##### Table of Contents

---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



---



FORM 10-Q



---



|x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended Date: September 30, 2005



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 number 0-14050



---



THE SANDS REGENT

(exact name of registrant as specified in charter)



---



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 88-0201135                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|345 North Arlington Avenue, Reno, Nevada                       |  | 89501                               
|(Address of principal executive offices)                       |  | (Zip code)                          



Registrants
telephone number, including area code (775) 348-2200



---



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 whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act.    Yes ̈No  x



Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



On November 8, 2005, the registrant had outstanding 7,107,304 shares of its common stock, $.10 par value.



---



---

##### Table of Contents

THE SANDS REGENT

FORM 10-Q

TABLE OF CONTENTS



|                             |  |                                                                                       |  |         
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | --------
|                             |  |                                                                                       |  | Page No.
|PART I
FINANCIAL INFORMATION |  |                                                                                      
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements                                                                  |  | 3       
|                             |  | Condensed Consolidated Statements of Income (unaudited)                               |  | 3       
|                             |  | Condensed Consolidated Balance Sheets (unaudited)                                     |  | 4       
|                             |  | Condensed Consolidated Statements of Cash Flows (unaudited)                           |  | 5       
|                             |  | Notes to Condensed Consolidated Financial Statements (unaudited)                      |  | 6-9     
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10-18   
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19      
|Item 4.                      |  | Controls and Procedures                                                               |  | 19      
|                             | 
|PART II
OTHER INFORMATION    |  |                                                                                      
|                             |  |                                                                                      
|Item 1.                      |  | Legal Proceedings                                                                     |  | 20      
|Item 2.                      |  | Changes in Securities                                                                 |  | 20      
|Item 3.                      |  | Defaults Upon Senior Securities                                                       |  | 20      
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders                                   |  | 20      
|Item 5.                      |  | Other Information                                                                     |  | 20      
|Item 6.                      |  | Exhibits and Reports on Form 8-K                                                      |  | 20      
|                             | 
|SIGNATURES                   |  | 21                                                                                   
|CERTIFICATIONS               |  |                                                                                      



---

##### Table of Contents

PART I FINANCIAL INFORMATION



Item 1. Financial Statements



THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)



|                                                 |  |                                 |           |   |      |   |           |  
|------------------------------------------------ |  | ------------------------------- | --------- | - | ---- | - | --------- | -
|                                                 |  | THREE MONTHS ENDEDSEPTEMBER 30, |          
|(Dollars in thousands, except per share amounts) |  | 2005                            |           |   | 2004 |  
|Operating revenues                               |  |                                 |           |   |      |   |           |  
|Gaming                                           |  | $                               | 13,420    |   |      | $ | 12,424    |  
|Lodging                                          |  |                                 | 3,187     |   |      |   | 3,054     |  
|Food and beverage                                |  |                                 | 3,046     |   |      |   | 3,047     |  
|Fuel and convenience store                       |  |                                 | 5,964     |   |      |   | 4,703     |  
|Other                                            |  |                                 | 503       |   |      |   | 479       |  
|                                                 |  |                                 |           |   |      |   |           |  
|Gross revenues                                   |  |                                 | 26,120    |   |      |   | 23,707    |  
|Promotional allowances                           |  |                                 | 1,988     |   |      |   | 1,832     |  
|                                                 |  |                                 |           |   |      |   |           |  
|Net revenues                                     |  |                                 | 24,132    |   |      |   | 21,875    |  
|                                                 |  |                                 |           |   |      |   |           |  
|Operating expenses                               |  |                                 |           |   |      |   |           |  
|Gaming                                           |  |                                 | 5,293     |   |      |   | 4,995     |  
|Lodging                                          |  |                                 | 1,074     |   |      |   | 1,105     |  
|Food and beverage                                |  |                                 | 2,079     |   |      |   | 1,938     |  
|Fuel and convenience store                       |  |                                 | 5,738     |   |      |   | 4,473     |  
|Other                                            |  |                                 | 165       |   |      |   | 157       |  
|Maintenance and utilities                        |  |                                 | 1,575     |   |      |   | 1,492     |  
|General and administrative                       |  |                                 | 3,297     |   |      |   | 3,045     |  
|Depreciation and amortization                    |  |                                 | 1,650     |   |      |   | 1,545     |  
|                                                 |  |                                 |           |   |      |   |           |  
|                                                 |  |                                 | 20,871    |   |      |   | 18,750    |  
|                                                 |  |                                 |           |   |      |   |           |  
|Income from operations                           |  |                                 | 3,261     |   |      |   | 3,125     |  
|                                                 |  |                                 |           |   |      |   |           |  
|Other income (expense)                           |  |                                 |           |   |      |   |           |  
|Interest expense                                 |  |                                 | (428      | ) |      |   | (606      | )
|Other, net                                       |  |                                 | 9         |   |      |   | (46       | )
|                                                 |  |                                 |           |   |      |   |           |  
|                                                 |  |                                 | (419      | ) |      |   | (652      | )
|                                                 |  |                                 |           |   |      |   |           |  
|Income before income taxes                       |  |                                 | 2,842     |   |      |   | 2,473     |  
|Income tax provision                             |  |                                 | (962      | ) |      |   | (833      | )
|                                                 |  |                                 |           |   |      |   |           |  
|Net income                                       |  | $                               | 1,880     |   |      | $ | 1,640     |  
|                                                 |  |                                 |           |   |      |   |           |  
|Net income per share                             |  |                                 |           |   |      |   |           |  
|Basic                                            |  | $                               | 0.27      |   |      | $ | 0.29      |  
|Diluted                                          |  | $                               | 0.25      |   |      | $ | 0.27      |  
|                                                 |  |                                
|Weighted average of shares outstanding           |  |                                 |           |   |      |   |           |  
|Basic                                            |  |                                 | 6,996,409 |   |      |   | 5,646,555 |  
|Diluted                                          |  |                                 | 7,459,005 |   |      |   | 6,118,804 |  



The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.



3



---

##### Table of Contents

THE SANDS REGENT

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)



|                                                                                                   |  |                   |         |   |              |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------ | - | ------- | -
|(Dollars in thousands except share data)                                                           |  | SEPTEMBER 30,2005 |         |   | JUNE 30,2005 |  
|ASSETS                                                                                             |  |                   |         |   |              |   |         |  
|Cash and cash equivalents                                                                          |  | $                 | 4,748   |   |              | $ | 3,272   |  
|Accounts receivable, net                                                                           |  |                   | 751     |   |              |   | 580     |  
|Inventories                                                                                        |  |                   | 682     |   |              |   | 692     |  
|Prepaid expenses and other assets                                                                  |  |                   | 1,824   |   |              |   | 1,805   |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total current assets                                                                               |  |                   | 8,005   |   |              |   | 6,349   |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Property and equipment:                                                                            |  |                   |         |   |              |   |         |  
|Land                                                                                               |  |                   | 12,307  |   |              |   | 10,007  |  
|Buildings and improvements                                                                         |  |                   | 46,548  |   |              |   | 43,597  |  
|Equipment, furniture and fixtures                                                                  |  |                   | 28,332  |   |              |   | 27,264  |  
|Leasehold improvements                                                                             |  |                   | 178     |   |              |   | 178     |  
|Construction in progress                                                                           |  |                   | 2,122   |   |              |   | 854     |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total property and equipment                                                                       |  |                   | 89,487  |   |              |   | 81,900  |  
|Less accumulated depreciation and amortization                                                     |  |                   | 44,270  |   |              |   | 42,992  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Property and equipment, net                                                                        |  |                   | 45,217  |   |              |   | 38,908  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Other assets:                                                                                      |  |                   |         |   |              |   |         |  
|Goodwill                                                                                           |  |                   | 32,968  |   |              |   | 28,642  |  
|Other intangibles                                                                                  |  |                   | 12,760  |   |              |   | 12,426  |  
|Other                                                                                              |  |                   | 956     |   |              |   | 1,202   |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total other assets                                                                                 |  |                   | 46,684  |   |              |   | 42,270  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total assets                                                                                       |  | $                 | 99,906  |   |              | $ | 87,527  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                               |  |                   |         |   |              |   |         |  
|Accounts payable                                                                                   |  | $                 | 2,287   |   |              | $ | 2,578   |  
|Accrued salaries, wages and benefits                                                               |  |                   | 2,039   |   |              |   | 1,884   |  
|Other accrued expenses                                                                             |  |                   | 1,402   |   |              |   | 398     |  
|Federal income tax payable                                                                         |  |                   | 767     |   |              |   | 774     |  
|Deferred federal income tax liability                                                              |  |                   | 388     |   |              |   | 338     |  
|Current maturities of long-term debt                                                               |  |                   | 3,459   |   |              |   | 2,198   |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total current liabilities                                                                          |  |                   | 10,342  |   |              |   | 8,170   |  
|Long-term debt                                                                                     |  |                   | 25,360  |   |              |   | 17,744  |  
|Deferred federal income tax liability                                                              |  |                   | 2,354   |   |              |   | 2,209   |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total liabilities                                                                                  |  |                   | 38,056  |   |              |   | 28,123  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Common stock ($.10 par value, 20,000,000 shares authorized; 9,482,714 and 9,376,766 shares issued) |  |                   | 948     |   |              |   | 938     |  
|Additional paid-in capital                                                                         |  |                   | 27,844  |   |              |   | 26,938  |  
|Unearned compensationrestricted stock                                                             |  |                   | (350    | ) |              |   |        |  
|Retained earnings                                                                                  |  |                   | 55,766  |   |              |   | 53,886  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|                                                                                                   |  |                   | 84,208  |   |              |   | 81,762  |  
|Treasury stock (at cost; 2,403,000 shares)                                                         |  |                   | (22,358 | ) |              |   | (22,358 | )
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total stockholders equity                                                                         |  |                   | 61,850  |   |              |   | 59,404  |  
|                                                                                                   |  |                   |         |   |              |   |         |  
|Total liabilities and stockholders equity                                                         |  | $                 | 99,906  |   |              | $ | 87,527  |  
|                                                                                                   |  |                   |         |   |              |   |         |  



