**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, 2006





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 Street****Reno,
                Nevada**
            **89502**(Address
                of Principal Executive Offices)
            (ZIP
                Code)**1175
                W. Moana Lane, Suite 200, Reno, Nevada 89509**(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, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer [ ] Accelerated Filer [X] Non-accelerated Filer [
      ]





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, 2006, based on the closing price as reported on
      The
      Nasdaq Stock Market (SM) of $28.12 per share, was approximately
      $389,199,753.





As
      of
      March 5,
      2007,
      Registrant had 19,072,634 shares of Common Stock outstanding.





DOCUMENTS
      INCORPORATED BY REFERENCE





Portions
      of the Proxy Statement for Registrant's 2007 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
      our Golden Road subsidiary, 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
      975 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.





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 an unaffiliated party pursuant to a lease
      arrangement); Keno; and a poker room.








The
      following table summarizes the components of our casino revenues for the periods
      shown:








Years
                ended December 31,2006
            2005
            2004Slot
                & video poker
            81.9%
            81.7%
            79.7%Table
                games
            15.1%
            15.5%
            17.5%Keno,
                poker room and sports book rent
            3.0%
            2.8%
            2.8%





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 pla yers
      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 826 rooms and
      suites, and a low-rise motor lodge with another 149 rooms, for a total of 975
      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 underwent a $3.8 million complete
      interior renovation
      that was completed in
      March
      2004 .
      As part
      of the renovation, certain suites were expanded and, as a result, five regular
      hotel rooms were eliminated. The second hotel tower now contains 278 rooms
      and
      suites. The third tower was completed
      in June 1999 and contains 388 rooms and suites in 28 stories. The rooms on
      the top seven floors in this newest 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 31,2006
            2005
            2004Occupancy
                rate
            93.30%
            93.00%
            93.60%Average
                daily room rate
            $69.87
            $63.24
            $64.16





We
      continually monitor and adjust hotel room rates based upon demand and other
      competitive factors. Our Average Daily Room Rate ("ADR") has also been impacted
      by rooms sold at discounted rates to select wholesale operators for tour and
      travel packages. The decreases in ADR and occupancy in 2005 compared to 2004
      were due to fewer conventions at the adjacent Reno-Sparks Convention Center
      and
      the fact that Reno did not host a major bowling tournament in 2005. Conventions
      typically draw higher room rates.








**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 andseafood,
                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 machine s,
      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 moderately 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 $5.8 million in 2006, $6.1 million in 2005 and $9.7 million
      in 2004. A summary of capital expenditures for the last three years is as
      follows (in millions):





Years
                ended December 31,2006
            2005
            2004Cash
                acquisitions of property and equipment
            $5.8
            $6.1
            $9.1Financed
                purchases of property and equipment
            -
            -
            0.6Total
                capital expenditures
            $5.8
            $6.1
            $9.7








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 primarily consisted of the re placement
      of and upgrade to our ventilation and cooling system, acquisition of gaming
      and
      computer systems equipment, and continued renovations to the facility. During
      2004, capital expenditures consisted primarily of renovations to our second
      tower hotel rooms and suites, the installation of a new slot player tracking
      system, $1.35 million in leased driveway improvements and continued acquisitions
      of and upgrades to gaming equipment.





In
      2004,
      we constructed a driveway that is being shared between the Atlantis and the
      adjacent Sierra Marketplace Shopping Center (the "Shopping Center") that is
      owned and controlled by affiliates of our chief executive officer and our
      president. A new traffic signal was erected at mid-block on South Virginia
      Street, serving the new driveway. As part of this project, we are 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. We also use part of the common area
      of
      the Shopping Center and pay our proportional share of the common area expense
      of
      the Shopping Center. We have the option to renew the lease for 3 five-year
      terms, and at the end of the extension period, we have the option to purchase
      the leased section of the Shopping Center at a price to be determined based
      on
      an MAI Appraisal. We use the leased space for pedestrian and vehicle access
      to
      the Atlantis, and we have use of a portion of the parking spaces at the Shopping
      Center. The total cost of the project was $2.0 million; we were responsible
      for
      two thirds of the total cost, or $1.35 million. The project was completed,
      the
      driveway was put into use and we began paying rent on September 30, 2004 (see
      Part III - ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS incorporated
      herein by reference to the Company's Proxy Statement to be filed with the
      Securities and Exchange Commission in connection with the Annual Meeting of
      Stockholders to be held on May 22, 2007). The cost of the new driveway is being
      depreciated over the initial 15-year lease term; some components of the new
      driveway are being depreciated over a shorter period of time (see “Property and
      Equipment” in Notes to Consolidated Financial Statements - Note 1. Summary of
      Significant Accounting Policies”). We remain committed to implementing
      renovations and upgrades and will consider all capital expenditure projects
      proposed by our executive officers and key employees.




**CURRENT
      EXPANSION**





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







**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 slot machines. 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.





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**





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, restaurants, cocktail lounges,
      convention and meeting rooms and other amenities.





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





RENO
      AREA
      RESIDENTS: The Atlantis' proximity to rapidly growing, generally more affluent,
      south Reno residential areas provides a significant source of middle to
      upper-middle income gaming customers. We market to Reno area 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.





We
      believe local gaming customers prefer slot and video poker machines to table
      games, and prefer video poker machines to reel-spinning (or electronically
      simulated reel-spinning) slot machines. Accordingly, the Atlantis provides
      a
      diverse selection of video poker machines. Moreover, we believe that Reno area
      residents seek out and frequent casinos with higher payout rates on slot and
      video poker machines and more liberal rules on table games relative to other
      northern Nevada casinos. We believe the Atlantis offers higher than average
      payout rates on slot machines and we have adopted liberal
      rules for blackjack games, including the use of single decks of cards at some
      tables .
      We also
      utilize a frequent player club called "Club Paradise" to encourage Locals'
      repeat play at our casino. Members of Club Paradise earn points for their casino
      play that can be redeemed for complimentary products and services offered by
      the
      Atlantis.





LEISURE
      TRAVELERS:  Reno
      is a
      popular gaming and vacation destination that enjoys direct freeway access to
      nearly all major northern California population centers and non-stop air service
      from most large cities in the western United States and many mid-west and
      southern population centers such as
      Chicago,  Dallas  and
      Atlanta .
      The
      principal segments of Reno's leisure traveler market are independent travelers,
      package tour and travel customers 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 believe this market segment is largely comprised
      of individuals who drive and, to a lesser extent, fly to Reno primarily northern
      California and the Pacific Northwest. We strive to attract the middle to
      upper-middle income strata of this consumer segment through advertising and
      direct marketing in select regions. This segment represents a significant
      portion of the Atlantis' customers, especially those visiting on
      weekends.





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 customer visits and supplement
      mid-week occupancy.





We
      welcome direct on-line reservations on the Atlantis' website www.atlantiscasino.com and are
      also 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 high-end players.





CONVENTIONEERS:  Convention
      business, like package tour and travel, generates mid-week customer visits
      and
      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 customer traffic for the Atlantis from a market
      segment that is presently underserved in the Reno area. As described in the
      “CURRENT EXPANSION” section above, w e
      plan to
      add a pedestrian skywalk over Peckham Street that will connect the Reno-Sparks
      Convention Center directly to the Atlantis.





We
      market
      to all customer 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 its rooms,
      food and beverage offerings, entertainment and promotions.





Our
      frequent player club, "Club Paradise," allows our customers 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 in our direct
      marketing efforts. We believe that Club Paradise significantly enhances our
      ability to build customer loyalty and generate repeat customer
      visits.








**COMPETITION**





Competition
      in the Reno area gaming market is intense. Based on information obtained from
      the December 31, 2006 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' competition for Locals comes primarily from other
      large-scale casinos located outside of downtown Reno that offer amenities that
      appeal to middle to upper-middle income customers, and secondarily with those
      casinos located in downtown Reno that offer similar amenities. We compete for
      Locals 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 its 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
      and
      catering mainly to Locals (“Station”), has acquired three sites 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 the dominant
      Locals casino operator in the Las Vegas market. Should Station proceed with
      its
      plans, Station will create additional competition for us in the Locals,
      conventioneer and tour and travel markets and could have a material adverse
      impact on our business. We also believe, however, that Station’s plans could
      contribute to the synergies of concentration for casino properties in the Reno
      area near the Atlantis which could draw gaming patrons away from downtown Reno
      and that properties in this area, including the Atlantis, could
      benefit.





We
      believe that the Atlantis' primary competition for leisure travelers comes
      from
      other large-scale casinos, including those located in downtown Reno and those
      located away from downtown Reno, that offer amenities that appeal to middle
      to
      upper-middle income customers. 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 many customers who prefer to avoid the more congested downtown area; however,
      the Atlantis' location is a disadvantage in that it does not afford us the
      ability to generate walk-in traffic (except with respect to persons attending
      events at the Convention Center), which is a significant source of customers
      for
      some casinos located in downtown Reno.





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 secondarily from other cities on the U.S. West
      Coast 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.





The
      Atlantis also competes for gaming customers 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 1999 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 a key factor in our ability to attract Locals
      which competitor facilities will not easily be able to 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 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 of California
      that allow the tribes to increase the number of slot machines beyond the
      previous limit of 2,000-per-tribe limit in exchange for higher fees from each
      of
      the five tribes. The State of California hopes to execute similar compacts
      with
      more Indian tribes.








**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.








**EMPLOYEES**





As
      of
      February 19, 2007, we had approximately 1,900 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.





**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
      1999 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 customers 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.
      The State of California has expressed interest in executing similar compacts
      with more Indian tribes. The resulting increase in the number of slot machines
      permitted in California Native American Casinos could further adversely impact
      Reno area casino operations and our operations.





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 customers 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
      LOCALS 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 Locals (“Station”), has acquired three sites 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 the dominant
      Locals casino operator in the Las Vegas market. Should Station proceed with
      its
      plans, Station will create additional competition for us in the Locals,
      conventioneer and tour and travel markets and could have a material adverse
      impact on our business.





**CONSTRUCTION
      RELATED DISRUPTIONS TO OUR BUSINESS COULD IMPACT OUR BUSINESS OPERATIONS
      THROUGHOUT THE REMAINDER OF 2007 AND IN THE FIRST HALF OF
      2008**





As
      discussed above in “Item 1. Business—Current Expansion,” we intend to commence
      construction on a $50 million expansion to certain areas of 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 disruptions to our operations from different construction activities
      on
      the property. In addition, the presence of construction activity on our property
      may make it more inconvenient for our patrons to access certain locations at
      the
      Atlantis, and certain patrons may elect to patronize other Reno area casinos
      rather than deal with any construction-related inconveniences. As a result,
      our
      business and our results of operations may be adversely impacted during the
      remainder of 2007 and in the first half of 2008.





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





We
      expect
      to begin 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
      heavily 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 Locals business could be
      adversely impacted.





