $300,000 plus common area charges in each of the
years 2007, 2006 and 2005 for its leased driveway space at the Shopping
Center.





The
Company is currently leasing sign space from the Shopping Center. The lease took
effect in March 2005 for a monthly cost of $1. The lease was renewed for another
year with a monthly lease of $1,000 effective January 1, 2006.  The
Company paid $12,420and $12,000 for the
twelve months ended December 31, 2007 and 2006, respectively, and did not make
any payments during 2005.





On September 23, 2003, the Company
entered into an option agreement with an affiliate of its principal stockholders
to purchase property in South Reno for development of a new hotel casino.
Through the property owner, the Company filed an application with the City of
Reno for both master plan and zoning changes for 13 acres of the property. On
January 20, 2005, the City of Reno Planning Commission approved the application
for zoning change on the property; the Reno City Council would next have to
approve the application. On April 13, 2005, the Reno City Council rejected the
application for master plan and zoning change. As a result of the City Council’s
decision, the Company expensed in 2005 a charge of approximately $289,000 in
gaming development costs related to the potential new hotel casino. The option
agreement was set to expire on September 15, 2005 and the Company’s Board of
Directors voted to let the agreement expire on such date without exercising the
option to purchase.





The
Company is currently leasing billboard advertising space from affiliates of its
principal stockholders for a total cost of $49,000 in 2007, $42,000 in 2006 and
$31,500 in 2005.





Until
December 2006, the Company rented office and storage space from a company
affiliated with Monarch’s principal stockholders and paid rent of approximately
$26,000 in 2006, $28,000 in 2005 and did not incur any such expense in
2007.  Effective December 2006, Monarch’s principal stockholders sold
this building and, through April 15, 2007, the Company continued to rent space
from the new owner which is not a related party to Monarch.





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 plans to
utilize for 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.








NOTE
11:  SUBSEQUENT EVENTS





On March
11, 2008, the Board of Directors authorized a new repurchase plan (the "New
Repurchase Plan") for up to 1,000,000 shares of the Company’s common stock to be
repurchased in the open market or in privately negotiated transactions from time
to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of
1934, subject to market conditions, applicable legal requirements and other
factors. The New Repurchase Plan does not obligate the Company to acquire any
particular amount of common stock and the New Repurchase Plan may be suspended
at any time at the Company’s discretion.  The Company had repurchased
all authorized Company common stock under the previous Repurchase
Plan.




















NOTE 12.  SELECTED
QUARTERLY FINANCIAL DATA (UNAUDITED)


20071st
      Quarter
            
            
            2nd
      Quarter
            
            
            3rd
      Quarter
            
            
            4th
      Quarter
            
            
            TotalNet
      revenues
            
            $
            37,781,591
            
            
            $
            41,561,320
            
            
            $
            43,623,296
            
            
            $
            36,890,164
            
            
            $
            159,856,371Operating
      expenses
            
            
            29,551,263
            
            
            
            31,481,233
            
            
            
            31,877,887
            
            
            
            31,258,286
            
            
            
            124,168,669Income
      from operations
            
            
            8,230,328
            
            
            
            10,080,087
            
            
            
            11,745,409
            
            
            
            5,631,878
            
            
            
            35,687,702Net
      income
            
            
            5,495,112
            
            
            
            6,900,450
            
            
            
            8,033,871
            
            
            
            4,050,785
            
            
            
            24,480,218Income
      per share of
              common
      stockBasic
            
            $
            0.29
            
            
            $
            0.36
            
            
            $
            0.42
            
            
            $
            0.21
            
            
            $
            1.28Diluted
            
            $
            0.28
            
            
            $
            0.36
            
            
            $
            0.41
            
            
            $
            0.21
            
            
            $
            1.27








20061st
      Quarter
            
            
            2nd
      Quarter
            
            
            3rd
      Quarter
            
            
            4th
      Quarter
            
            
            TotalNet
      revenues
            
            $
            35,605,134
            
            
            $
            37,622,776
            
            
            $
            41,748,378
            
            
            $
            36,992,666
            
            
            $
            151,968,954Operating
      expenses
            
            
            28,253,119
            
            
            
            30,334,617
            
            
            
            30,547,067
            
            
            
            29,342,518
            
            
            
            118,477,321Income
      from operations
            
            
            7,352,016
            
            
            
            7,288,159
            
            
            
            11,201,310
            
            
            
            7,650,148
            
            
            
            33,491,633Net
      income
            
            
            4,768,098
            
            
            
            4,822,232
            
            
            
            7,371,041
            
            
            
            5,119,000
            
            
            
            22,080,371Income
      per share of
              common
      stockBasic
            
            $
            0.25
            
            
            $
            0.25
            
            
            $
            0.39
            
            
            $
            0.27
            
            
            $
            1.16Diluted
            
            $
            0.25
            
            
            $
            0.25
            
            
            $
            0.38
            
            
            $
            0.27
            
            
            $
            1.15





ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None.