The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.



4



---

##### Table of Contents

THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)



|                                                                                  |  |                                 |         |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                  |  | THREE MONTHS ENDEDSEPTEMBER 30, |        
|(Dollars in thousands)                                                            |  | 2005                            |         |   | 2004 |  
|Operating Activities                                                              |  |                                 |         |   |      |   |        |  
|Net income                                                                        |  | $                               | 1,880   |   |      | $ | 1,640  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                 |         |   |      |   |        |  
|Depreciation and amortization                                                     |  |                                 | 1,650   |   |      |   | 1,545  |  
|(Gain) loss on disposal of property and equipment                                 |  |                                 | (9      | ) |      |   | 46     |  
|(Increase) decrease in accounts receivable, net                                   |  |                                 | (171    | ) |      |   | 81     |  
|Decrease in inventories                                                           |  |                                 | 34      |   |      |   | 38     |  
|(Increase) decrease in prepaid expenses and other current assets                  |  |                                 | (19     | ) |      |   | 239    |  
|(Increase) decrease in other assets                                               |  |                                 | (40     | ) |      |   | 55     |  
|Increase (decrease) in accounts payable                                           |  |                                 | (1      | ) |      |   | 67     |  
|Increase (decrease) in accrued expenses                                           |  |                                 | 1,147   |   |      |   | (758   | )
|Change in federal income taxes payable/receivable                                 |  |                                 | (7      | ) |      |   | (62    | )
|Change in deferred federal income taxes                                           |  |                                 | 195     |   |      |   | 95     |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Net cash provided by operating activities                                         |  |                                 | 4,658   |   |      |   | 2,986  |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Investing Activities                                                              |  |                                 |         |   |      |   |        |  
|Investment in property and equipment                                              |  |                                 | (1,729  | ) |      |   | (1,069 | )
|Net cash paid for Dayton Depot Casino                                             |  |                                 | (10,297 | ) |      |   |       |  
|Proceeds from sale of assets                                                      |  |                                 | 9       |   |      |   | 3      |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Net cash used in investing activities                                             |  |                                 | (12,017 | ) |      |   | (1,066 | )
|                                                                                  |  |                                 |         |   |      |   |        |  
|Financing Activities                                                              |  |                                 |         |   |      |   |        |  
|Payments on long-term debt                                                        |  |                                 | (1,180  | ) |      |   | (2,024 | )
|Issuance of long-term debt                                                        |  |                                 | 10,050  |   |      |   |       |  
|Payment of costs relative to the issuance of long-term debt                       |  |                                 | (35     | ) |      |   | (41    | )
|Issuance of Company common stock                                                  |  |                                 |        |   |      |   | 18     |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Net cash provided by (used in) financing activities                               |  |                                 | 8,835   |   |      |   | (2,047 | )
|                                                                                  |  |                                 |         |   |      |   |        |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                 | 1,476   |   |      |   | (127   | )
|Cash and cash equivalents, beginning of period                                    |  |                                 | 3,272   |   |      |   | 5,443  |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                          |  | $                               | 4,748   |   |      | $ | 5,316  |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Supplemental disclosure of cash flow information                                  |  |                                 |         |   |      |   |        |  
|Interest paid, net of amount capitalized                                          |  | $                               | 325     |   |      | $ | 606    |  
|Federal income taxes paid                                                         |  | $                               | 774     |   |      | $ | 800    |  
|Supplemental disclosure of non-cash investing and financing activities            |  |                                 |         |   |      |   |        |  
|Property and equipment acquired by accounts payable                               |  | $                               | 290     |   |      | $ | 133    |  
|Issuance of common stock to acquire Dayton Depot Casino                           |  | $                               | 551     |   |      | $ |       |  
|Fair value of assets acquired and liabilities assumed in business combination     |  |                                 |         |   |      |   |        |  
|Current assets other than cash                                                    |  | $                               | 24      |   |      |   |        |  
|Property and equipment                                                            |  |                                 | 6,100   |   |      |   |        |  
|Intangibles                                                                       |  |                                 | 4,736   |   |      |   |        |  
|Current liabilities                                                               |  |                                 | (12     | ) |      |   |        |  
|Common stock issued                                                               |  |                                 | (551    | ) |      |   |        |  
|                                                                                  |  |                                 |         |   |      |   |        |  
|Cash paid net of cash acquired                                                    |  | $                               | 10,297  |   |      |   |        |  
|                                                                                  |  |                                 |         |   |      |   |        |  



The accompanying notes are an integral
part of these unaudited condensed consolidated financial statements.



5



---

##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 1 - BASIS OF PRESENTATION



The accompanying condensed consolidated financial statements include the accounts of The
Sands Regent (the Company) and its wholly-owned subsidiaries: Zante, Inc. (Zante), Last Chance, Inc. (Last Chance), Plantation Investments, Inc. (Plantation), and Dayton Gaming, Inc.
(Dayton). The Company and its subsidiaries are incorporated in Nevada. Zante owns and operates the Sands Regency Casino/Hotel (Sands Regency) in downtown Reno, Nevada. Last Chance owns and operates the Gold Ranch Casino and
RV Resort in Verdi, Nevada, and California Prospectors, Ltd. (California Prospectors), a Nevada limited liability company, which operates a California lottery station. Together, Last Chance and California Prospectors are presented as
Gold Ranch. Plantation owns and operates Rail City Casino (Rail City). On September 1, 2005, the Company acquired, through Dayton Gaming, Inc., the assets of Dayton Depot and Red Hawk Sports Bar (Dayton Depot
Casino) in Dayton, Nevada. (See Note 6)



The accounting policies followed
in the preparation of the financial information herein are the same as those summarized in the Companys 2005 Annual Report on Form 10-K, except for the Companys adoption of Statement of Financial Accounting Standards (SFAS)
No. 123R on July 1, 2005 (see Notes 4 and 5). The condensed consolidated balance sheet at June 30, 2005 was derived from audited consolidated financial statements at that date. The interim condensed consolidated financial information is
unaudited and should be read in conjunction with the Companys 2005 Form 10-K. In the opinion of management, all adjustments and normally recurring accruals necessary to fairly present the financial condition of the Company as of
September 30, 2005 and the results of its operations and its cash flows for the three months ended September 30, 2005 and 2004 have been included. Interim results of operations are not necessarily indicative of the results of operations
for the full year due to seasonality and other factors.