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





Our
      largest source of leisure traveler customers is California and the Pacific
      Northwest, including a large number who drive to Reno from the San Francisco
      and
      Sacramento metropolitan areas. Since 1999, 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 and
      this trend is expected to continue. 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 customers, 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 avian flu or other 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 customers
      or
      employees is suspected of having contracted certain highly contagious diseases,
      we may be required to quarantine these customers 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.





**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 our 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 deter our 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 expansions
      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.








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








**ITEM
      3. LEGAL PROCEEDINGS**





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





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








**ITEM
      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 2 006.








**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. Prices prior
      to March 31, 2005, are adjusted to reflect a 2-for-1 stock split effective
      on
      such date.





2006
            2005High
            Low
            High
            LowFirst
                quarter
            $29.85
            $22.44
            $21.72
            $18.95Second
                quarter
            $32.97
            $25.14
            $24.98
            $16.56Third
                quarter
            $28.50
            $17.50
            $26.32
            $14.82Fourth
                quarter
            $25.74
            $19.45
            $22.94
            $15.50








As
      of
      March 5, 2007, there were approximately 87 holders of record of our common
      stock, and approximately 1,571 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.





(b)
      Not
      applicable.





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





Under
      the
      Second 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 Second 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. As of December
      31, 2006, the Company made no purchases pursuant to the Second Plan.

















**** **ITEM
      6. SELECTED FINANCIAL DATA**











Years
      ended December 31,


Amounts
      in thousands, except per share amounts


2006
            
            2005
            
            2004
            
            2003
            
            2002OPERATING
                RESULTSCasino
                revenues
            $  
                103,333
            
            $ 
                94,501
            
            $
                84,132
            
            $   
                74,956
            
            $ 
                 70,773Other
                revenues
            72,329
            
            67,165
            
            65,545
            
            59,741
            
            57,641Gross
                revenues
            175,662
            
            161,666
            
            149,677
            
            134,697
            
            128,414Promotional
                allowances
            (23,693)
            
            (21,881)
            
            (20,220)
            
            (18,746)
            
            (17,376)Net
                revenues
            151,969
            
            139,785
            
            129,457
            
            115,951
            
            111,038Income
                from operations
            33,492
            (F1)
            33,069
            (F2)
            26,274
            (F3)
            17,209
            (F4)
            17,196
            (F5)Income
                before income tax
            33,860
            
            32,056
            
            24,689
            
            14,572
            
            13,033Net
                income
            $  
                22,080
            
            $
                21,035
            
            $
                16,526
            
            $    
                9,606
            
            $  
                 8,603INCOME
                PER SHARE OF COMMON STOCK (F6)Net
                income per shareBasic
            $     
                1.16
            
            $    
                1.12
            
            $    
                0.88
            
            $     
                0.51
            
            $   
                  0.46Diluted
            $     
                1.15
            
            $   
                 1.10
            
            $    
                0.88
            
            $    
                 0.51
            
            $    
                 0.45Weighted
                average number of common shares and potential common shares
                outstandingBasic
            18,990
            
            18,849
            
            18,756
            
            18,759
            
            18,916Diluted
            19,275
            
            19,094
            
            18,815
            
            18,825
            
            19,042OTHER
                DATADepreciation
                and amortization
            $  
                 8,559
            
            $   
                8,379
            
            $   
                9,628
            
            $ 
                 10,797
            
            $
                  10,320Other
                income (expense)
            $   
                   368
            
            $ (1,013)
            
            $
                (1,584)
            
            $
                 (2,638)
            
            $ 
                (3,934)Capital
                expenditures (F7)
            $5,795
            
            $  
                 6,113
            
            $   
                9,710
            
            $  
                  8,406
            
            $   
                 6,534BALANCE
                SHEET DATATotal
                assets
            $138,381
            
            $117,670
            
            $118,339
            
            $115,877
            
            $117,480Current
                maturities of long-term debt
            $        
                   -
            
            $    
                       -
            
            $          
                -
            
            $   
                6,060
            
            $   
                8,279Long-term
                debt, less current maturities
            $          
                 -
            
            $ 
                  8,100
            
            $
                32,400
            
            $ 
                41,125
            
            $ 
                52,000Stockholders'
                equity (F8)
            $115,646
            
            $ 
                87,559
            
            $
                65,763
            
            $ 
                48,723
            
            $
                 40,301























Footnotes
      to Selected Financial Data :


(F1)
      2006
      includes a $55 thousand loss on disposal of fixed assets


(F2)
      2005
      includes a $42 thousand gain  on
      disposal of fixed assets.


(F3) 2004
      includes a $173 thousand loss on disposal of fixed assets .


(F4) 2003
      includes a $133 thousand
      gain on disposal of fixed assets.


(F5)
      2002
      includes a $35 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,
      2006.








**ITEM
      7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND 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 Locals, tour
      and travel visitors and conventioneers by offering exceptional service, value
      and an appealing theme to our guests. Our hands-on management style focuses
      on
      customer service and cost efficiencies.





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








**OPERATING
      RESULTS SUMMARY**





During
      2006, we exceeded all previously reported Company annual casino revenues, net
      revenues, net income and earnings per share.





*Amounts
                in millions, except per share amounts*
            
            PercentageIncrease
                / (Decrease)2006
            2005
            2004
            06
                vs 05
            05
                vs 04Casino
                revenues
            $103.3
            $
                94.5
            $
                84.1
            9.3%
            12.3%Food
                and beverage revenues
            41.0
            38.6
            37.3
            6.2%
            3.3%Hotel
                revenues
            26.4
            23.9
            24.3
            10.5%
            (1.7)%Other
                revenues
            4.9
            4.7
            3.9
            4.3%
            20.5%Net
                revenues
            152.0
            139.8
            129.5
            8.7%
            8.0%Sales,
                general and admin exp
            46.3
            38.1
            35.0
            21.5%
            8.9%Income
                from operations
            33.5
            33.1
            26.3
            1.2%
            25.9%Net
                income
            22.1
            21.0
            16.5
            5.2%
            27.3%Earnings
                per share - diluted
            1.15
            1.10
            0.88
            4.5%
            25.0%Operating
                margin
            22.0%
            23.7%
            20.3%
            (1.7)
                pts
            3.4
                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, our ability to attract
      leisure travelers, and our steadily declining interest expense resulting from
      overall reductions in our outstanding debt.





In
      2006,
      our income from operations increased 1.2% over 2005, while our net income and
      earnings per diluted share increased 5.2% and 4.5%, respectively. Significant
      factors that affected our 2006 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 2006 increased 8.7% over 2005 due to increases in our
                casino,
                food and beverage, hotel and other revenue segments, which increased
                9.3%,
                6.2%, 10.5% and 4.3%, respectively, over
                2005.





·
            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 options expense (pre-tax), $3.1 million of which
                was
                reported as sales, general and administrative 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.





·
            Sales,
                general and administrative expenses increased 21.5% over 2005 primarily
                driven by the stock option expense described above, increased marketing
                and promotional expenses, higher energy and utilities expense, higher
                professional fees and higher bad debt
                expense.





·
            We
                paid off all of our bank related debt in the first quarter of 2006
                and
                began investing available cash in short-term, interest bearing
                instruments. As a result, interest expense declined in 2006 compared
                to
                2005 by $915,000 while interest income increased by $466,000 over
                that
                same period.








**CAPITAL
      SPENDING AND DEVELOPMENT**





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





Capital
      expenditures at the Atlantis (including non-cash capital expenditures) totaled
      approximately $5.8 million, $6.1 million and $9.7 million in 2006, 2005, and
      2004, respectively. 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 re placement
      of and upgrade to our ventilation and cooling system, acquisition of gaming
      and
      computer systems equipment, and continued renovations to the facility. During
      2004, capital expenditures consisted primarily of renovations to our second
      tower hotel rooms and suites, the installation of a new slot player tracking
      system, $1.35 million in leased driveway improvements and continued acquisitions
      of and upgrades to gaming equipment.








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 our principal stockholders (the "Shopping Center"). As part of
      this project, we are 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. We are
      also using part of the common area of the Shopping Center and pay our
      proportional share of the common area expense of the Shopping Center. We have
      the option to renew the lease for 3 five-year terms, and at the end of the
      extension period, we have the option to purchase the leased section of the
      Shopping Center at a price to be determined based on an MAI appraisal. We use
      the leased space for pedestrian and vehicle access to the Atlantis and we have
      use of a portion of the parking spaces at the Shopping Center. The total cost
      of
      the project was $2.0 million; we were responsible for two thirds of the total
      cost, or $1.35 million. This project was completed, the driveway was put into
      use and we began paying rent on September 30, 2004 (see Part III - ITEM 13.
      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS incorporated herein by reference
      to the Company's Proxy Statement to be filed with the Securities and Exchange
      Commission in connection with the Annual Meeting of Stockholders to be held
      on
      May 22, 2007). The cost of the new driveway is being depreciated over the
      initial 15-year lease term; some components of the new driveway are being
      depreciated over a shorter period of time (see “Property and Equipment” in Notes
      to Consolidated Financial Statements - Note 1. Summary of Significant Accounting
      Policies”).





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.





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







**STATEMENT
      ON FORWARD-LOOKING INFORMATION**





Certain
      information included herein contains statements that may be considered
      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, such as
      statements relating to anticipated expenses, capital spending and financing
      sources. Such forward-looking information involves important risks and
      uncertainties that could significantly affect anticipated results in the future
      and, accordingly, such results may differ from those expressed in any
      forward-looking statements made herein. These risks and uncertainties include,
      but are not limited to, those relating to competitive industry conditions,
      expansion of Indian casinos in California, Reno-area tourism conditions,
      dependence on existing management, leverage and debt service (including
      sensitivity to fluctuations in interest rates), the regulation of the gaming
      industry (including actions affecting licensing), outcome of litigation,
      domestic or global economic conditions including those affected by the events
      of
      September 11, 2001, and the ongoing situation in Iraq, and changes in federal
      or
      state tax laws or the administration of such laws as well as other factors
      described in ITEM 1A. RISK FACTORS.








**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, self
      insurance reserves, 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 amount of
      reserve is determined by reviewing the actual expenditures for the previous
      twelve-month period and reviewing 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.





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.





Advertising
      Costs





All
      advertising costs are expensed as incurred.





Property
      and Equipment





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







Land
      improvements  15-40
      years


Buildings   30-40
      years


Building
      improvements  15-40
      years


Furniture   5-10
      years


Equipment   5-20
      years





Expenditures
      for maintenance and repairs are expensed as incurred; expenditures for material
      asset improvements are generally capitalized. We periodically evaluate our
      fixed
      and other long-term assets for impairment to ensure that they are appropriately
      valued.





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.