ITEM 9A. CONTROLS AND
PROCEDURES





Disclosure Controls and
Procedures





As of the
end of the period covered by this Annual Report on Form 10-K, (the "Evaluation
Date"), an evaluation was carried out by our management, with the participation
of our Chief Executive Officer and our Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures (as defined by Rule
13a-15(e) under the Securities Exchange Act of 1934). Based upon the evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this report. No changes were made to our internal control over
financial reporting (as defined by Rule 13a-15(e) under the Securities Exchange
Act of 1934) during the last fiscal quarter that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.





Management’s Report on
Internal Control over Financial Reporting





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





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





Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2007. In making this assessment, it used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control-Integrated Framework. Based on our assessment we believe
that, as of December 31, 2007, the Company’s internal control over financial
reporting is effective based on those criteria.





The
Company’s independent registered public accounting firm has issued an audit
report on our assessment of the Company’s internal control over financial
reporting. This report appears in Item 8 of this Form 10-K.








ITEM 9B. OTHER
INFORMATION





None.








PART III








ITEM 10. DIRECTORS AND
EXECUTIVE OFFICERS OF THE REGISTRANT





This
information is incorporated by reference from the Company's Proxy Statement to
be filed with the Commission in connection with the Annual Meeting of
Stockholders to be held on June 18, 2008.








ITEM 11. EXECUTIVE
COMPENSATION





This
information is incorporated by reference from the Company's Proxy Statement to
be filed with the Commission in connection with the Annual Meeting of
Stockholders to be held on June 18, 2008.






ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





Following
is information related to the Company’s equity compensation.


Plan
      Category
            
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            
            
            Weighted-average
      exercise price of outstanding options, warrants and rights
            
            
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            
            
            (b)
            
            
            (c)Equity
      compensation plans approved by security holders (F1)
            
            
            1,295,426
            
            
            $
            19.04
            
            
            
            1,345,076Equity
      compensation plans not approved by security holders
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            
            1,295,426
            
            
            $
            19.04
            
            
            
            1,345,076








(F1)
Includes the 1993 Directors’ Stock Option Plan, 1993 Employee Stock Option Plan
and 1993 Executive Long-Term Incentive Plan, as amended.





Additional
information is incorporated by reference from the Company's Proxy Statement to
be filed with the Commission in connection with the Annual Meeting of
Stockholders to be held on June 18, 2008.








ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS





This
information is incorporated by reference from the Company's Proxy Statement to
be filed with the Commission in connection with the Annual Meeting of
Stockholders to be held on June 18, 2008.








ITEM 14. PRINCIPAL
ACCOUNTANT FEES AND SERVICES





This
information is incorporated by reference from the Company's Proxy Statement to
be filed with the Commission in connection with the Annual Meeting of
Stockholders to be held on June 18, 2008.














PART IV





ITEM 15. EXHIBITS AND
FINANCIAL STATEMENT SCHEDULES





1.
Financial Statements





Included in Part II of this
report:





a) Report of Independent Registered
Public Accounting Firm





b) Consolidated Statements of Income
for the years ended December 31, 2007,


2006 and
2005.





c)
Consolidated Balance Sheets at December 31, 2007 and 2006.





d)
Consolidated Statements of Stockholders' Equity for the years ended


December
31, 2007, 2006 and 2005.





e)
Consolidated Statements of Cash Flows for the years ended December
31,


2007,
2006 and 2005.





f)
Notes to Consolidated Financial Statements.








2.
Financial Statements Schedules





Schedule
II. - VALUATION AND QUALIFYING ACCOUNTS


Year
      ended December 31,
            
            Balance
      at beginning of year
            
            
            Charged
      to costs and expenses
            
            
            Deductions
      (F1)
            
            
            Other
            
            
            Balance
      at end of year2005Allowance
      for doubtful accounts
            
            $
            800,683
            
            
            $
            550,512
            
            
            $
            (269,448
            )
            
            $
            -
            
            
            $
            1,081,7472006Allowance
      for doubtful accounts
            
            $
            1,081,747
            
            
            $
            903,426
            
            
            $
            (731,876
            )
            
            $
            -
            
            
            $
            1,253,2972007Allowance
      for doubtful accounts
            
            $
            1,253,297
            
            
            $
            554,891
            
            
            $
            (390,069
            )
            
            $
            -
            
            
            $
            1,418,119








(F1) The
Company reviews receivables monthly and, accordingly, adjusts the allowance for
doubtful accounts monthly.  The Company records write-offs
annually.  The amount charged to Costs and Expenses reflects the bad
debt expense recorded in the consolidated statements of income, while the amount
recorded for Deductions reflects the adjustment to actual allowance for doubtful
accounts reserve at the end of the period.