NOTE 2 - EARNINGS
PER SHARE



Earnings per share is calculated in accordance with SFAS No.
128Earnings Per Share. SFAS 128 provides for the reporting of basic, or undiluted earnings per share, and diluted earnings per share. Basic earnings per share is computed by dividing net income by the
weighted average number of shares outstanding during the period. Diluted earnings per share reflects the addition of potentially dilutive securities, which for the Company, consist of stock options, convertible debt and warrants. Dilution is
determined based upon the assumption that the options, the convertible debt, and the warrants are exercised or converted. The weighted average number of shares outstanding for the calculation of diluted earnings per share include the dilutive effect
of the Companys stock options, convertible debt and outstanding warrants unless the associated strike price(s) exceeds the average closing price in the period.



The following is a reconciliation of the number of shares (denominator) used in the basic and diluted earnings per share computations:



|                                                             |  |                                  |  |                 |       |   |        |       |                 |   |       |  
|------------------------------------------------------------ |  | -------------------------------- |  | --------------- | ----- | - | ------ | ----- | --------------- | - | ----- | -
|                                                             |  | THREE MONTHS ENDED SEPTEMBER 30, | 
|                                                             |  | 2005                             |  |                 | 2004  |  
|                                                             |  | Shares                           |  | Per ShareAmount |       |   | Shares |       | Per ShareAmount |  
|Basic net income per share                                   |  | 6,996                            |  | $               | 0.27  |   |        | 5,647 |                 | $ | 0.29  |  
|Effect of dilutive securities, convertible debt and warrants |  | 463                              |  |                 | (0.02 | ) |        | 472   |                 |   | (0.02 | )
|                                                             |  |                                  |  |                 |       |   |        |       |                 |   |       |  
|Diluted net income per share                                 |  | 7,459                            |  | $               | 0.25  |   |        | 6,119 |                 | $ | 0.27  |  
|                                                             |  |                                  |  |                 |       |   |        |       |                 |   |       |  



6



---

##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 3 - BUSINESS SEGMENTS



The Company
reports business segment information based on geographic location. The following is a breakdown of relevant data by location.



|                                |  |                                 |        |   |      |   |        |  
|------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -
|                                |  | THREE MONTHS ENDEDSEPTEMBER 30, |       
|(Dollars in thousands)          |  | 2005                            |        |   | 2004 |  
|Net revenues                    |  |                                 |        |   |      |   |        |  
|Rail City Casino                |  | $                               | 6,117  |   |      | $ | 6,070  |  
|Sands Regency Casino/Hotel      |  |                                 | 9,550  |   |      |   | 9,002  |  
|Gold Ranch Casino and RV Resort |  |                                 | 8,102  |   |      |   | 6,803  |  
|Dayton Depot Casino             |  |                                 | 363    |   |      |   |       |  
|                                |  |                                 |        |   |      |   |        |  
|                                |  | $                               | 24,132 |   |      | $ | 21,875 |  
|                                |  |                                 |        |   |      |   |        |  
|Income from operations          |  |                                 |        |   |      |   |        |  
|Rail City Casino                |  | $                               | 1,771  |   |      | $ | 1,449  |  
|Sands Regency Casino/Hotel      |  |                                 | 1,542  |   |      |   | 1,323  |  
|Gold Ranch Casino and RV Resort |  |                                 | 486    |   |      |   | 680    |  
|Dayton Depot Casino             |  |                                 | 92     |   |      |   |       |  
|Corporate                       |  |                                 | (630   | ) |      |   | (327   | )
|                                |  |                                 |        |   |      |   |        |  
|                                |  | $                               | 3,261  |   |      | $ | 3,125  |  
|                                |  |                                 |        |   |      |   |        |  
|Depreciation and amortization   |  |                                 |        |   |      |   |        |  
|Rail City Casino                |  | $                               | 488    |   |      | $ | 487    |  
|Sands Regency Casino/Hotel      |  |                                 | 876    |   |      |   | 876    |  
|Gold Ranch Casino and RV Resort |  |                                 | 228    |   |      |   | 138    |  
|Dayton Depot Casino             |  |                                 | 51     |   |      |   |       |  
|Corporate                       |  |                                 | 7      |   |      |   | 44     |  
|                                |  |                                 |        |   |      |   |        |  
|                                |  | $                               | 1,650  |   |      | $ | 1,545  |  
|                                |  |                                 |        |   |      |   |        |  



NOTE 4- ADOPTION OF RECENTLY ISSUED
ACCOUNTING PRONOUNCEMENT



In December 31, 2004, the Financial
Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment (SFAS 123R), replacing SFAS No. 123, Accounting for Stock-Based Compensation, and superceding Accounting Principles
Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires recognition of share-based compensation in the financial statements. SFAS 123R is effective as of the first annual reporting period
that begins after June 15, 2005 and has been adopted by the Company on July 1, 2005. See Note 5 for further details.



7



---

##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 5 - STOCK-BASED COMPENSATION



On
July 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payments (SFAS No. 123R) which requires companies to measure the cost of employee services received in exchange for an award of equity instruments based on the
grant date fair value of the award. The Company has elected to use the Modified Prospective Transition method such that SFAS No. 123R applies to new awards and to awards modified, repurchased or canceled after the effective date. The Company has a
stock option and a restricted stock plan. Generally, stock options granted to employees fully vest four years from the grant date and in one year for directors and have a term of ten years. No new options were granted subsequent to July 1, 2005. In
September 2005 the Company issued 36,600 restricted shares of stock to employees which vest 25% annually, starting one year from the date of grant. The Company recognizes stock-based compensation expense over the requisite service period of the
individual grants and awards, generally equal to the vesting period.



Prior to
July 1, 2005, the Company accounted for these plans under the intrinsic value method described in APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretation. The Company, applying the intrinsic value method,
did not record stock-based compensation cost in net income because the exercise price of its stock options equaled the market price of the underlying stock at the date of grant. Compensation costs for the portion of unvested stock options for which
the required service period has not been rendered that are outstanding as of July 1, 2005 shall be recognized as the remaining required services are rendered. The compensation costs relating to unvested awards is based on the grant date fair value
of those awards as calculated under SFAS No. 123R.



Compensation expense of
$85,000 related to stock options issued prior to July 1, 2005 and $16,000 related to the grant of restricted stock in September 2005 is included in general and administrative expenses for the three months ended September 30, 2005.



As of September 30, 2005, $256,000 of total unrecognized compensation costs related to
nonvested stock options is expected to be recognized over future periods.



SFAS
No. 123R requires the Company to present proforma information for periods prior to the adoption as if it had accounted for all stock-based compensation under the fair value method. Had compensation costs under the Companys plans been recorded
last year, the effect on the Companys net income and earnings per share would have been as follows (in thousands, except per share amounts):



|                                                                                                                              |  |                                      |       |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ----- | -
|                                                                                                                              |  | Three months endedSeptember 30, 2004 |      
|Net income, as reported                                                                                                       |  | $                                    | 1,640 |  
|Total stock-based employee compensation expense determined under fair value method for all awards, net of income tax benefits |  |                                      | (33   | )
|                                                                                                                              |  |                                      |       |  
|Pro forma net income                                                                                                          |  | $                                    | 1,607 |  
|                                                                                                                              |  |                                      |       |  
|Earnings per share:                                                                                                           |  | $                                    |       |  
|Basicas reported                                                                                                             |  | $                                    | 0.29  |  
|                                                                                                                              |  |                                      |       |  
|Basicpro forma                                                                                                               |  | $                                    | 0.28  |  
|                                                                                                                              |  |                                      |       |  
|Dilutedas reported                                                                                                           |  | $                                    | 0.27  |  
|                                                                                                                              |  |                                      |       |  
|Dilutedpro forma                                                                                                             |  | $                                    | 0.26  |  
|                                                                                                                              |  |                                      |       |  



NOTE 6 - ACQUISITIONS



On September 1, 2005, the Company completed its acquisition of the
assets of Dayton Depot and Red Hawk Sports Bar (Dayton Depot Casino) through its subsidiary, Dayton Gaming, Inc., a Nevada corporation, pursuant to an Asset Purchase Agreement dated February 28, 2005 (the Agreement).