Concentrations
      of Credit Risk





Financial
      instruments which potentially subject us to concentrations of credit risk
      consist principally of bank deposits and trade receivables. We maintain our
      cash
      in bank deposit accounts which, at times, may exceed federally insured limits.
      We have 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 our customer base. We believe we are not exposed to any
      significant credit risk on cash and accounts receivable.





Stockholder
      Guarantee Fees





All
      of
      our bank debt was personally guaranteed by our three largest stockholders since
      the inception of our original loan agreement on December 29, 1997 . Effective
      January 1, 2001, until February 20, 2004, we compensated the guarantors at
      the
      rate of 2% per annum of the quarterly average outstanding bank debt amount.
      There were no stockholder guarantee fees during the twelve months ended December
      31, 2006 and 2005. For
      the
      twelve months ended December 31, 2004, we recorded interest expense of
      approximately $136,000 related to these guarantee fees. The individuals who
      guaranteed the Original Credit Facility were not required to do so for the
      New
      Credit Facility (as defined below).








**RESULTS
      OF OPERATIONS**





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 is the highest in Company
      history. 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 represents
      a record high for our Company. We believe the Atlantis continued to benefit
      in
      2006 from the rapid growth occurring in the residential and commercial areas
      south of the Atlantis in Reno, from the increasing popularity of the Atlantis
      with visitors to the Reno area and from our commitment to ongoing property
      upgrades and renovations.





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.







2005
      Compared with 2004





For
      the
      year ended December 31, 2005, we earned net income of $21.0 million, or $1.10
      per diluted share, on net revenues of $139.8 million, compared to a net income
      of $16.5 million, or $0.88 per diluted share, on net revenues of $129.5 million
      for the year ended December 31, 2004. Our income from operations totaled $33.1
      million for 2005, a 25.9% increase when compared to $26.3 million for 2004.
      We
      believe the Atlantis continued to benefit in 2005 from the rapid growth
      occurring in the residential and commercial areas south of the Atlantis in
      Reno,
      from the increasing popularity of the Atlantis with visitors to the Reno area
      and from our commitment to ongoing property upgrades and
      renovations.





Casino
      revenues totaled $94.5 million in 2005, up 12.3% from $84.1 million in 2004,
      driven by increases in slot, poker and Keno win, partially offset by flat
      revenues in table game win. Revenue from slot and video poker machines ("slot
      machines") increased approximately 15.2% in 2005 compared to 2004. We believe
      that increased slot machine play was due to continued effective marketing and
      continuous upgrade of facilities and equipment. Table game win decreased
      approximately 0.2% in 2005 compared to 2004 due to a slightly lower win
      percentage partially offset by an increase in drop. Keno and poker room revenues
      combined increased approximately 9.6% in 2005 over 2004. Keno write increased
      approximately 7.7% in 2005 compared to 2004 while poker revenue increased
      approximately 10.1% compared to 2004 due to continued effective marketing.
      Casino operating expenses were 33.9% of casino revenues in 2005, an improvement
      from 36.3% in 2004. The improved casino margin in 2005 over 2004 was due to
      improved win percentages, reduced payroll and benefit costs, reduced
      complimentary costs and reduced direct operating costs as a percentage of casino
      revenue resulting in more efficient operations.





Food
      and
      beverage revenues increased 3.3% to $38.6 million in 2005 from $37.3 million
      in
      2004, primarily due to a 7.1% increase in average revenue per cover, partially
      offset by a ---4.1% decrease in the number of covers served. Food and beverage
      operating expenses decreased to 48.7% of food and beverage revenues in 2005
      compared to 50.5% in 2004, due to increased revenue per cover, a slight decrease
      in cost of sales and more efficient operations .





Hotel
      revenues totaled $23.9 million in 2005, a decrease of 1.7% from $24.3 million
      in
      2004. The decrease reflects a decrease in both the average daily room rate
      (“ADR”) and occupancy rate during the twelve month period of 2005 compared to
      the same period in 2004. Year 2005 revenues also included a $3.00 per occupied
      room energy surcharge that was also assessed during 2004. The Atlantis' ADR
      was
      $63.24 in 2005, compared to $64.16 in 2004. The average occupancy rate at the
      Atlantis was 93.0% in 2005 compared to 93.6% in 2004. Hotel operating expenses
      decreased slightly to 32.2% of hotel revenues in 2005, compared to 32.3% in
      2004. The decreases in ADR and occupancy in 2005 were due to fewer conventions
      at the adjacent Reno-Sparks Convention Center and the fact that Reno did not
      host a major bowling tournament in 2005. Conventions typically draw higher
      room
      rates. This decrease in operating expenses as a percentage of hotel revenues
      resulted primarily from reduced direct departmental expenses as a percentage
      of
      hotel revenue, partially offset by an increase in payroll and benefit costs
      as a
      percentage of hotel revenue.





Promotional
      allowances increased to $21.9 million, or 13.5% of gross revenues, in 2005
      compared to $20.2 million, or also 13.5% of gross revenues, in 2004. 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 approximately 20.5% in 2005 to $4.7 million from $3.9 million
      in 2004. The overall increase includes a 1.6% increase in entertainment fun
      center revenue and a 10.5% increase in gift and sundries retail shops revenue.
      These increases were partially offset by an approximate $173,000 loss on
      disposition of assets recorded in 2004 as opposed to a $42,000 gain in 2005.
      Other expenses were approximately 28.6% of other revenues in 2005, a decrease
      from 34.5% in 2004.


Selling,
      general and administrative ("SG&A") expenses totaled $38.1 million, or 27.2%
      of net revenues, in 2005 compared to $35.0 million, or 27.0% of net revenues,
      in
      2004. The slight increase in these expenses as a percentage of revenues reflects
      increased payroll and benefit costs, increased rental expense, increased energy
      costs and increased marketing and promotional expenditures.





Depreciation
      and amortization expense was $8.4 million in 2005, a decrease of 13.0% compared
      to $9.6 million in 2004. The decrease is due to the fact that previously
      capitalized assets have become fully depreciated. The
      Company, in its ordinary course of business and as part of its ongoing capital
      expenditures, intends to replace old and obsolete equipment with newer, more
      current equipment.





Interest
      expenses for 2005 totaled approximately $1.0 million, down 36.0% from $1.6
      million in 2004, due to lower outstanding debt which was partially offset by
      slightly higher prevailing interest rates. There were no guarantee fees paid
      to
      our three principal stockholders in 2005, while we paid approximately $136,000
      in 2004. The individuals who guaranteed the Company's Original Credit Facility
      (defined in "The Credit Facility" below) did not provide such guarantees for
      the
      New Credit Facility (also defined in "The Credit Facility" below) and,
      therefore, the Company will no longer be required to pay such fees in the
      future. At December 31, 2005, all of our interest-bearing debt was related
      to a
      reducing revolving credit facility with floating interest rates tied to a base
      rate approximately equal to the prime rate or LIBOR (at our option) plus a
      margin which fluctuates according to our ratio of funded debt to Earnings Before
      Interest, Taxes, Depreciation and Amortization ("EBITDA")(See Item 8, "FINANCIAL
      STATEMENTS, Notes to Consolidated Financial Statements, Note 5."). An increase
      in interest rates could have a material effect on our financial results.








**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      have
      historically funded our daily hotel and casino activities with net cash provided
      by operating activities. For the years 2006, 2005 and 2004, net cash provided
      by
      operating activities totaled $35.2 million, $31.0 million and $25.7 **** 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 $5.8 million, $6.1 million and $9.1 **** million
      in 2006, 2005 and 2004, respectively. Total capital expenditures, including
      amounts financed, were $5.8 million, $6.1 million and $9.7 million in 2006,
      2005
      and 2004, respectively.





Net
      cash
      used in financing activities, principally related to our ongoing paydown on
      our
      outstanding debt, totaled $5.4 million in 2006, $23.9  million
      in 2005 and $14.5 million in 2004.








**COMMITMENTS
      AND CONTINGENCIES**





Our
      contractual cash obligations as of December 31, 2006 and the next five years
      and
      thereafter are as follows:





Payments
                Due by Periodless
                than
            1
                to 3
            4
                to 5
            more
                thanTotal
            1
                year
            years
            years
            5
                yearsLong-Term
                Debt
            $            
                 -
            $             
                -
            $           
                -
            $         
                  -
            $              
                -Operating
                Leases(1)
            4,717,000
            370,000
            740,000
            740,000
            2,867,000Purchase
                Obligations(2)
            2,054,000
            2,054,000
            -
            -
            -Total
                Contractual Cash
              Obligations
            $6,771,000
            $2,424,000
            $740,000
            $740,000
            $2,867,000








(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).





(2)
      Our
      open purchase order commitments total approximately $2.1 million. Of the total
      purchase order commitments, approximately $1.8 million are cancelable by the
      Company upon providing a 30-day notice.





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





Under
      the
      Second 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 Second 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. As of December
      31, 2006, the Company made no purchases pursuant to the Second
      Plan.





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




We
      believe that our existing cash balances, cash flow from operations, equipment
      financing, and borrowings available under the 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, and in the original
      amount of $80 million but that had been reduced to $46 million at payoff (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 our option, borrowings under the
      New
      Credit Facility will accrue interest at a rate designated by the agent bank
      at
      its base rate (the "Base Rate") or at the London Interbank Offered Rate
      ("LIBOR") for one, two, three or six month periods. The rate of interest paid
      by
      us will include a margin added to either the Base Rate or to LIBOR that is
      tied
      to our ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending on
      our
      Leverage Ratio, this margin can vary between 0.25 percent and 1.25 percent
      above
      the Base Rate, and between 1.50 percent and 2.50 percent above LIBOR (under
      the
      Original Credit Facility, this margin varied between 0.00 percent and 2.00
      percent above the Base Rate, and between 1.50 percent and 3.50 percent above
      LIBOR). At December 31, 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 0.25 percent or LIBOR plus 1.50
      percent.





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





The
      New
      Credit Facility is secured by liens on substantially all of the real and
      personal property of the Atlantis, and is guaranteed by Monarch. The Original
      Credit Facility was guaranteed individually by certain controlling stockholders
      of the Company. These individuals were not required to provide any personal
      guarantees for the New Credit Facility and, therefore, going forward, we will
      no
      longer incur guarantee fee expenses.





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





The
      maturity date of the New Credit Facility is February 23, 2009. Beginning June
      30, 2004, the maximum principal available under the Credit Facility was to
      be
      reduced over five years by an aggregate of $30.875 million in equal increments
      of $1.625 million per quarter with the remaining balance due at the maturity
      date. We may prepay borrowings under the 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. At December 31,
      2006,
      our available borrowings were $ 24.0 million.
      Effective February 2007, in consideration of our cash balance, cash expected
      to
      be generated from operations and to avoid agency and commitment fees, we elected
      to permanently reduce the available borrowings to $5 million. We may permanently
      reduce the maximum principal available under the 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.





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.