Exhibits





Number                          Exhibit
Description





3.01
            Articles
      of Incorporation of Monarch Casino & Resort, Inc., filed June 11, 1993
      are incorporated herein by reference from the Company's Form S-1
      registration statement (SEC File 33-64556), Part II, Item 16, Exhibit
      3.01.





3.02                  Bylaws
of Monarch Casino & Resort, Inc., adopted June 14, 1993 are incorporated herein by
reference from the Company's Form S-1 registration statement (SEC File
33-64556), Part II, Item 16, Exhibit 3.02.





3.03
            Articles
      of Incorporation of Golden Road Motor Inn, Inc. filed March 6, 1973;
      Certificate Amending Articles of Incorporation of Golden Road Motor Inn,
      Inc. filed August 29, 1973; and Certificate of Amendment of Articles of
      Incorporation filed April 5, 1984 are incorporated herein by reference
      from the Company's Form S-1 registration statement (SEC File 33-64556),
      Part II, Item 16, Exhibit 3.03.





3.04
            Bylaws
      of Golden Road Motor Inn, Inc., adopted March 9, 1973
            are
      incorporated herein by reference from the Company's Form S-1 registration
      statement (SEC File 33-64556), Part II, Item 16, Exhibit
    3.04.





3.05
            Amendment
      to Bylaws of Monarch Casino & Resort, Inc. adopted January 24, 1995 is
      incorporated herein by reference to the Company's Form 10-K report (SEC
      File 0-022088) for the fiscal year ended December 31, 2006, Exhibit
      3.05.





4.01                  Specimen
Common Stock Certificate for the Common Stock of Monarch Casino
& Resort, Inc. is incorporated herein by reference from the Company's Form
S-1 registration statement (SEC File 33-4556), Part , Item 16,


Exhibit 4.01.





4.02
            Amended
      and Restated Monarch Casino & Resort, Inc. 1993 Directors' Stock
      Option Plan is incorporated herein by reference to the Company's Form 10-K
      report (SEC File 0-022088) for the fiscal year ended December 31, 1998,
      Item 14(c), Exhibit 4.02.





4.03
            Amended and Restated Monarch Casino & Resort, Inc. 1993 Executive
      Long-Term Incentive Plan is incorporated herein by reference to the
      Company's Form
      10-K report (SEC File 0-22088) for the fiscal year
      ended
              December 31, 1997, Item 14(c), Exhibit
  4.03.







4.04
            Amended
      and Restated Monarch Casino & Resort, Inc. 1993 Employee Stock Option
      Plan is incorporated herein by reference to the Company's Form 10-K report
      (SEC File 0-22088) for the fiscal year ended December 31, 1997, Item
      14(c), Exhibit 4.04.





4.05
            Second
      Amendment to Monarch Casino & Resort, Inc. 1993 Directors’ Stock
      Option Plan is incorporated herein by reference to the Company's Proxy
      Statement (SEC File 0-22088) in relation to the Company’s 2003 Annual
      Meeting of Stockholders Exhibit
A-1.





4.06
            Second
      Amendment to Monarch Casino & Resort, Inc. 1993 Employee Stock Option
      Plan is incorporated herein by reference to the Company's Proxy Statement
      (SEC File 0-22088) in relation to the Company’s 2003 Annual Meeting of
      Stockholders Exhibit A-2.





4.07
            Second
      Amendment to Monarch Casino & Resort, Inc. 1993 Executive Long-Term
      Incentive Plan is incorporated herein by reference to the Company's Proxy
      Statement (SEC File 0-22088) in relation to the Company’s 2003 Annual
      Meeting of Stockholders Exhibit
A-3.





4.08
            Third
      Amendment to Monarch Casino & Resort, Inc. 1993 Employee Stock Option
      Plan is incorporated herein by reference to the Company's Form 10-K report
      (SEC File 0-022088) for the fiscal year ended December 31, 2006, Exhibit
      4.08.





4.09
            Third
      Amendment to Monarch Casino & Resort, Inc. 1993 Executive Long-Term
      Incentive Plan is incorporated herein by reference to the Company's Form
      10-K report (SEC File 0-022088) for the fiscal year ended December 31,
      2006, Exhibit 4.09.