The preliminary purchase price of $10.9 million (including acquisition costs)
was calculated based on EBITDA (earnings before interest, taxes, depreciation and amortization) for Dayton Depot Casino for the twelve months preceding the closing date of the acquisition as prescribed in the Agreement. The purchase was funded with
the payment of $10.3 million in cash and issuance of 69,438 shares of Company stock. The cash paid in connection with the transaction came primarily from an amended and restated credit facility (Note 8), which, in concert with the stock, funded the
acquisition including net working capital. The company stock issued to the seller contains a two year trading restriction from the date of the acquisition. The value of the stock issued in the transaction has been recorded at a 20% discount to
market value to account for the impact of the trading restriction.



The
purchase price of Dayton Depot Casino was preliminarily allocated based on the fair market value of assets acquired net of liabilities assumed. We have retained a third party valuation of significant identifiable assets acquired as well as other
assets acquired and certain liabilities. We are still in the process of valuing certain assets, which we expect to complete by the end of the second quarter of fiscal year 2006. The purchase price amount in excess of net assets acquired was
allocated to goodwill. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:



|                          |  |   |        |  
|------------------------- |  | - | ------ | -
|Current assets            |  | $ | 24     |  
|Property and equipment    |  |   | 6,100  |  
|Goodwill                  |  |   | 4,326  |  
|Other intangible assets   |  |   | 414    |  
|                          |  |   |        |  
|Total assets acquired     |  |   | 10,864 |  
|                          |  |   |        |  
|Current liabilities       |  |   | (12    | )
|                          |  |   |        |  
|Total liabilities assumed |  |   | (12    | )
|                          |  |   |        |  
|Net assets acquired       |  | $ | 10,852 |  
|                          |  |   |        |  



The pro forma consolidated results of
operations, as if the acquisition of Dayton Depot Casino had occurred on July 1, 2004, are as follows (in thousands except per share data):



|                             |  |                                      |        |                                      |   |       
|---------------------------- |  | ------------------------------------ | ------ | ------------------------------------ | - | ------
|                             |  | Three months endedSeptember 30, 2005 |        | Three months endedSeptember 30, 2004
|Net revenues                 |  | $                                    | 25,045 |                                      | $ | 23,014
|Net income                   |  | $                                    | 1,961  |                                      | $ | 1,776 
|Basic net income per share   |  | $                                    | 0.28   |                                      | $ | 0.31  
|Diluted net income per share |  | $                                    | 0.26   |                                      | $ | 0.29  



NOTE 7 - INTANGIBLES AND GOODWILL



Intangible Balances



|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|----------------------------------- |  | ------------------- | ------ | ----------------------- | - | --- |  | ------------------- | ------ | ----------------------- | - | ------ |  | - | --- |  | - | ------
|                                    |  | September 30, 2005  |        | June 30, 2005          
|(Dollars in thousands)              |  | GrossCarryingAmount |        | AccumulatedAmortization |   | Net |  | GrossCarryingAmount |        | AccumulatedAmortization |   | Net   
|Finite-lived intangible assets:     |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|Customer list/relationships         |  | $                   | 1,190  |                         | $ | 780 |  | $                   | 410    |                         | $ | 1,190  |  | $ | 709 |  | $ | 481   
|Under-market land lease             |  |                     | 448    |                         |   | 27  |  |                     | 421    |                         |   | 448    |  |   | 21  |  |   | 427   
|Non-compete agreement               |  |                     | 231    |                         |   | 3   |  |                     | 228    |                         |   |       |  |   |    |  |   |      
|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|                                    |  |                     | 1,869  |                         |   | 810 |  |                     | 1,059  |                         |   | 1,638  |  |   | 730 |  |   | 908   
|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|Indefinite-lived intangible assets: |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|Grandfathered gaming license        |  |                     | 7,205  |                         |   |    |  |                     | 7,205  |                         |   | 7,205  |  |   |    |  |   | 7,205 
|Trademark/tradename                 |  |                     | 4,478  |                         |   |    |  |                     | 4,478  |                         |   | 4,303  |  |   |    |  |   | 4,303 
|Other                               |  |                     | 18     |                         |   |    |  |                     | 18     |                         |   | 10     |  |   |    |  |   | 10    
|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|                                    |  |                     | 11,701 |                         |   |    |  |                     | 11,701 |                         |   | 11,518 |  |   |    |  |   | 11,518
|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       
|                                    |  | $                   | 13,570 |                         | $ | 810 |  | $                   | 12,760 |                         | $ | 13,156 |  | $ | 730 |  | $ | 12,426
|                                    |  |                     |        |                         |   |     |  |                     |        |                         |   |        |  |   |     |  |   |       



8



---

##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Amortization of Intangibles



The
aggregate amortization expense was $80,000 and $155,000 for the three months ended September 30, 2005 and 2004, respectively. Estimated annual amortization expense for the current and succeeding fiscal years is as follows:



|                       |  |            |  |              |    
|---------------------- |  | ---------- |  | ------------ | ---
|(Dollars in thousands) |  | Fiscalyear |  | Amortization
|                       |  | 2006       |  | $            | 343
|                       |  | 2007       |  |              | 195
|                       |  | 2008       |  |              | 129
|                       |  | 2009       |  |              | 100
|                       |  | 2010       |  |              | 86 



Goodwill Changes and Balance by
Segment



|                                |  |           |        |           |   |             |  |       |       |  |   |       
|------------------------------- |  | --------- | ------ | --------- | - | ----------- |  | ----- | ----- |  | - | ------
|(Dollars in thousands)          |  | Rail City |        | GoldRanch |   | DaytonDepot |  | Total
|Balance at beginning of period  |  | $         | 17,624 |           | $ | 11,018      |  | $     |      |  | $ | 28,642
|Dayton Depot Casino acquisition |  |           |       |           |   |             |  |       | 4,326 |  |   | 4,326 
|                                |  |           |        |           |   |             |  |       |       |  |   |       
|Balance at September 30, 2005   |  | $         | 17,624 |           | $ | 11,018      |  | $     | 4,326 |  | $ | 32,968
|                                |  |           |        |           |   |             |  |       |       |  |   |       



NOTE 8  RECENTLY AMENDED AND
RESTATED CREDIT FACILITIES



In connection with the acquisition of Dayton
Depot Casino, the Company executed an amended and restated syndicated financing arrangement (Credit Agreement) through Wells Fargo Bank. The Credit Agreement provides for a 5-year, $22,000,000 term loan collateralized by substantially
all property and equipment of Zante, Inc., Plantation Investments, Inc., and Dayton Gaming, Inc., and the furniture, fixtures and equipment of Last Chance, Inc. The balance of the term loan was $21.2 million at September 30, 2005 and $16.1 million
at June 30, 2005. The loan has a variable interest rate based on LIBOR or the U.S. Prime Index plus an applicable margin as detailed in the Credit Agreement. The interest rate at September 30, 2005 was LIBOR plus 2.25% or Prime plus .75%.
The interest rate at June 30, 2005 was LIBOR plus 2% or Prime plus .5%. At September 30, 2005 and June 30, 2005 the weighted average interest rate on the term loan was 6.06% and 5.38% respectively. The weighted average interest rate on the revolving
credit facility at September 30, 2005 and June 30, 2005 was 6.88% and 6.50% respectively. The loan has a 5-year amortization schedule, and matures on September 1, 2010, with interest and any unpaid principal due and payable on that date.
Additionally, as part of the Credit Agreement, the Company secured a Wells Fargo Bank syndicated, 5-year $25,000,000 revolving credit facility with collateralization and terms which are substantially similar to the term loan. The balance of the
revolving credit facility was $ 3.4 million at June 30, 2005 and $ 7.2 million at September 30, 2005. The credit facility requires interest-only payments and matures September 1, 2010, with interest and any unpaid principal
due and payable on that date. Together, the bank term loan and revolving credit facility requires the Company to be in compliance with certain financial and other covenants, restricts future encumbrances, and limits situations where a change in
control in the Company may occur. The financial covenants include the requirement that a minimum EBITDA (earnings before interest expense, taxes, depreciation and amortization) and certain other financial ratios be maintained. The Company believes
that it is in compliance with all covenants and restrictions at September 30, 2005. For a more complete description of the credit facilities, refer to the Companys Annual Report on Form 10-K for the year ended June 30, 2005.