**STOCKHOLDER
      GUARANTEE FEES**





From
      December 29, 1997 until February 20, 2004, all of our bank debt was personally
      guaranteed by our three largest stockholders . Effective
      January 1, 2001 and until February 20, 2004, we compensated the guarantors
      at
      the rate of 2% per annum of the quarterly average outstanding bank debt. We
      did
      not pay any stockholder guarantee fees f or
      the
      twelve months ended December 31, 2006 or 2005. For the twelve months ended
      December 31, 2004, we recorded interest expense of approximately $136,000 for
      these guarantee fees. The individuals who guaranteed our bank debt were not
      required to guarantee the New Credit Facility, and, as a result, we will no longer incur
      these expenses.








**SHORT-TERM
      DEBT**





At
      December 31, 2006, 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
      March
      2006, the Financial Accounting Standards Board (FASB) issued SFAS 156,
      Accounting for Servicing of Financial Assets - an Amendment of SFAS 140. This
      Statement amends SFAS 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities, with respect to the accounting for
      separately recognized servicing assets and servicing liabilities. Adoption
      of
      this SFAS is required  as
      of
      January 1, 2007 .
      T he
      Company does not expect that the adoption of SFAS 156 will have a significant
      impact on the Company’s financial position or results of operations.





In
      June
      2006, the 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 will adopt FIN 48 as of
      January 1, 2007, as required. The cumulative effect of adoption FIN 48 will
      be
      recorded in retained earnings. The Company does not expect that the adoption
      of
      FIN 48 will have a significant 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.










**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, 2006
      that
      are subject to market risk.





As
      of
      December 31, 2006 we had no outstanding debt subject to market risk; however,
      we
      had variable interest rate debt in the amount of approximately $8.1 million
      as
      of December 31, 2005 and $32.4 million as of December 31, 2004, which was
      subject to market risk.





A
      one
      percent increase in interest rates would have resulted in an increase in
      interest expense of approximately $186,000 in 2005 and $397,000 in
      2004.








**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 and
      Resort, Inc. and Subsidiary (the “Company”) as of December 31, 2006 and 2005,
      and the related consolidated statements of income, stockholders' equity, and
      cash flows for each of the three years in the period ended December 31, 2006.
      Our audits also included the financial statement schedule listed in the index
      at
      Item 15(a). These financial statements and schedule 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 the Company at
      December 31, 2006 and 2005, and the consolidated results of their operations
      and
      their cash flows for each of the three years in the period ended December 31,
      2006, in conformity with U.S. generally accepted accounting principles. Also,
      in
      our opinion, the related financial statement schedule, when considered in
      relation to the basic financial statements taken as a whole, present fairly
      in
      all material respects the information set forth herein.





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 effectiveness of the Company's internal
      control over financial reporting as of December 31, 2006, 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
      9, 2007 expressed an unqualified opinion thereon.








/s/
      Ernst
& Young LLP





Las
      Vegas, Nevada


March
      9,
      2007











**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





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








We
      have
      audited management’s assessment, included in the accompanying Management's
      Report on Internal Control Over Financial Reporting, that Monarch Casino &
Resort, Inc. and Subsidiary (the “Company”) maintained effective internal
      control over financial reporting as of December 31, 2006, 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. Our responsibility is to express an opinion
      on
      management’s assessment and an opinion on the effectiveness of 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, evaluating management’s assessment, testing and evaluating
      the design and operating effectiveness of internal control, 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, management’s assessment that the Company maintained effective internal
      control over financial reporting as of December 31, 2006, is fairly stated,
      in
      all material respects, based on the COSO criteria. Also, in our opinion, the
      Company maintained, in all material respects, effective internal control over
      financial reporting as of December 31, 2006, 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 of the Company
      as of December 31, 2006 and 2005, and the related consolidated statements of
      income, stockholders’ equity, and cash flows for each of the three years in the
      period ended December 31, 2006 of the Company and our report dated March 9,
      2007 **** expressed
      an unqualified opinion thereon.










/s/
      Ernst
& Young LLP








Las
      Vegas, Nevada


March
      9,
      2007














**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF INCOME**





Years
                ended December 31,2006
            
            2005
            
            2004RevenuesCasino
            $103,332,559
            
            $94,501,028
            
            $
                84,131,876Food
                and beverage
            41,037,321
            
            38,564,365
            
            37,333,977Hotel
            26,412,755
            
            23,909,915
            
            24,318,082Other
            4,878,840
            
            4,690,105
            
            3,892,669Gross
                revenues
            175,661,475
            
            161,665,413
            
            149,676,604Less
                promotional allowances
            (23,692,521)
            
            (21,880,793)
            
            (20,219,714)Net
                revenues
            151,968,954
            
            139,784,620
            
            129,456,890Operating
                expensesCasino
            34,134,518
            
            31,990,758
            
            30,513,391Food
                and beverage
            19,533,532
            
            18,795,268
            
            18,859,211Hotel
            8,383,382
            
            7,696,576
            
            7,858,616Other
            1,450,100
            
            1,340,556
            
            1,344,163Selling,
                general and administrative
            46,309,938
            
            38,073,313
            
            34,979,998Gaming
                development costs
            106,477
            
            439,984
            
            -Depreciation
                and amortization
            8,559,374
            
            8,379,033
            
            9,627,870Total
                operating expenses
            118,477,321
            
            106,715,488
            
            103,183,249Income
                from operations
            33,491,633
            
            33,069,132
            
            26,273,641Other
                income (expense)Stockholder
                guarantee fee expense
            -
            
            -
            
            (136,164)Interest
                income
            466,050
            
            257
            
            -Interest
                expense
            (97,722)
            
            (1,013,377)
            
            (1,448,125)Total
                other income (expense)
            368,328
            
            (1,013,120)
            
            (1,584,289)Income
                before income taxes
            33,859,961
            
            32,056,012
            
            24,689,352Provision
                for income taxes
            11,779,590
            
            11,020,552
            
            8,162,912Net
                income
            $
                22,080,371
            
            $21,035,460
            
            $
                16,526,440Earnings
                per share of common stockNet
                incomeBasic
            $        
                1.16
            
            $          1.12
            
            $    
                      0.88Diluted
            $        
                1.15
            
            $          1.10
            
            $   
                       0.88Weighted
                average number ofcommon
                shares and potentialcommon
                shares outstanding:Basic
            18,990,331
            
            18,848,532
            
            18,756,450Diluted
            19,274,847
            
            19,093,777
            
            18,814,686








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








**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**





December
                31,2006
            
            2005ASSETSCurrent
                assetsCash
            
            $
            36,985,187
            
            $
            12,886,494Receivables,
                net
            
            
            3,268,970
            
            
            3,559,602Federal
                income tax refund receivable
            
            
            -
            
            
            286,760Inventories
            
            
            1,471,667
            
            
            1,456,453Prepaid
                expenses
            
            
            2,833,126
            
            
            2,401,619Deferred
                income taxes
            
            
            965,025
            
            
            1,326,224Total
                current assets
            
            
            45,523,975
            
            
            21,917,152Property
                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
            
            
            10,398,814Furniture
                & equipment
            
            
            72,708,061
            
            
            67,393,755Leasehold
                improvements
            
            
            1,346,965
            
            
            1,346,965176,951,263
            
            
            171,600,709Less
                accumulated depreciation and amortization
            
            
            (84,325,578
            )
            
            (76,117,346
            )Net
                property and equipment
            
            
            92,625,685
            
            
            95,483,363Other
                assets, net
            
            
            231,247
            
            
            269,524Total
                assets
            
            $
            138,380,907
            
            $
            117,670,039






























































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





**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**








LIABILITIES
                AND STOCKHOLDERS' EQUITY
            
            December
                31,Current
                liabilities
            
            2006
            
            2005Accounts
                payable
            
            $ 
                                            
                8,590,669
            
            $                              
                7,335,630Accrued
                expenses
            
            
            9,878,851
            
            
            8,722,221Federal
                income taxes payable
            
            
            16,457
            
            
            -Total
                current liabilities
            
            
            18,485,977
            
            
            16,057,851Long-term
                debt, less current maturities
            
            
            -
            
            
            8,100,000Deferred
                income taxes
            
            
            4,248,614
            
            
            5,953,193Stockholders'
                equityPreferred stock, $.01 par value, 10,000,000shares authorized; none issued
            
            
            -
            
            
            -Common stock, $.01 par value, 30,000,000shares authorized; 19,072,550 shares issued;19,065,968 outstanding at 12/31/0618,879,310 outstanding at 12/31/05
            
            
            190,726
            
            
            190,726Additional paid-in capital
            
            
            23,205,045
            
            
            17,882,827Treasury stock, 6,582 shares at 12/31/06193,240 shares at 12/31/05, at cost
            
            
            (24,145
            )
            
            (708,877
            )Retained earnings
            
            
            92,274,690
            
            
            70,194,319Total
                stockholders' equity
            
            
            115,646,316
            
            
            87,558,995Total liabilities and stockholder's equity
            
            $
            138,380,907
            
            $
            117,670,039





































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
















**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITY**














Common
                Stock
            
            AdditionalShares
            
            
            
            Paid-in
            
            Retained
            
            TreasuryOutstanding
            
            Amount
            
            Capital
            
            Earnings
            
            Stock
            
            TotalBalance,
                January 1, 2004
            18,680,656
            
            $190,726
            
            $
                17,337,272
            
            $32,632,419
            
            $(1,437,614)
            
            $
                48,722,803Exercise
                of stock options
            131,792
            
            
            
            30,637
            
            
            
            483,462
            
            514,099Net
                income
            
            
            
            
            
            
            16,526,440
            
            
            
            16,526,440Balance,
                December 31, 2004
            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)
            
            $
                115,646,316















































































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





**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**





Years
                ended December 31,2006
            
            2005
            
            2004Cash
                flows from operating activities:Net
                income
            $
                22,080,371
            
            $
                21,035,460
            
            $
                16,526,440Adjustments
                to reconcile net income to netcash
                provided by operating activities:Depreciation
                and amortization
            8,559,374
            
            8,379,033
            
            9,627,870Amortization
                of deferred loan costs
            38,277
            
            137,096
            
            173,708Share
                based compensation
            3,273,708
            
            -
            
            -Provision
                for bad debts
            903,426
            
            550,512
            
            394,065Loss
                (gain) on disposal of assets
            55,115
            
            (41,636)
            
            172,893Deferred
                income taxes
            (1,343,380)
            
            (766,817)
            
            1,081,656Changes
                in assets and liabilitiesReceivables,
                net
            (326,034)
            
            (943,183)
            
            (272,331)Inventories
            (15,214)
            
            (3,756)
            
            (206,728)Prepaid
                expenses
            (431,507)
            
            (55,377)
            