10.01
            Non-standardized
      401(k) Plan Adoption Agreement between Monarch Casino & Resort, Inc.
      and Smith Barney Shearson dated November 7, 1995 is incorporated herein by
      reference to the Company's Form 10-K report (SEC File 0-22088) for the
      fiscal year ended December 31, 1995, Item 14(a)(3), Exhibit
      10.21.





10.02
            Trademark
      Agreement between Golden Road Motor Inn, Inc. and Atlantis Lodge, Inc.,
      dated February 3, 1996 is incorporated herein by reference to the
      Company's Form 10-K report (SEC File 0-22088) for the fiscal year ended
      December 31, 1995, Item 14(a)(3), Exhibit
10.23.





10.03              Credit
Agreement, dated as of February 20, 2004, among Golden Road Motor Inn, Inc.
as Borrower, Monarch Casino & Resort, Inc., as Guarantor, the Lenders as
defined therein, and Wells Fargo Bank as


administrative and collateral Agent for the
Lenders and Swingline Lender is incorporated herein by reference to the Company's
Form 8-K report (SEC File 0-22088) dated March 8, 2004, Exhibit
99.1.





10.04
            Lease
      Agreement and Option to Purchase dated as of January 29, 2004, between
      Golden Road Motor Inn, Inc. as Lessee and Biggest Little Investments, L.P.
      as Lessor is incorporated herein by reference to the Company's Form 10-K
      (SEC File 0-22088) dated March 11, 2004, Exhibit
  10.18.





10.05                  First
Amendment, dated as of February 8, 2007, to the Credit Agreement, dated as
of February 20, 2004, among Golden Road Motor Inn, Inc. as Borrower, Monarch
Casino & Resort, Inc., as Guarantor, the Lenders


as defined therein, and
Wells Fargo Bank as administrative and collateral Agent for the Lenders and
Swingline Lender is incorporated herein by reference to the Company's Form 10-K
report (SEC File 0-022088) for


the fiscal year ended December 31, 2006, Exhibit 10.05.


21.01                  Amended
and Restated List of Subsidiaries of Monarch Casino & Resort,
Inc.





23.1                    Consent
of Independent Registered Public Accounting Firm





31.1                    Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





31.2                    Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





32.1
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 is filed as an exhibit to
      this  Form 10-K.





32.2
            Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 is filed as an exhibit to this Form
      10-K.














SIGNATURES





Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.





MONARCH
CASINO & RESORT, INC.


(Registrant)








Date:
March 14,
2008                                           By: /s/ RONALD
ROWAN


Ronald
Rowan, Chief Financial Officer


and
Treasurer (Principal Financial


Officer
and Duly Authorized Officer)





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.








Signature                                           Title                                           Date








/S/ JOHN
FARAHI                              Co-Chairman
of the Board of
Directors                                                                           March
14, 2008


John
      Farahi
            Chief
      Executive Officer (Principal Executive Officer) and Director





/S/ BOB
FARAHI                                Co-Chairman
of the Board of
Directors,                                                                           March
14, 2008


Bob
Farahi                                           President,
Secretary and Director








/S/ RONALD
ROWAN                       Chief
Financial Officer and
Treasurer                                                                               March
14, 2008


Ronald
Rowan                                     (Principal
Financial Officer and


Principal Accounting Officer)





/S/ CHARLES W.
SCHARER              Director                                                                                                                               
 March 14, 2008


Charles
W. Scharer











/S/ CRAIG. F.
SULLIVAN                  
Director                                                                                                                                
March 14, 2008


Craig F.
Sullivan








/S/ RONALD R.
ZIDECK                   
Director                          
                                                                                                      March
14, 2008


Ronald R.
Zideck














EXHIBIT
21.01





LIST
OF SUBSIDIARIES OF MONARCH CASINO & RESORT, INC.





Subsidiary
            Jurisdiction
      of
              Incorporation
            
            Percentage
              OwnershipGolden
      Road Motor Inn, Inc., dba Atlantis Casino Resort
            Nevada
            
            
            100
            %Golden
      Town, Inc.
            Nevada
            
            
            100
            %High
      Desert Sunshine, Inc.
            Nevada
            
            
            100
            %

















EXHIBIT
23.1








CONSENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








We
consent to the incorporation by reference in the Registration Statement (Form
S-8 Nos. 333-144254, 333-144253, 333-144252, 333-85412, 333-85418, and
333-85420) pertaining to the Directors’ Stock Option Plan, Executive Long-Term
Stock Incentive Plan, and Employee Stock Option Plan of Monarch Casino &
Resort, Inc. of our reports dated March 12, 2008, with respect to the
consolidated financial statements and schedule of Monarch Casino & Resort,
and the effectiveness of internal control over financial reporting of Monarch
Casino & Resort, included in the Annual Report (Form 10-K) for the year
ended December 31, 2007.