9



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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



The Sands Regent and its subsidiaries (the Company, we, our, or us) operate the Rail City Casino (Rail City)
in Sparks, Nevada (Dayton Depot Casino), the Sands Regency Casino Hotel (the Sands) in downtown Reno, Nevada, the Gold Ranch Casino and RV Resort (the Gold Ranch) on Interstate-80 in Verdi, Nevada and, effective
September 1, 2005, the Dayton Depot Casino and Red Hawk Sports Bar in Dayton, Nevada. The Sands has 833 hotel rooms and 5 restaurants, including Tony Romas Famous for Ribs, Mels the Original diner, and Arbys. It has a full
selection of gaming options, including 544 slot machines, 17 table games, keno, bingo, and a sportsbook operated by a third party. Additionally, the Sands has a Just for Laughs comedy club, a cabaret lounge, and a health spa.



Gold Ranchs gaming options include 243 slot machines, a California lottery station on
Gold Ranchs property which straddles the Nevada/California border, and a sportsbook operated by a third party. Additionally, Gold Ranch has a 105-space RV park, 2 restaurants (a family style restaurant and a Jack-in-the-Box), a Bar and an ARCO
gas station and convenience store.



Rail City has approximately 16,600 square
feet of gaming space housing 650 slots, 6 table games, keno, a sportsbook operated by a third party, a 24-hour family-style restaurant and a bar.



On September 1, 2005, the Company acquired Dayton Depot Casino in Dayton, Nevada. Dayton Depot has 16,000 square feet of casino and a family-style restaurant, two
bars, 250 slot machines and a sportsbook operated by a third party. The Red Hawk Sports Bar, located across Highway 50 from the Depot Casino, houses 33 slot machines and a convenience store. The results of operations for the quarter ended
September 30, 2005 include the results of Dayton Depot Casino beginning September 1, 2005.



Critical Accounting Policies and Estimates



The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Certain of the Companys policies, including the estimated lives assigned to
long-lived assets, asset impairment, goodwill and other intangibles impairment, the adequacy of our allowance for uncollectible receivables, self insurance reserves, litigation reserves, and customer rewards program liability requires that the
Company 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. The Companys 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 Company estimates.



10



---

##### Table of Contents

Table of Contents



THE SANDS REGENT

MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Results of Operations - Quarter ended September 30, 2005, as compared to the quarter ended September 30, 2004.



CONSOLIDATED RESULTS. For the quarter ended September 30, 2005, the Companys consolidated net revenues increased from $21.9 million to $24.1 million, or 10.3% from
the quarter ended September 30, 2004. On a by-property basis, the net revenue for Rail City increased 0.8% from the corresponding quarter of the prior year, while net revenue for the Sands increased 6.1% from the corresponding quarter of the prior
year. Gold Ranch net revenue increased 19.1% from the corresponding quarter of the prior year, attributable to increases in the retail price of gasoline. Consolidated net revenues include a partial quarter of Dayton Depot Casino of $363,000. Dayton
Depot was acquired by the Company on September 1, 2005. The factors that are attributed to the financial results of the business are discussed below.



Consolidated income from operations was $3.3 million for the quarter ended September 30, 2005, compared to $3.1 million for the same quarter of the prior year. Rail City
achieved income from operations of $1.8 million, a 22.2% increase from the same quarter of the prior year. The Sands achieved income from operations of $1.5 million, a 16.5% increase from the same quarter of the prior year. Income from operations at
Gold Ranch of $486,000 represents a 28.5% decrease. Rising gasoline prices contributed to decreases in weekend traffic on Interstate-80 which resulted in an adverse impact to Gold Ranch. The competitive nature of gasoline prices does not allow the
property to increase its profit margins in spite of increased retail pricing. Total gallons of gasoline pumped at Gold Ranch, a key indicator of customer traffic to the property, decreased 11.6% from the same period in the prior year. Consolidated
income from operations includes a partial quarter of Dayton Depot Casino. Dayton Depot Casino was acquired by the Company on September 1, 2005.



Corporate expenses increased to $630,000 for the quarter ended September 30, 2005, compared to $327,000 for the same quarter of the prior year. Increases from the prior
period reflect the implementation in the current quarter of the requirements of SFAS 123R Share-Based Payment of $85,000 for stock options issued prior to July 1, 2005 and $16,000 for current year grants of restricted stock and $34,000
accrued for management incentive awards to be awarded in the future based on fiscal 2006 performance. In addition, the Company incurred $178,000 of costs related to preparation to meet the new internal control requirements of the Sarbanes-Oxley Act
of 2002.



The Company had consolidated net income of $1.9 million, or $.27 per
share ($.25 diluted), for the three months ended September 30, 2005, compared to $ 1.6 million, or $.29 per share ($.27 diluted), for the three months ended September 30, 2004.



RAIL CITY CASINO



The following table highlights Rail City Casinos sources of revenues and expenses for the periods indicated:



|                           |  |                                 |       |   |      |   |       |         |  |       |  
|-------------------------- |  | ------------------------------- | ----- | - | ---- | - | ----- | ------- |  | ----- | -
|                           |  | THREE MONTHS ENDEDSEPTEMBER 30, |      
|(dollars in thousands)     |  | 2005                            |       |   | 2004 |   |       | PERCENT | 
|Gaming revenues            |  | $                               | 5,599 |   |      | $ | 5,493 |         |  | 1.9   | %
|Gaming expenses            |  | $                               | 2,025 |   |      | $ | 2,111 |         |  | -4.1  | %
|Expense margin             |  |                                 | 36.2  | % |      |   | 38.4  | %       |  |       |  
|Food and beverage revenues |  | $                               | 1,181 |   |      | $ | 1,276 |         |  | -7.4  | %
|Food and beverage expenses |  | $                               | 811   |   |      | $ | 803   |         |  | 1.0   | %
|Expense margin             |  |                                 | 68.7  | % |      |   | 62.9  | %       |  |       |  
|Total net revenues         |  | $                               | 6,117 |   |      | $ | 6,070 |         |  | 0.8   | %
|Total operating expenses   |  | $                               | 4,346 |   |      | $ | 4,621 |         |  | -6.0  | %
|Expense margin             |  |                                 | 71.0  | % |      |   | 76.1  | %       |  |       |  
|Maintenance and utilities  |  | $                               | 374   |   |      | $ | 370   |         |  | 1.1   | %
|Percent of net revenues    |  |                                 | 6.1   | % |      |   | 6.1   | %       |  |       |  
|General and administrative |  | $                               | 634   |   |      | $ | 837   |         |  | -24.3 | %
|Percent of net revenues    |  |                                 | 10.4  | % |      |   | 13.8  | %       |  |       |  



RAIL CITY CASINO. Gaming revenue of
$5.6 million for the quarter ending September 30, 2005 reflects a 1.9% increase or $106,000 from the quarter ended September 30, 2004. The slot machine win percentage remained constant for the first quarters of 2005 and 2004, however, the total
coin-in, an indicator of total slot machine wagering, increased $2.1 million from $102.1 million for the first quarter 2004 to $104.2 million for the same quarter in 2005. The win percentage which remained consistent with the prior year quarter on
increased total coin-in, represents the total increased gaming revenue for the first quarter ending September 30, 2005.



Gaming operating expenses for the first quarter of 2005 were $2.0 million, decreasing $86,000 from $2.1 million for the first quarter of 2004, due to reduced rental
agreements, maintenance contracts and expense for slot machine parts.



Food and
beverage revenue of $1.2 million for the first quarter of 2005 decreased $95,000 from $1.3 million for the same quarter of 2004. Cover counts (number of meals served) for the first three months of 2005 are 10.0% less than for the same period one
year ago.