            (111,469)Other
                assets
            -
            
            -
            
            (452,065)Accounts
                payable
            1,255,038
            
            1,587,855
            
            (2,660,112)Accrued
                expenses
            1,156,630
            
            1,134,254
            
            1,459,395Federal
                income taxes payable
            16,457
            
            -
            
            -Net
                cash provided by operating activities
            35,222,261
            
            31,013,441
            
            25,733,322Cash
                flows from investing activities:Proceeds
                from sale of assets
            38,280
            
            41,636
            
            38,954Acquisition
                of property and equipment
            (5,795,089)
            
            (6,113,220)
            
            (9,149,964)Net
                cash used in investing activities
            (5,756,809)
            
            (6,071,584)
            
            (9,111,010)Cash
                flows from financing activities:Proceeds
                from exercise of stock options
            2,213,489
            
            429,859
            
            265,747Deferred
                tax asset write-off
            (203,067)
            
            -
            
            -Tax
                benefit of stock option exercise
            722,819
            
            -
            
            -Proceeds
                from long-term borrowings
            -
            
            3,000,000
            
            49,460,304Principal
                payments on long-term debt
            (8,100,000)
            
            (27,300,000)
            
            (64,244,895)Net
                cash used in financing activities
            (5,366,759)
            
            (23,870,141)
            
            (14,518,844)Net
                increase in cash
            24,098,693
            
            1,071,716
            
            2,103,468Cash
                at beginning of year
            12,886,494
            
            11,814,778
            
            9,711,310Cash
                at end of year
            $
                36,985,187
            
            $
                12,886,494
            
            $
                11,814,778Supplemental
                disclosure of cash flow information:Cash
                paid for interest.
            $       
                66,659
            
            $     
                973,314
            
            $  
                1,420,230Cash
                paid for income taxes
            $
                12,300,000
            
            $ 11,250,000
            
            $  
                6,570,000Supplemental
                schedule of non-cash investing and financing activities:The
                Company financed the purchase of property andequipment
                in the following amounts
            $               
                 -
            
            $              
                  -
            
            $    
                560,304








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








**MONARCH
      CASINO & RESORT, INC. AND SUBSIDIARY**


**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.





On
      March
      16, 2005, the Company declared a 2 for 1 stock split effective March 31, 2005.
      As a result of the split, 9,536,275 additional shares were issued. Stockholders’
equity has been restated to give retroactive recognition to the stock split
      for
      all periods presented by reclassifying the par value of the additional shares
      arising from the split from additional paid-in capital to common stock. All
      references in the financial statements and notes thereto to the number of shares
      and per share amounts reflect the stock split.





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 amount of
      reserve is determined by reviewing the actual expenditures for the previous
      twelve-month period and reviewing 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, 2006, 2005 and 2004.








Stockholder
      Guarantee Fees





All
      of
      the Company's bank debt was personally guaranteed by the Company's three largest
      stockholders since the inception of our original loan agreement on December
      29,
      1997 . Effective
      January 1, 2001, until February 20, 2004, the Company compensated the guarantors
      at the rate of 2% per annum of the quarterly average outstanding bank debt
      amount. For
      the
      year ended December 31, 2004 the Company recorded interest expense of
      approximately $136,000 for these guarantee fees. The individuals who guaranteed
      our Original Credit Facility were not required to do so for the New Credit
      Facility (as defined in NOTE 5. - LONG-TERM DEBT). Therefore, the Company no
      longer incurs such guarantee fee expenses.





Inventories





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





Property
      and Equipment





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





Land
      improvements  15-40
      years


Buildings   30-40
      years


Building
      improvements  15-40
      years


Furniture   5-10
      years


Equipment   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 31,2006
            2005
            2004Food
                and beverage
            $11,706,382
            $11,363,365
            $10,393,036Hotel
            2,004,909
            1,820,435
            1,692,539Other
            504,945
            436,430
            402,496$14,216,236
            $13,620,230
            $12,488,071




Advertising
      Costs





All
      advertising costs are expensed as incurred. Advertising expense, which is
      included in selling, general & administrative expense, was $3,533,057,
      $3,321,653 and $3,455,130 for 2006, 2005 and 2004, 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.





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 7. 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 years ended
      December 31, 2005 and 2004, 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 recognitions provisions
      of
      FASB Statement 123(R), Share-Based Payment, using the modified prospective
      transition method. Under that transition method, compensation cost recognized
      in
      the year ended December 31, 2006 includes: (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 and net income for the year ended January 31, 2006 are
      $3.3
      million and $2.2 lower, respectively, than if it had continued to account for
      share based compensation under APB 25. Basic and diluted earnings per share
      for
      the year ended December 31, 2006 would have been $1.28 and $1.26, respectively,
      if the Company had not adopted Statement 123(R), compared to reported basic
      and
      diluted earnings per share of $1.16 and $1.15, respectively.





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 $722,819 excess tax benefit for the
      year
      ended December 31, 2006 classified as a financing cash inflow would have been
      classified as an operating cash inflow 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 years ended December 31, 2005 and 2004 would have been changed
      to the pro forma amounts indicated below:







Year
                ended December 31,2005
            2004Net
                income, as reported
            $21,035,460
            $16,526,440Stock
                based employee compensation
              expensed
                determined under the fair
              value
                based method for all awards,
              net
                of related tax effects
            (1,113,398)
            (45,264)Pro
                forma net income
            $19,922,062
            $16,481,176Basic
                earnings per shareAs
                reported
            $
                1.12
            $
                0.88Pro
                forma
            $
                1.06
            $
                0.88Diluted
                earnings per shareAs
                reported
            $
                1.10
            $
                0.88Pro
                forma
            $
                1.04
            $
                0.88







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 31,2006
            
            2005
            
            2004Shares
            Per
                Share Amount
            
            Shares
            Per
                Share Amount
            
            Shares
            Per
                Share AmountNet
                incomeBasic
            18,990
            $
                1.16
            
            18,849
            $
                1.12
            
            18,756
            $
                0.88Effect
                of dilutive
              stock
                options
            285
            (0.01)
            
            245
            (0.02)
            
            59
            -Diluted
            19,275
            $
                1.15
            
            19,094
            $
                1.10
            
            18,815
            $
                0.88







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 31,2006
            2005
            2004Options
                to purchase shares of
              common
                stock (in thousands)
            122
            35
            812Exercise
                prices
            $25.89-$28.25
            $19.98-$21.46
            $11.69-$17.20Expiration
                dates (mo./yr.)
            5/16-6/16
            4/15-11/15
            10/14-11/14








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.





The
      fair
      value of long-term debt approximates fair value based on the current borrowing
      rates offered to the Company for debt of the same remaining
      maturities.





Concentrations
      of Credit Risk





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





Certain
      Risks and Uncertainties





A
      significant portion of the Company's revenues and operating income are generated
      from patrons who are residents of northern California. A change in general
      economic conditions or the extent and nature of casino gaming in California,
      Washington or Oregon could adversely affect the Company's operating results.
      The
      constitutional amendment approved by California voters in 1999 allowing the
      expansion of Indian casinos in California has had an impact on casino revenues
      in Nevada in general, and many analysts have continued to predict the impact
      will be more significant on the Reno-Lake Tahoe market. 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 due to the Atlantis' emphasis
      on
      Reno area residents as a significant base of its business, as well as its
      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 a key factor in our ability to attract Locals which competitor
      facilities will not easily be able to 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. One
      major facility near Sacramento has been operating since June 2003 and has been
      very successful, adversely impacting many hotel casinos in Reno. Once these
      facilities receive all the required permits and are built, they could provide
      an
      alternative to Reno area casinos, especially during certain winter periods
      when
      auto travel through the Sierra Nevada mountain passes is hampered.





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 allows
      the tribes to increase the number of slot machines beyond the previous
      2,000-per-tribe limit in exchange for higher fees from each of the five tribes.
      The State of California hopes to sign similar compacts with more Indian
      tribes.





In
      addition, the Company relies on non-conventioneer visitors partially comprised
      of individuals flying into the Reno area. The “War on Terrorism,” combined with
      the ongoing situation in Iraq and the threat of further terrorist attacks could
      have an adverse effect on the Company's revenues from this segment. The
      terrorist attacks that took place in the United States on September 11, 2001
      were unprecedented events that created economic and business uncertainties,
      especially for the travel and tourism industry. The potential for future
      terrorist attacks, the national and international responses, and other acts
      of
      war or hostility including the ongoing situation in Iraq, have created economic
      and political uncertainties that could materially adversely affect our business,
      results of operations, and financial condition in ways we cannot
      predict.





A
      change
      in regulations on land use requirements with regard to development of new hotel
      casinos in the proximity of the Atlantis could have an adverse impact on our
      business, results of operations, and financial condition. Also see other factors
      described in ITEM 1A. RISK FACTORS in the Company’s filing on form
      10-K.





Impact
      of Recently Issued Accounting Standards





In
      March
      2006, the Financial Accounting Standards Board (FASB) issued SFAS 156,
      Accounting for Servicing of Financial Assets - an Amendment of SFAS 140. This
      Statement amends SFAS 140, Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities, with respect to the accounting for
      separately recognized servicing assets and servicing liabilities. Adoption
      of
      this SFAS is required as of January
      1, 2007 .
      T he
      Company does not expect that the adoption of SFAS 156 will have a significant
      impact on the Company’s financial position or results of operations.





In
      June
      2006, the 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 will adopt FIN 48 as of
      January 1, 2007, as required. The cumulative effect of adoption FIN 48 will
      be
      recorded in retained earnings. The Company does not expect that the adoption
      of
      FIN 48 will have a significant 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.







NOTE
      2. ACCOUNTS RECEIVABLE





Accounts
      receivable consist of the following:


December
                31,2006
            2005Casino
            $
                3,338,227
            $
                3,390,539Hotel
            1,019,019
            749,578Other
            165,021
            501,2324,522,267
            4,641,349Less
                allowance for
              doubtful
                accounts
            (1,253,297)
            (1,081,747)$
                3,268,970
            $
                3,559,602








The
      Company
      recorded bad debt expense of $903,426, $550,512 and $394,065 in 2006, 2005
      and
      2004, respectively.








NOTE
      3. ACCRUED EXPENSES





Accrued
      expenses consist of the following:





December
                31,2006
            2005Accrued
                salaries, wages
              and
                related benefits
            $4,714,956
            $4,365,618Progressive
                slot machine
              and
                other gaming accruals
            2,539,657
            2,286,389Accrued
                gaming taxes
            660,478
            527,996Accrued
                interest
            25,534
            32,749Other
                accrued liabilities
            1,938,226
            1,509,469$9,878,851
            $8,722,221








NOTE
      4. LEASE COMMITMENTS





The
      Company leases certain furniture and equipment. The leases generally provide
      for
      the lessee to pay taxes, maintenance, insurance, and certain other operating
      costs of the leased property. The leases on most of the properties contain
      renewal provisions.