/s/
Ernst & Young LLP








Las
Vegas, NV


March 12,
2008














EXHIBIT
31.1





CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002





I, Ronald
Rowan, Chief Financial Officer of Monarch Casino & Resort,
Inc.,


certify
that:





1.
            I
      have reviewed this annual report on Form 10-K of Monarch Casino &
      Resort, Inc. a Nevada Corporation;





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;





4.
            The
      registrant’s other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f), for the registrant and
  have:





a.
            Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;


b.
            Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;


c.
            Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and


d.
            Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter that has materially affected or is reasonably likely to
      materially affect the registrant’s internal control over financial
      reporting; and





5.
            The
      registrant’s other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):


a.
            All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and


b.
            Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal
      controls over financial reporting.








Date:
March 14, 2008





By: /s/ Ronald
Rowan


Ronald
Rowan


Chief
Financial Officer and Treasurer




















EXHIBIT
31.2





CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002





I, John
Farahi, Chief Executive Officer of Monarch Casino & Resort,
Inc.,


certify
that:








1.
            I
      have reviewed this annual report on Form 10-K of Monarch Casino &
      Resort, Inc. a Nevada Corporation;





2.
            Based
      on my knowledge, this report does not contain any untrue statement of a
      material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were made, not misleading with respect to the period covered by this
      report;





3.
            Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the
      financial condition, results of operations and cash flows of the
      registrant as of, and for, the periods presented in this
      report;





4.
            The
      registrant’s other certifying officer and I are responsible for
      establishing and maintaining disclosure controls and procedures (as
      defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
      control over financial reporting (as defined in Exchange Act Rules
      13a-15(f) and 15d-15(f), for the registrant and
  have:





a.
            Designed
      such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure
      that material information relating to the registrant, including its
      consolidated subsidiaries, is made known to us by others within those
      entities, particularly during the period in which this report is being
      prepared;


b.
            Designed
      such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial
      reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principles;


c.
            Evaluated
      the effectiveness of the registrant’s disclosure controls and procedures
      and presented in this report our conclusions about the effectiveness of
      the disclosure controls and procedures, as of the end of the period
      covered by this report based on such evaluation;
  and


d.
            Disclosed
      in this report any change in the registrant’s internal control over
      financial reporting that occurred during the registrant’s most recent
      fiscal quarter that has materially affected or is reasonably likely to
      materially affect the registrant’s internal control over financial
      reporting; and





5.
            The
      registrant’s other certifying officer and I have disclosed, based on our
      most recent evaluation of internal control over financial reporting, to
      the registrant’s auditors and the audit committee of the registrant’s
      board of directors (or persons performing the equivalent
      functions):


a.
            All
      significant deficiencies and material weaknesses in the design or
      operation of internal control over financial reporting which are
      reasonably likely to adversely affect the registrant’s ability to record,
      process, summarize and report financial information;
  and


b.
            Any
      fraud, whether or not material, that involves management or other
      employees who have a significant role in the registrant’s internal
      controls over financial reporting.











Date:
March 14, 2008





By: /s/ John
Farahi


John
Farahi


Chief
Executive Officer











EXHIBIT
32.1





18
U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002





I, Ronald
Rowan, Chief Financial Officer and Treasurer of Monarch Casino & Resort,
Inc. (the “Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, 18 U.S.C. Section 1350, that:





1.
            The
      Annual Report on Form 10-K of the Company for the annual period ended
      December 31, 2007 (the “Report”) fully complies with the requirements of
      Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m);
      and


2.
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.





/S/ RONALD
ROWAN


Chief
Financial Officer and Treasurer


March 14,
2008














EXHIBIT
32.2





CERTIFICATION PURSUANT TO 18
U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002





I, John
Farahi, Chief Executive Officer of Monarch Casino & Resort, Inc. (the
“Company”), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350, that:





3.
            The
      Annual Report on Form 10-K of the Company for the annual period ended
      December 31, 2007 (the “Report”) fully complies with the requirements of
      Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m);
      and


4.
            The
      information contained in the Report fairly presents, in all material
      respects, the financial condition and results of operations of the
      Company.








/S/ JOHN
FARAHI


John
Farahi


Chief
Executive Officer


March 14,
2008