General and administrative expenses for the quarter ended September
30, 2005 were $634,000 compared to $837,000 for the prior year period, a decrease of $203,000. The decrease was primarily attributable to payroll and related tax and benefit reductions of $116,000. During the quarter ended September 30, 2005 the
property had several temporary vacancies in management positions that have been subsequently filled. The reduction in payroll and related taxes and benefits experienced in the first fiscal quarter is not expected to continue through the remainder of
the fiscal year. In addition, decreased professional fees of $49,000 and decreased advertising costs of $18,000 contributed to the overall savings in general and administrative expenses.



The Company is proceeding with plans to expand the facilities at Rail City by approximately 23,500 square feet. This expansion will allow
the property to increase from its current 650 slot machines to a first stage of approximately 850 slot machines with space that will allow a further increase to a total of approximately 1,000 slot machines. Included in the scope of the expansion
will be an additional restaurant and bar venue. The Company expects an early calendar year 2006 groundbreaking but our expansion plans remain contingent on our ability to acquire a parcel of land, currently leased by Rail City, which is owned by the
State of Nevada. If we are unable to acquire the parcel of land in question, we have an alternative plan that we intend to pursue to expand the facility.



11



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



SANDS REGENCY HOTEL AND CASINO



The following table highlights the Sands sources of revenues and expenses for the periods indicated:



|                           |  |                                 |       |   |      |   |       |         |  |      |  
|-------------------------- |  | ------------------------------- | ----- | - | ---- | - | ----- | ------- |  | ---- | -
|                           |  | THREE MONTHS ENDEDSEPTEMBER 30, |      
|(dollars in thousands)     |  | 2005                            |       |   | 2004 |   |       | PERCENT | 
|Gaming revenues            |  | $                               | 5,947 |   |      | $ | 5,390 |         |  | 10.3 | %
|Gaming expenses            |  | $                               | 2,608 |   |      | $ | 2,424 |         |  | 7.6  | %
|Expense margin             |  |                                 | 43.9  | % |      |   | 45.0  | %       |  |      |  
|Lodging revenues           |  | $                               | 3,005 |   |      | $ | 2,847 |         |  | 5.5  | %
|Lodging expenses           |  | $                               | 1,022 |   |      | $ | 1,040 |         |  | -1.7 | %
|Expense margin             |  |                                 | 34.0  | % |      |   | 36.5  | %       |  |      |  
|Food and beverage revenues |  | $                               | 1,275 |   |      | $ | 1,310 |         |  | -2.7 | %
|Food and beverage expenses |  | $                               | 915   |   |      | $ | 817   |         |  | 12.0 | %
|Expense margin             |  |                                 | 71.8  | % |      |   | 62.4  | %       |  |      |  
|Total net revenues         |  | $                               | 9,550 |   |      | $ | 9,002 |         |  | 6.1  | %
|Total operating expenses   |  | $                               | 8,009 |   |      | $ | 7,679 |         |  | 4.3  | %
|Expense margin             |  |                                 | 83.9  | % |      |   | 85.3  | %       |  |      |  
|Maintenance and utilities  |  | $                               | 996   |   |      | $ | 940   |         |  | 6.0  | %
|Percent of net revenues    |  |                                 | 10.4  | % |      |   | 10.4  | %       |  |      |  
|General and Administrative |  | $                               | 1,456 |   |      | $ | 1,444 |         |  | 0.8  | %
|Percent of net revenues    |  |                                 | 15.2  | % |      |   | 16.0  | %       |  |      |  



SANDS REGENCY HOTEL AND CASINO. Net
revenue for the Sands Regency was $9.6 million for the quarter ended September 30, 2005, represented a 6.1% increase over the net revenue of $9.0 million for the quarter ended September 30, 2004. Gaming revenue for the quarter increased 10.3% over
the prior period. The increase in gaming revenue is comprised of a $296,000 increase in slot revenue to $4.6 million for the current quarter as compared to $4.3 million for the prior year quarter. Live poker generated revenue of $117,000 in the
quarter ended September 30, 2005 and was not offered in the prior year quarter. Keno revenue for the quarter was $55,000, an increase from $39,000 in the prior year quarter. Keno is currently operated by the Company compared to having been a leased
operation in the prior year quarter.



Gaming expenses for the quarter ending
September 30, 2005 were $2.6 million increased 7.6% or $184,000, from the prior year quarter. Increased expenses are related to the addition of poker and the return of keno to be a Company offered product.



Lodging revenue for the quarter ended September 30, 2005 was $3.0 million increased $158,000
or 5.5% over the prior year quarter. Hotel room occupancy was 70.7% for the quarter ended September 30, 2005, compared to 69.9% for the same quarter of the prior year. Average daily room rate increased 2.5% from the prior year quarter.





12



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS



GOLD RANCH CASINO AND RV RESORT.



The following table highlights Gold Ranchs sources of revenues and
expenses for the periods indicated:



|                                    |  |                                 |       |   |      |   |       |         |  |       |  
|----------------------------------- |  | ------------------------------- | ----- | - | ---- | - | ----- | ------- |  | ----- | -
|                                    |  | THREE MONTHS ENDEDSEPTEMBER 30, |      
|(dollars in thousands)              |  | 2005                            |       |   | 2004 |   |       | PERCENT | 
|Gaming revenues                     |  | $                               | 1,562 |   |      | $ | 1,541 |         |  | 1.4   | %
|Gaming expenses                     |  | $                               | 528   |   |      | $ | 460   |         |  | 14.8  | %
|Expense margin                      |  |                                 | 33.8  | % |      |   | 29.9  | %       |  |       |  
|Lodging revenues                    |  | $                               | 182   |   |      | $ | 207   |         |  | -12.1 | %
|Lodging expenses                    |  | $                               | 52    |   |      | $ | 65    |         |  | -20.0 | %
|Expense margin                      |  |                                 | 28.6  | % |      |   | 31.4  | %       |  |       |  
|Food and beverage revenues          |  | $                               | 516   |   |      | $ | 461   |         |  | 11.9  | %
|Food and beverage expenses          |  | $                               | 319   |   |      | $ | 318   |         |  | 0.3   | %
|Expense margin                      |  |                                 | 61.8  | % |      |   | 69.0  | %       |  |       |  
|Fuel and convenience store revenues |  | $                               | 5,964 |   |      | $ | 4,703 |         |  | 26.8  | %
|Fuel and convenience store expenses |  | $                               | 5,738 |   |      | $ | 4,473 |         |  | 28.3  | %
|Expense margin                      |  |                                 | 96.2  | % |      |   | 95.1  | %       |  |       |  
|Total net revenues                  |  | $                               | 8,102 |   |      | $ | 6,803 |         |  | 19.1  | %
|Total operating expenses            |  | $                               | 7,616 |   |      | $ | 6,123 |         |  | 24.4  | %
|Expense margin                      |  |                                 | 94.0  | % |      |   | 90.0  | %       |  |       |  
|Maintenance and utilities           |  | $                               | 193   |   |      | $ | 182   |         |  | 6.0   | %
|Percent of net revenues             |  |                                 | 2.4   | % |      |   | 2.7   | %       |  |       |  
|General and Administrative          |  | $                               | 553   |   |      | $ | 481   |         |  | 15.0  | %
|Percent of net revenues             |  |                                 | 6.8   | % |      |   | 7.1   | %       |  |       |  



GOLD RANCH CASINO AND RV RESORT. For
the quarter ended September 30, 2005, Gold Ranch had net revenue of $8.1 million compared to $6.8 million for the quarter ended September 30, 2004. Gold Ranch gasoline revenues were 19.0% higher during the current fiscal quarter, resulting
from increases in the retail price of gasoline, which averaged $2.73 per gallon versus $2.03 in the same quarter of the prior year. Gasoline gallons sold were 11.6% lower for the quarter compared to the last year due to the increasing cost of fuel
that resulted in reduced traffic counts on I-80, immediately adjacent to the property.



Gaming revenue for Gold Ranch, comprised principally of slot machine revenue, increased to $1.6 million in the September 2005 quarter from $1.5 million for the quarter ended September 2004. During the quarter the property increased its
marketing and promotional activities in an effort to increase tracked customer play. However, the continued escalation in the retail price of gas and the resulting decrease in traffic offset much of the growth achieved in tracked customer play. The
Company believes and historical performance of the property has shown that there is a relationship between gasoline gallons sold and gaming revenue.