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
      new traffic signal was erected at mid-block on South Virginia Street, serving
      the new 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 period, 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 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 new driveway is being depreciated over the initial 15-year lease term;
      some
      components of the new driveway are being depreciated over a shorter period
      of
      time.





The
      Company 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,
      2006:





Operating
              LeasesYear
                ending December 31,2007
            $
                370,0002008
            370,0002009
            370,0002010
            370,0002011
            370,000Thereafter
            2,867,000Total
                minimum lease payments
            $4,717,000








Rental
      expense for operating leases amounted to $9,085,
      $79,383 and $175,596 in 2006, 2005 and 2004, respectively, as reported in
      selling, general and administrative expenses in the statements of
      income.








NOTE
      5. LONG-TERM DEBT





Long-term
      debt consists of the following:








December
                31,2006
            2005Amounts
                outstanding under bank reducing
              revolving
                credit facility (the "New Credit
              Facility"),
                collateralized by substantially all
              property
                and equipment of Golden Road
              and
                guaranteed by Monarch, with floating
              interest
                rates tied to a base rate
              approximately
                equal to the prime rate or
              LIBOR
                (at the Company's option) plus a
              margin
                which fluctuates according to the
              Company's
                ratio of funded debt to Earnings
              Before
                Interest, Taxes, Depreciation and
              Amortization
                ("EBITDA"). The weighted
              average
                interest rate was approximately
              6.09%
                at December 31, 2005 (see “The
              Credit
                Facility” below
            $   
                -
            $
                8,100,000Less
                current maturities
            -
            -$  
                 -
            $
                8,100,000





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, and
      in
      the original amount of $80 million but that had been reduced to $46 million
      at
      payoff (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 the Company’s option, borrowings
      under the New Credit Facility accrue interest at a rate designated by the agent
      bank at its base rate (the "Base Rate") or at the London Interbank Offered
      Rate
      ("LIBOR") for one, two, three or six month periods. The rate of interest paid
      by
      the Company will include a margin added to either the Base Rate or to LIBOR
      that
      is tied to our ratio of funded debt to EBITDA (the "Leverage Ratio"). Depending
      on our Leverage Ratio, this margin can vary between 0.25 percent and 1.25
      percent above the Base Rate, and between 1.50 percent and 2.50 percent above
      LIBOR (under the Original Credit Facility, this margin varied between 0.00
      percent and 2.00 percent above the Base Rate, and between 1.50 percent and
      3.50
      percent above LIBOR). At December 31, 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 0.25 percent or LIBOR plus
      1.50 percent.





Subject
      to the Company’s February 2007 decision to reduce the total borrowings available
      to $5 million as described below, the Company may utilize proceeds from the
      New
      Credit Facility for working capital needs, general corporate purposes and for
      ongoing capital expenditure requirements at the Atlantis.





The
      New
      Credit Facility is secured by liens on substantially all of the real and
      personal property of the Atlantis, and is guaranteed by Monarch. The Original
      Credit Facility was guaranteed individually by certain controlling stockholders
      of the Company. These individuals were not required to provide any personal
      guarantees for the New Credit Facility and, therefore, going forward, the
      Company will no longer incur guarantee fee expenses.





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 the New Credit Facility is February 23, 2009. Beginning June
      30, 2004, the maximum principal available under the Credit Facility was to
      be
      reduced over five years by an aggregate of $30.875 million in equal increments
      of $1.625 million per quarter with the remaining balance due at the maturity
      date. 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. At December 31,
      2006,
      available borrowings under the New Credit Facility were $ 24.0 million.
      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 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 31,2006
            2005
            2004Current
                provision
            $13,157,285
            $11,834,750
            $7,081,256Deferred
                provision (benefit)
            (1,377,695)
            (814,198)
            1,081,656$11,779,590
            $11,020,552
            $8,162,912





Income
      tax benefits were recognized through stockholders’ equity of $519,751, $330,333
      and $248,353 during the years of 2006, 2005 and 2004, 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 31,2006
            2005
            2004Income
                tax at the statutory rate
            35.0%
            35.0%
            35.0%Non-deductible
                expenses and other
            -
            -
            (1.1)%Tax
                credits
            (0.2)%
            (0.6)%
            (0.8)%34.8%
            34.4%
            33.1%








The
      components of the deferred income tax assets and liabilities at December 31,
      2006 and 2005, as presented in the Consolidated Balance Sheets, are as follows:





2006
            2005DEFERRED
                TAX ASSETSShare
                based compensation
            $  
                  659,231
            $              
                 -Compensation
                and benefits
            393,087
            412,354Bad
                debt reserves
            438,654
            378,611Accrued
                gaming liabilities
            353,360
            341,435Accrued
                interest
            8,937
            11,462Accrued
                other
            199,499
            182,362Deferred
                income tax asset
            $ 
                2,052,768
            $
                1,326,224DEFERRED
                TAX LIABILITIESImpairment
                of assets
            $   
                (72,260)
            $  
                 (72,260)Depreciation
            (4,749,378)
            (5,390,693)Land
                basis
            (285,706)
            (285,706)Real
                estate taxes
            (229,013)
            (204,534)Deferred
                income tax liability
            $(5,336,357)
            $(5,953,193)NET
                DEFERRED INCOME TAX LIABILITY
            $(3,283,589)
            $(4,626,969)







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 $59,774, $46,504, **** and
      $44,947, and in 2006, 2005 and 2004, 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 2,250,000 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, 2006 is presented below:





Weighted
                AverageOptions
            
            Shares
            
            Exercise
                Price
            
            Remaining
                Contractual Term
            
            Aggregate
                Intrinsic ValueOutstanding
                at beginning of period
            
            1,117,558
            
            $13.25
            
            -
            
            -Granted
            
            330,299
            
            23.75
            
            -
            
            -Exercised
            
            (186,658)
            
            11.89
            
            -
            
            -Forfeited
            
            (140,000)
            
            13.91
            
            -
            
            -Expired
            
            -
            
            -
            
            -
            
            -Outstanding
                at end of period
            
            1,121,199
            
            $16.49
            
            8.5
                yrs.
            
            $8,283,614Exercisable
                at end of period
            
            346,869
            
            $10.85
            
            6.4
                yrs.
            
            $3,839,591








A
      summary
      of the status of the Company’s nonvested shares as of December 31, 2006, and
      changes during the year and changes during the year ended December 31, 2006,
      is
      presented below:




Nonvested
                Shares
            
            Shares
            
            Weighted-Average
                Grant Date Fair ValueNonvested
                at January 1, 2006
            
            883,993
            
            $13.27Granted
            
            330,299
            
            23.75Vested
            
            (299,962)
            
            12.92Forfeited
            
            (140,000)
            
            13.91Nonvested
                at December 31, 2006
            
            774,330
            
            $18.14








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 year ended December 31, 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,
      2006 totaled approximately $4.5 million and is expected to be recognized over
      a
      weighted average period of 1.58 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 31,2006
            2005
            2004Expected
                volatility
            38.0%
            46.7%
            45.5%Expected
                dividends
            -
            -
            -Expected
                life (in years)Directors’
                Plan
            2.5
            6.2
            4.7Executive
                Plan
            6.9
            9.0
            9.0Employee
                Plan
            2.9
            5.5
            5.0Weighted
                average risk free rate
            4.6%
            4.0%
            3.8%Weighted
                average grant date fair value per
              share
                of options granted
            $      
                10.64
            $        
                9.19
            $        
                5.26Total
                intrinsic value of options exercised
            $2,238,390
            $1,081,274
            $2,457,211Cash
                received for all stock option exercises
            $2,213,489
            $  
                429,859
            $  
                265,747Tax
                benefit realized for tax return deductions
            $ 
                 519,752
            $  
                330,333
            $  
                248,353







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 year ended December 31, 2006Casino
            $       
                59,685Food
                & beverage
            51,673Hotel
            47,233Selling,
                general & administrative
            3,115,117Total
                stock-based compensation,before
                taxes
            3,273,708Tax
                benefit
            (1,145,797)Total
                stock-based compensation,net
                of tax
            $  
                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
      March
      10, 2003, the Company announced a plan to repurchase up to 500,000 shares
      (adjusted for the 2 for 1 stock split effective March 31, 2005), or 2.6%, of
      the
      Company’s common stock in open market transactions (the “First Plan”). During
      2003, the Company purchased 360,000 shares (adjusted for the 2 for 1 stock
      split
      mentioned above) pursuant to the First Plan and made no subsequent purchases.
      On
      September 28, 2006, the Company’s Board of Directors terminated the First Plan
      and authorized a second stock repurchase plan (the “Second Plan”).





Under
      the
      Second 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 Second 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. As of December
      31, 2006, the Company made no purchases pursuant to the Second
      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.





The
      Company expects to begin construction in the second quarter of 2007 on the
      next
      expansion phase of the Atlantis. New space to be added to the first floor casino
      level, the second and third floors and the basement level will total
      approximately 116,000 square feet. Once complete, the existing casino floor
      will
      be expanded by over 10,000 square feet, or approximately 20%. The first floor
      plans include a redesigned, updated and expanded race and sports book of
      approximately 4,000 square feet and an enlarged poker room. The plans also
      include a New York-style deli restaurant. The second floor expansion will create
      additional ballroom and convention space of approximately 27,000 square feet,
      doubling 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 is currently in negotiations to add a pedestrian skywalk over Peckham
      Street that will connect the Reno-Sparks Convention Center directly to the
      Atlantis. Upon completion of an agreement, construction is expected to take
      approximately twelve months and is expected to be funded entirely out of
      existing cash on hand plus cash flow from operations. Excluding the cost of
      the
      skywalk, the expansion is estimated to cost approximately $50 million. Final
      design plans, and the resultant cost estimate, of the skywalk have not been
      completed.




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.”
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, Interim Treasurer, Interim Secretary and
      a
      Director of Monarch. Ben Farahi formerly was the Co-Chairman of the Board,
      Secretary, Treasurer, Chief Financial Officer and a Director of Monarch.
      Monarch’s board of directors accepted Ben Farahi’s resignation from these
      positions on May 23, 2006.





The
      Company currently rents various spaces totaling approximately
      13,000 square feet in the Shopping Center which it uses as office and storage
      space and paid rent of approximately $95,520 plus common area expenses in 2006.
      The Company paid rent of approximately $85,730 and $67,200 plus common
      area expenses in 2005 and 2004, 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
      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 2006 and $300,000 and $75,800 plus common area
      charges in 2005 and 2004, respectively, 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
      $12,000 for the twelve months ended December 31, 2006 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. T hrough
      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 $42,000 in 2006, $31,500 in 2005 and $53,000
      in
      2004.





The
      Company is currently renting 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
      $ 27,900
      in 2004.
      Effective December 2006, Monarch’s principal stockholders sold this building and
      the Company continues to rent space from the new owner who is not a related
      party to Monarch.








NOTE
      11. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)





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









20051st
                Quarter
            
            2nd
                Quarter
            
            3rd
                Quarter
            
            4th
                Quarter
            
            TotalNet
                revenues
            $31,562,702
            
            $34,982,387
            
            $38,347,892
            
            $34,891,896
            
            $139,784,877Operating
                expenses
            25,373,622
            
            26,746,318
            
            27,197,049
            
            27,398,499
            
            106,715,488Income
                from operations
            6,189,080
            
            8,236,069
            
            11,150,843
            
            7,493,397
            
            33,069,389Net
                income
            3,853,706
            
            5,194,106
            
            7,087,214
            
            4,900,434
            
            21,035,460Income
                per share of
              common
                stockBasic
            $      
                    0.20
            
            $      
                   0.28
            
            $     
                    0.38
            
            $        
                 0.26
            
            $     
                      1.12Diluted
            $    
                      0.20
            
            $     
                    0.27
            
            $    
                     0.37
            
            $      
                   0.26
            
            $       
                    1.10











**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, 2006. 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, 2006, 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 May 22, 2007.








**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 May 22, 2007.











**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)
            
            1,121,199
            
            $16.49
            
            575,383Equity
                compensation plans not approved by security holders
            
            -
            
            -
            
            -Total
            
            1,121,199
            
            $16.49
            
            575,383








(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 May 22, 2007.








**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 May 22, 2007.








**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 May 22, 2007.







**PART
      IV**





**ITEM
      15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**





(a)
            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,
      2006,


2005
      and
      2004.





c)
      Consolidated Balance Sheets at December 31, 2006, and 2005.





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


December
      31, 2006, 2005 and 2004.





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


2006,
      2005 and 2004.





f)
      Notes
      to Consolidated Financial Statements.








(a)
      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 year2004Allowance
                for doubtful accounts
            
            $1,030,618
            
            $394,065
            
            ($624,000)
            
            $   
                -
            
            $   800,6832005Allowance
                for doubtful accounts
            
            $  
                800,683
            
            $550,512
            
            ($269,448)
            
            $   
                -
            
            $1,081,7472006Allowance
                for doubtful accounts
            
            $1,081,747
            
            $903,426
            
            ($731,876)
            
            $  
                 -
            
            $1,253,297








(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.








(b)
            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 filed
      as an exhibit to this Form 10-K.





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 33-64556), Part II, 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.





4.09  Third
      Amendment to Monarch Casino & Resort, Inc. 1993 Executive Long-Term
      Incentive Plan.





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.





21.01  Amended
      and Restated List of Subsidiaries of Monarch Casino & Resort, Inc.
      incorporated herein by reference to the Company’s Form 10-K (SEC f ile
      0-22088) dated March 14, 2006.





23.1  Consent
      of Independent Registered Public Accounting Firm.





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





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





32.1  C ertification
      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 pursuantto
                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, 2007    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,
      2007


John
      Farahi   Chief
      Executive Officer (Principal


Executive
      Officer) and Director





/S/
      BOB FARAHI    Co-Chairman
      of the Board of Directors, March 14,
      2007


Bob
      Farahi    President,
      and Director







/S/
      RONALD ROWAN   Treasurer
      and Chief Financial Officer March 14,
      2007


Ronald
      Rowan   (Principal
      Financial Officer
      and


Principal
      Accounting Officer)




/S/
      CHARLES W. SCHARER  Director      March
      14, 2007


Charles
      W. Scharer











/ S/
      CRAIG. F. SULLIVAN Director    March
      14,
      2007


Craig
      F.
      Sullivan








/ S/
      RONALD R. ZIDECK Director    March
      14,
      2007


Ronald
      R.
      Zideck













**EXHIBIT
      10.05**





**FIRST
      AMENDMENT, DATED AS OF February 8, 2007, TO THE CREDIT AGREEMENT, DATAED 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.**








FIRST
      AMENDMENT TO


CREDIT
      AGREEMENT








THIS
      FIRST AMENDMENT TO CREDIT AGREEMENT ("First Amendment") is made and entered
      into
      as of the 8 th day of
      February, 2007, by
      and
      among GOLDEN ROAD MOTOR INN, INC., a Nevada corporation (the "Borrower") and
      MONARCH CASINO & RESORT, INC., a Nevada corporation ("Guarantor"), each
      financial institution whose name is set forth on the signature pages of this
      First Amendment (each individually a "Lender" and collectively the "Lenders"),
      WELLS FARGO BANK, National Association, as the swingline lender (herein in
      such
      capacity, together with its successors and assigns, the "Swingline Lender"),
      and
      WELLS FARGO BANK, National Association, as the issuer of letters of credit
      (in
      such capacity, together with its successors and assigns, the "L/C Issuer"),
      WELLS FARGO BANK, National Association, as administrative and collateral agent
      for the Lenders, Swingline Lender and L/C Issuer (herein, in such capacity,
      called the "Agent Bank" and, together with the Lenders, Swingline Lender and
      L/C
      Issuer, collectively referred to as the "Banks").





R_E_C_I_T_A_L_S:





WHEREAS:




A.  Borrower,
      Guarantor and Banks entered into a Credit Agreement dated as of
      February 20, 2004 (the "Existing Credit Agreement") for the purpose of
      establishing a revolving line of credit in the initial principal amount of
      Fifty
      Million Dollars ($50,000,000.00), including a subfacility for the funding of
      swingline advances up to the maximum aggregate amount of Two Million Five
      Hundred Thousand Dollars ($2,500,000.00) at any time outstanding and a
      subfacility for the issuance of letters of credit up to the maximum aggregate
      amount of Two Million Five Hundred Thousand Dollars
      ($2,500,000.00).






B.  For
      the
      purpose of this First Amendment, all capitalized words and terms not otherwise
      defined herein shall have the respective meanings and be construed herein as
      provided in Section 1.01 of the Existing Credit Agreement and any reference
      to a provision of the Existing Credit Agreement shall be deemed to incorporate
      that provision as a part hereof, in the same manner and with the same effect
      as
      if the same were fully set forth herein.






C.  Borrower
      desires to amend the Existing Credit Agreement for the following
      purposes:




(i)  Decreasing
      the Aggregate Commitment from its present level of Twenty-Four Million Dollars
      ($24,000,000.00) to Five Million Dollars ($5,000,000.00);





(ii)  Restating
      the Aggregate Commitment Reduction Schedule and deleting the requirement to
      make
      any Scheduled Reductions prior to the Maturity Date;





(iii)  Restating
      the definition of Applicable Margin;





(iv)  Restating
      the requirements set forth in subsections 5.08(e) and (f); and





(v)  Removing
      and terminating the Syndication Interests of each of the Lenders, other than
      Wells Fargo Bank, National Association ("WFB") and restating the Schedule of
      Lenders' Proportions in Credit Facility as of the First Amendment Effective
      Date
      for the purpose of showing WFB as the holder of one hundred percent (100%)
      of
      the Syndication Interests in the Credit Facility.




D.  Subject
      to the terms, provisions and conditions hereinafter set forth, Lenders have
      agreed to the amendments, revisions and modifications set forth in this First
      Amendment.




NOW,
      THEREFORE, in consideration of the foregoing and other good and valuable
      considerations, the receipt and sufficiency of which are hereby acknowledged,
      the parties hereto agree to the amendments and modifications to the Existing
      Credit Agreement as specifically hereinafter provided as follows:




1.  Definitions .
      As of
      the First Amendment Effective Date, Section 1.01 of the Existing Credit
      Agreement entitled "Definitions" shall be and is hereby amended to include
      the
      following definitions. Those terms which are currently defined by
      Section 1.01 of the Existing Credit Agreement and which are also defined
      below shall be superseded and restated by the applicable definition set forth
      below:




"Aggregate
      Commitment" shall mean, as of the First Amendment Effective Date, reference
      to
      the aggregate amount committed by Lender for advance to or on behalf of the
      Borrower as Borrowings under the Credit Facility up to the maximum principal
      amount of Five Million Dollars ($5,000,000.00), as may be reduced from time
      to
      time by (i) Voluntary Permanent Reductions and/or (ii) Mandatory
      Commitment Reductions.





"Aggregate
      Commitment Reduction Schedule" shall mean the Aggregate Commitment Reduction
      Schedule marked "Schedule 2.01(c)", affixed to the First Amendment and by this
      reference incorporated herein and made a part hereof, which revised
      Schedule 2.01(c)
      shall fully supersede and restate Schedule 2.01(c) attached to the Existing
      Credit Agreement.





"Applicable
      Margin" means for any Base Rate Loan or LIBOR Loan, the applicable percentage
      amount to be added to the Base Rate or LIBO Rate, as the case may be, on and
      after the First Amendment Effective Date and continuing on each Rate Adjustment
      Date until Bank Facility Termination, the margin rates as set forth in Table
      One
      below in each instance based on the Leverage Ratio calculated with regard to
      the
      Borrower as of each Fiscal Quarter end, commencing with the Fiscal Quarter
      ending December 31, 2006, together with the immediately preceding three (3)
      Fiscal Quarters on a four (4) Fiscal Quarter basis:













**TABLE
                ONE**
            **TABLE
                TWO****Leverage
                Ratio**
            **Base
                Rate**
              **Margin**
            **LIBO**
              **Rate**
              **Margin**
            **Commitment**
              **Percentage**Greater
                than or equal to 2.25 to 1.00
            0.75%
            1.75%
            0.350%Greater
                than or equal to 1.50 to 1.00 but less than 2.25 to 1.00
            0.50%
            1.50%
            0.300%Greater
                than or equal to 0.75 to 1.0 but less than 1.50 to 1.00
            0.25%
            1.25%
            0.250%Less
                than 0.75 to 1.00
            0.00%
            1.00%
            0.200%








"Credit
      Agreement" shall mean the Existing Credit Agreement as amended by the First
      Amendment, together with all Schedules, Exhibits and other attachments thereto,
      as it may be further amended, modified, extended, renewed or restated from
      time
      to time.





"Existing
      Credit Agreement" shall have the meaning set forth in Recital Paragraph A
      of the First Amendment.





"First
      Amendment" shall have the meaning set forth in the Preamble of the First
      Amendment to Credit Agreement.





"First
      Amendment Effective Date" shall mean the date upon which each of the conditions
      precedent set forth in Paragraph 6 of the First Amendment has been fully
      satisfied.





"Schedule
      of Lenders' Proportions in Credit Facility" shall mean, as of the First
      Amendment Effective Date, the Schedule of Lenders' Proportions in Credit
      Facility, a copy of which is marked "Schedule 2.01(a)", affixed to the
      First Amendment and by this reference incorporated herein and made a part
      hereof, setting forth the respective Syndication Interest and maximum amount
      to
      be funded under the Credit Facility by Lender, as the same may be amended,
      modified or restated from time to time in connection with an Assignment and
      Assumption Agreement, which revised Schedule 2.01(a) shall fully restate and
      supersede Schedule 2.01(a) attached to the Existing Credit
      Agreement.