Gold Ranch income from operations for the quarter ended September 30, 2005 was $486,000, a $194,000 decrease from $680,000 in the quarter ended September 30,
2004. The decline in Gold Ranchs income from operations was primarily due to a $63,000 increase in marketing costs intended to drive trial and increase the number of customers in the database. In addition, depreciation expense increased
$90,000 resulting from the installation in the spring of 2005 of an automated slot customer tracking system.



13



---

##### Table of Contents

THE SANDS REGENT AND SUBSIDIARIES

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



DAYTON DEPOT CASINO



The operating results of Dayton Depot and Red Hawk Sports Bar (Dayton Depot Casino), which was acquired on September 1, 2005, are reflected below. First
month results of operations under new ownership may not be indicative of future results.



The following table highlights Dayton Depot Casinos sources of revenues and expenses for the three months ended September 30, 2005:



|                           |  |                                     |      |  
|-------------------------- |  | ----------------------------------- | ---- | -
|(dollars in thousands)     |  | THREE MONTHS ENDEDSEPTEMBER 30,2005 |     
|Gaming revenues            |  | $                                   | 312  |  
|Gaming expenses            |  | $                                   | 132  |  
|Expense margin             |  |                                     | 42.3 | %
|Food and beverage revenues |  | $                                   | 74   |  
|Food and beverage expenses |  | $                                   | 34   |  
|Expense margin             |  |                                     | 45.9 | %
|Total net revenues         |  | $                                   | 363  |  
|Total operating expenses   |  | $                                   | 271  |  
|Expense margin             |  |                                     | 74.7 | %
|Maintenance and utilities  |  | $                                   | 12   |  
|Percent of net revenues    |  |                                     | 3.3  | %
|General and Administrative |  | $                                   | 31   |  
|Percent of net revenues    |  |                                     | 8.5  | %



We are implementing a new operating
strategy at Dayton Depot Casino that includes upgrading slot products, implementing marketing and promotional programs that have been successful for the other properties within the Company, finalizing design and remodeling of the restaurant and
moving ahead with plans to implement a slot player tracking system.



CORPORATE
COSTS. Corporate costs include the salaries and benefits of corporate officers and management, public company reporting costs, and related legal and accounting fees. Corporate costs were $630,000 in the quarter ended September 30, 2005, which
compares to $327,000 in the quarter ended September 30, 2004.



The
$303,000 increase in corporate costs is primarily the result of $178,000 of costs directly attributable to fees to outside professionals retained to assist in compliance with the new internal controls requirements of the Sarbanes - Oxley Act of 2002
(SOX), specifically SOX section 404. There were no outside costs relating to SOX compliance in the quarter ended September 30, 2004. The Company currently qualifies as a non-accelerated filer. The Securities and Exchange Commission
recently extended the required compliance dates for non-accelerated filers, and we are now required to report on our systems of internal controls (SOX 404) as of June 30, 2008. The Company has begun to shift the emphasis of the SOX 404 effort to be
more focused on internal resources and reduced use of outside professionals. Management compensation expense related to the adoption of SFAS 123R Share-Based Payment totaled $85,000 for the quarter ended September 30, 2005. There was no
management compensation expense related to SFAS 123R in the same period of the prior year.



INTEREST EXPENSE. Interest expense was $428,000 for the quarter ended September 30, 2005, compared to $606,000 for the quarter ended September 30, 2004. Our long-term debt balance at September 30, 2005
was $28.8 million, which includes $10.3 million advanced on September 1, 2005, in connection with the acquisition of Dayton Depot Casino. This represents a decrease from $34.9 million at September 30, 2004.



14



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Capital Resources and Liquidity



At September 30, 2005, the Companys cash and cash equivalents were $4.7 million, an increase from $3.3 million as of July 1, 2005, the beginning of the
fiscal year. We had negative working capital of $2.5 million at September 30, 2005, consistent with our policy to use any available cash, which is not needed in operations, to pay down our line of credit to minimize interest expense. At
September 30, 2005, the Company had $17.8 million of borrowings available under its revolving credit facility.



Cash flow from operations provided $4.7 million during the three month period ended September 30, 2005, compared to $3.0 million for the corresponding period of the
prior year. This was primarily attributable to a $1.1 million increase in accrued expenses not paid compared with the corresponding period of the prior year. To facilitate a transition to a new accounting system on July 1, 2005, all invoice payments
were expedited at June 30, 2005. This resulted in lower accrued expenses at June 30, 2005. To appropriately gain visibility into the true net change between June 30, 2005 and September 30, 2005, combining accounts payable and other accrued expenses
provides a net increase of $713,000 primarily attributable to the purchase of new gaming equipment during the quarter.



Investing activities accounted for a $12.0 million use of cash for the three months ended September 30, 2005, compared with $1.1 million for the three months ended
September 30, 2004. The difference represents the net cash paid for the purchase of Dayton Depot Casino on September 1, 2005. Financing activities accounted for $8.8 million of cash inflows during the three month period ended
September 30, 2005 compared to $2.2 million cash outflow for the three month period ended September 30, 2004. The change from the prior period related to borrowing of $10.1 million on the amended and restated credit facility to fund the
purchase of Dayton Depot Casino.



Our amended and restated bank term loan and
revolving credit facility, which totaled $47.0 million as of September 2005, requires the Company to be in compliance with certain financial and other covenants, restricts future encumbrances and limits situations where a change in control in the
Company may occur. The financial covenants include the requirement that a minimum EBITDA (earnings before interest expense, taxes, depreciation and amortization) and certain other financial ratios be maintained. The Company believes that it is in
compliance with all covenants and restrictions at September 30, 2005.



The
Company believes that its cash funds, cash generated from operations, and available borrowing capacity will be sufficient to fund its operations, meet current debt obligations, and fulfill its capital expenditure obligations for the next 12 months;
however, the Companys operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond its control. If the Company is unable to generate sufficient cash flow, it could be required to adopt one
or more alternatives, such as reducing or delaying planned capital expenditures, selling assets, restructuring debt, or obtaining additional equity capital.



Commitments and Contingencies



The following table summarizes the Companys contractual obligations as of September 30, 2005.



|                               |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          
|------------------------------ |  | ----- | ---------- | ---------------------- | - | ----------- |  | ----------- | ---------- | ------------- | - | ---------- |  | - | ---------
|                               |  |       |            | Payments due by period
|                               |  | Total |            | Less than 1 year       |   | 1 - 3 years |  | 4 - 5 years |            | After 5 years
|Long term debt                 |  | $     | 28,819,000 |                        | $ | 3,459,167   |  | $           | 8,946,652  |               | $ | 16,413,181 |  | $ |         
|Interest on long-term debt (1) |  | $     | 13,942,534 |                        |   | 3,433,081   |  |             | 5,971,757  |               |   | 4,537,696  |  |   |         
|Operating leases (2)           |  | $     | 3,833,333  |                        |   | 575,000     |  |             | 1,150,000  |               |   | 1,150,000  |  |   | 958,333  
|Other (3)                      |  | $     | 1,257,920  |                        |   | 188,688     |  |             | 377,376    |               |   | 377,376    |  |   | 314,480  
|                               |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          
|                               |  | $     | 47,852,787 |                        | $ | 7,655,936   |  | $           | 16,445,785 |               | $ | 22,478,253 |  | $ | 1,272,813
|                               |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          

---

|(1) | Interest is calculated by assuming the Company keeps its line of credit fully advanced and the table assumes a weighted average interest rate of of 7.5% until maturity. All
long-term debt matures within 5 years.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents contractual lease obligations to Prospector Gaming Enterprises (PGE) on real property in connection with the Gold Ranch acquisition agreement. Amounts reflect
a minimum base payment schedule. The lease is subject to escalation based on the property meeting certain revenue thresholds. Management does not believe these thresholds will be met without major expansion of the gaming facilities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents management fees due to PGE in connection with the RV park at Gold Ranch. Future amounts payable are subject to adjustment based on changes in interest rates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Cautionary Note Regarding Forward-looking Statements



This quarterly report on Form 10-Q includes forward-looking
statements intended to qualify for the safe harbor from liability



15



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or
current facts. These statements contain words such as may, will, project, might, expect, believe, anticipate, intend, could,
would, estimate, continue or pursue, or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions,
strategies, future performance, and future financial results. We have based these forward-looking statements on our current expectations and projections about future events. Any forward-looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.