2.  Commitment
      Decrease .
      From
      and after the First Amendment Effective Date, the Aggregate Commitment shall
      be
      and is hereby reduced to Five Million Dollars ($5,000,000.00).






3.  Restatement
      of Section 2.01(a) .
      As of
      the First Amendment Effective Date, Section 2.01(a) of the Existing Credit
      Agreement shall be and is hereby fully amended and restated in its entirety
      as
      follows:




"a.  Subject
      to the conditions and upon the terms hereinafter set forth and in accordance
      with the terms and provisions of the Revolving Credit Note, on and after the
      Closing Date Lenders severally agree in the proportions set forth on the
      Schedule of Lenders' Proportions in Credit Facility to lend and advance
      Borrowings to Borrower, up to the Aggregate Commitment in the amount of Five
      Million Dollars ($5,000,000.00), in such amounts as Borrower may request by
      Notice of Borrowing duly executed by an Authorized Officer and delivered to
      Agent Bank from time to time as provided in Section 2.03. All outstanding
      principal and accrued and unpaid interest shall be fully paid on the Maturity
      Date."




4.  On
      and
      after the First Amendment Effective Date:






The
      definitions of "Aggregate Commitment", "Aggregate Commitment Reduction
      Schedule", "Applicable Margin" and "Schedule of Lenders' Proportions in Credit
      Facility" shall be deemed fully amended and restated by the definitions set
      forth in the First Amendment;






The
      definition of "Scheduled Reductions" shall be and is hereby deleted in its
      entirety from the Credit Agreement;






Section 2.01(e)
      entitled "Commitment Increase" and Section 2.01(f) entitled "Waiver of
      Scheduled Reductions" shall be and are hereby deleted in their entirety;
      and






WFB
      shall
      be the sole Lender under the Credit Agreement and the Syndication Interests
      held
      by each of the Lenders party hereto, other than WFB, shall be deemed terminated
      in all respects.






5.  Restatement
      of Subsections 5.08(e) and (f) .
      As of
      the First Amendment Effective Date, Subsections 5.08(e) and (f) of the Existing
      Credit Agreement shall be and are hereby fully amended and restated in their
      entirety as follows:




"e.  As
      soon
      as practicable, and in any event no later than March 1 of each Fiscal Year,
      projections by Fiscal Quarter for that Fiscal Year, including projected balance
      sheet, statement of operations and statement of cash flow of Borrower and
      projected consolidated and consolidating balance sheets and statements of
      operations and cash flows, of the Borrower, all in reasonable
      detail;





f.  As
      soon
      as practicable, and in any event no later than March 1 of each Fiscal Year,
      a Capital Expenditure budget by Borrower for the Hotel/Casino Facility for
      that
      Fiscal Year, all in reasonable detail;".




6.  Conditions
      Precedent to First Amendment Effective Date .
      The
      occurrence of the First Amendment Effective Date is subject to Agent Bank having
      received the following documents and payments, in each case in a form and
      substance reasonably satisfactory to Agent Bank, and the occurrence of each
      other condition precedent set forth below on or before February 13,
      2007:






Due
      execution by Borrower and Banks of seven (7) duplicate originals of this First
      Amendment;






Payment
      by Borrower to Agent Bank for the account of the Lenders of any unpaid
      Commitment Fees which are owing as of the First Amendment Effective
      Date;






Reimbursement
      to Agent Bank by Borrower for all reasonable fees and out-of-pocket expenses
      incurred by Agent Bank in connection with the First Amendment, but not limited
      to, reasonable attorneys' fees of Henderson & Morgan, LLC and all other like
      expenses remaining unpaid as of the First Amendment Effective Date;
      and






Such
      other documents, instruments or conditions as may be reasonably required by
      Agent Bank.






7.  Representations
      of Borrower .
      Borrower hereby represents to the Banks, which representations shall survive
      the
      First Amendment Effective Date and be deemed incorporated into Article IV of
      the
      Credit Agreement, that:






The
      representations and warranties contained in Article IV of the Existing Credit
      Agreement and contained in each of the other Loan Documents (other than
      representations and warranties which expressly speak only as of a different
      date, which shall be true and correct in all material respects as of such date)
      are true and correct on and as of the First Amendment Effective Date in all
      material respects as though such representations and warranties had been made
      on
      and as of the First Amendment Effective Date, except to the extent that such
      representations and warranties are not true and correct as a result of a change
      which is permitted by the Credit Agreement or by any other Loan Document or
      which has been otherwise consented to by Agent Bank or, where applicable, the
      Requisite Lenders;






Since
      the
      date of the most recent financial statements referred to in Section 5.08 of
      the
      Existing Credit Agreement, no Material Adverse Change has occurred and no event
      or circumstance which could reasonably be expected to result in a Material
      Adverse Change has occurred;






No
      event
      has occurred and is continuing which constitutes a Default or Event of Default
      under the terms of the Credit Agreement; and






The
      execution, delivery and performance of this First Amendment has been duly
      authorized by all necessary action of Borrower and this First Amendment
      constitutes the valid, binding and enforceable obligation of
      Borrower.






8.  Consent
      to First Amendment and Affirmation and Ratification of Guaranty .
      Guarantor joins in the execution of this First Amendment for the purpose of
      evidencing its consent to the terms, covenants, provisions and conditions herein
      contained for the purpose of ratifying and affirming its obligations under
      the
      Guaranty for the guaranty of the full and prompt payment and performance of
      all
      Indebtedness and Obligations under the Credit Facility, as modified and amended
      under this First Amendment.






9.  Incorporation
      by Reference .
      This
      First Amendment shall be and is hereby incorporated in and forms a part of
      the
      Existing Credit Agreement.






10.  Governing
      Law .
      This
      First Amendment to Credit Agreement shall be governed by the internal laws
      of
      the State of Nevada without reference to conflicts of laws
      principles.






11.  Counterparts .
      This
      First Amendment may be executed in any number of separate counterparts with
      the
      same effect as if the signatures hereto and hereby were upon the same
      instrument. All such counterparts shall together constitute one and the same
      document.






12.  Continuance
      of Terms and Provisions .
      All of
      the terms and provisions of the Credit Agreement shall remain unchanged except
      as specifically modified herein.






13.  Replacement
      Schedule Attached .
      The
      following additional and replacement Schedules and Exhibits are attached hereto
      and incorporated herein and made a part of the Credit Agreement as
      follows:




Schedule
      2.01(a) -  Schedule
      of Lenders' Proportions in Credit Facility as of First Amendment Effective
      Date





Schedule
      2.01(c) -  Aggregate
      Commitment Reduction Schedule





IN
      WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit
      Agreement to be executed as of the day and year first above
      written.





BORROWER :





GOLDEN
      ROAD MOTOR INN, INC.,


a
      Nevada
      corporation








By  /s/
      John Farahi





Name: John
      Farahi





Title CEO





MCRI :





MONARCH
      CASINO & RESORT, INC.,


a
      Nevada
      corporation








By  /s/
      John Farahi





Name John
      Farahi





Title CEO





BANKS :





WELLS
      FARGO BANK,


National
      Association,


Agent
      Bank, Lender and Swingline Lender





By /s/
      Steven Buntin


Steven
      Buntin,


Senior
      Vice President





U.S.
      BANK
      NATIONAL ASSOCIATION





By /s/
      Nicholas Butler


Nicholas
      Butler,


Vice
      President











COMERICA
      WEST INCORPORATED





By /s/
      Fatima Arshad


Fatima
      Arshad


Corporate
      Banking Representative








THE
      CIT
      GROUP/EQUIPMENT FINANCING, INC.





By /s/
      Katie J. Saunders


Name Katie
      J. Saunders


Title Vice
      President








BANK
      OF
      AMERICA, N.A.





By /s/
      Peter J. Vitale


Name Peter
      J. Vitale


Title Senior
      Vice President








BANK
      OF
      THE WEST





By /s/John
      Hyche


Name John
      Hyche


Title Senior
      Vice President





**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. 333-85412, 333-85418, and 333-85420) pertaining to the Directors’ Stock
      Option Plan, Executive Long-Term Stock Incentive Plan, and Employee Stock Option
      Plan, respectively, of Monarch Casino & Resort, Inc. of our reports dated
      March 9, 2007, with respect to the consolidated financial statements and
      schedule of Monarch Casino & Resort, Monarch Casino & Resort, Inc.
      management’s assessment of the effectiveness of internal control over financial
      reporting, 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, 2006.








/s/
      Ernst
& Young LLP








Las
      Vegas, NV


March
      13,
      2007








**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 annual 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 annual 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)) 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)
      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


c)
      disclosed in this report any change in the registrant's internal


control
      over financial reporting that occurred during the registrant's


fourth
      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 and reporting, to the


registrant's
      auditors and the audit committee of 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


control
      over financial reporting.





Date: March
      14 ,
      2007





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 annual 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 annual 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)) 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)
      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


c)
      disclosed in this report any change in the registrant's internal


control
      over financial reporting that occurred during the registrant's


fourth
      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 and reporting, to the


registrant's
      auditors and the audit committee of 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


control
      over financial reporting.








Date: March
      14 ,
      2007





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**








In
      connection with the Annual Report on Form 10-K of Monarch Casino & Resort,
      Inc., (the "Company") for the year ended December 31, 2006 as filed with the
      Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald
      Rowan, Chief Financial Officer and Treasurer of the Company, certify, pursuant
      to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002, that:





1. To
      the
      best of my knowledge, t he
      Report
      fully complies with the


requirements
      of section 13(a)
      or
      15(d) of the Securities Exchange Act


of
      1934;
      and





2.
      To the
      best of my knowledge, the information contained in the Report


fairly
      presents, in all material respects, the financial condition of


the
      Company as of the dates indicated and results of operations of


the
      Company for the periods indicated.











/S/
      RONALD ROWAN


Chie f
      Financial Officer and Treasurer


March
      14 ,
      2007








**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**








In
      connection with the Annual Report on Form 10-K of Monarch Casino & Resort,
      Inc., (the "Company") for the year ended December 31, 2006 as filed with the
      Securities and Exchange Commission on the date hereof (the "Report"), I, John
      Farahi, Chief Executive Officer of the Company, certify, pursuant to and for
      purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002, that:





1.
      To the
      best of my knowledge, the Report fully complies with the


requirements
      of section 13(a) or 15(d) of the Securities Exchange


Act
      of
      1934; and





2.
      To the
      best of my knowledge, the information contained in the


Report
      fairly presents, in all material respects, the financial


condition
      of the Company as of the dates indicated and results of


operations
      of the Company for the periods indicated.











/S/
      JOHN FARAHI


John
      Farahi


C hief
      Executive Officer


March
      14 ,
      2007