We caution the reader that forward-looking statements involve risks and uncertainties that
cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors
described below under Risks Related to our Business, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission:



Risks Relating to our Business



An investment in our common stock involves a high degree of risk. You should consider the risks described below and the otherinformation contained in this report
carefully before deciding to invest in the Company. If any of the following risks actually occur, our business, financial condition and operating results would be materially harmed. As a result, the trading price of our common stock could decline,
and you could lose a part or all of your investment.



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 Reno metropolitan area. Should there be negative changes in the business and job conditions in Reno, our locals business, which is a substantial part of our overall business, could be adversely impacted.



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 our facilities, or require us to use more expensive and therefore less profitable promotions to compete more efficiently. 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 afford them a competitive advantage in our markets.



Our business may be adversely impacted by expanded Native American gaming
operations in California and the Pacific Northwest.



Our largest sources
of tourist customers are California and the Pacific Northwest, including a large number who drive to Reno from the San Francisco and Sacramento metropolitan areas. The expansion of Native American casinos in California, Oregon and Washington will be
significant on the Reno-Tahoe market. For example, Thunder Valley Casino, a large new Native American casino managed by Station Casinos, Inc., opened June 9, 2003, 100 miles west of Reno in Rocklin, California. Californias well-documented
budgetary problems have state officials renegotiating certain compacts with Native American casino compacts have already been changed to allow for additional slot machines. The effect of increased gaming in California and other states is difficult
to predict. However, our business would be adversely impacted if Thunder Valley and other casinos attract patrons who would otherwise travel to Reno. In addition, a significant portion of our customer base is made up of Reno area residents. If other
Reno area casinos lose business due to competition from Native American casinos, they may intensify their marketing efforts to Reno area residents as well which could materially and adversely impact our business and financial results,



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



16



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



frequent our facilities. 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.



Terrorist attacks may seriously harm our business.



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 have created economic and political uncertainties that
could materially adversely affect our business, results of operations, and financial condition in ways we currently cannot predict.



If we lose key personnel, our business could be materially adversely affected



We depend on the continued performance of our Chief Executive Officer and his management team. If we lose the services of our senior
management personnel, and cannot replace such persons in a timely manner, our business could be materially adversely affected.



Our business is subject to restrictions and limitations imposed by 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. The Nevada Gaming Commission may, among other things, limit, condition, suspend, or revoke or
decline to renew a license for any cause deemed reasonably by such licensing authority. If we violate gaming laws or regulations, substantial fines could be levied against us 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 and adverse effect on our business, financial condition and results of operations.



If the State of Nevada or other local municipalities increase 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, the cities of Reno, Sparks or Dayton, or Washoe or Lyon County were to
increase gaming taxes and fees, our results of operations could be adversely affected.



Recently issued standards, rules and regulations of governing agencies and bodies could result in material increases to our corporate expense which could adversely affect our financial results.



We keep abreast of new generally acceptable accounting principles and rules and regulations
issued or adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission, the NASDAQ and other standard setting agencies. These principles, rules and regulations often require us to expend funds in order to meet
additional requirements. As a result, our expenses could materially increase, which could adversely affect our financial results. Recently issued accounting standards affecting our financial results are described in Note 4 to our consolidated
financial statements.



Our substantial indebtedness after recent
acquisitions could adversely affect our operations and financial results.



With our recent amended and restated credit agreement and the Companys recent acquisitions, we now have a bank credit facility, which, fully extended, amounts to $47.0 million. Our debt was $28.8 million as of September 30, 2005. We
expect to incur additional indebtedness as a result of our future casino acquisitions and other projects, which could result in overall indebtedness of the Company to increase to $50 million, or more in the next 12 months. The increased levels of
debt could, among other things:



| |  | require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for working capital, capital expenditures,
dividends, acquisitions and other purposes.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | increase our vulnerability to, and limit flexibility in planning for, adverse economic and industry conditions.
|- |  | ---------------------------------------------------------------------------------------------------------------



| |  | create competitive disadvantages compared to other companies with lower debt levels; and
|- |  | ----------------------------------------------------------------------------------------



| |  | limit our ability to apply proceeds from an offering or asset sale to purposes other than the repayment of debt.
|- |  | ----------------------------------------------------------------------------------------------------------------



17



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



We may be unable to successfully integrate the operations of our recent and future acquisitions and/or experience significant charges to earnings as a result of the
acquisition that may adversely affect our stock price and financial condition.



We have experienced significant growth due to our recent acquisition of gaming facilities, which is a key strategy to our long term plans. The future success of the Companys acquisitions will depend on a number of factors, including
the successful integration of the newly acquired operations with existing operations. Potential difficulties of combining operations of acquirees with that of the Company include, among others:



| |  | retaining key employees;
|- |  | ------------------------



| |  | consolidating administrative infrastructures;
|- |  | ---------------------------------------------



| |  | coordinating sales and marketing functions; and
|- |  | -----------------------------------------------



| |  | minimizing the diversion of managements attention from ongoing business concerns.
|- |  | ----------------------------------------------------------------------------------



Even if the Company is able to integrate its acquisitions successfully, this integration may not result in the realization of the full
benefits and growth opportunities that we expect or these benefits may not be achieved with the anticipated time frame.



In addition, as a result of the recent acquisitions we have experienced, and will likely continue to experience, significant charges to earnings for merger and related
expenses that may include transaction costs or closure costs. These costs may include substantial fees for investment bankers, attorneys, accountants and financial printing costs. Charges that we may incur in connection with acquisitions could
adversely affect our results of operations.



18



---

##### Table of Contents

THE SANDS REGENT

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Item 3. Quantitative and Qualitative Disclosures About Market Risk



With our amended and restated Credit Agreement executed in September 2005 in connection with the acquisition of Dayton Depot Casino, the Company has substantial variable interest rate debt. The Company does not use
interest rate derivative instruments to manage exposure to interest rate changes. Assuming the reducing credit facilities are fully advanced, a principal amount currently equal to $47.0 million, the Company would be subject to substantial market
interest rate risks. A one percent increase in interest rates would result in an increase in interest expense of approximately $470,000 annually.



Additionally, terms of the Companys RV park management agreement with Prospector Gaming Enterprises (PGE), referenced as (3) in the
Commitments and Contingencies section of this report, state that the Company pay monthly an amount equal to 120% of PGEs debt service on the underlying RV park note, which varies directly with changes in the Prime index. The financial impact
to the Company of a full one percent increase in the Prime index is less than $25,000 per year.



Item 4. Controls and Procedures



We maintain
disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the
SECs rules and forms, and that such information is accumulated and communicated to our management including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



As required by SEC rule 13a15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.



During the first quarter of fiscal 2006, the Company implemented the Microsoft Great Plains financial accounting and reporting system at all of its business units. The
Company plans to continue to implement additional modules of the system through fiscal year 2006. Based on managements evaluation, the necessary steps have been taken to monitor and maintain appropriate internal controls during the period of change.



Other than as disclosed above, there has been no change in our internal
controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



19



---

##### Table of Contents

THE SANDS REGENT

PART II OTHER INFORMATION



Item 1. Legal Proceedings



The Company is party to various lawsuits, which have arisen in the normal course of its business. At the time of this filing, the liability arising from unfavorable outcomes of lawsuits is not expected to have a material impact on the
Companys financial condition or financial results.



Item 2. Changes in Securities



None



Item 3. Defaults Upon Senior Securities



None



Item 4. Submission of Matters to a Vote of Security Holders



None



Item 5. Other Information



None



Item 6. Exhibits



( a ) Exhibits



|             |  |                                                                                                                                                                   
|------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit 10.1 |  | Amended and Restated Credit Agreement dated September 1, 2005 (incorporated by reference to the Companys Current Report on Form 8-K, filed on September 6, 2005).
|             | 
|Exhibit 10.2 |  | Form of Restricted Stock Agreement (incorporated by reference to the Companys Current Report on Form 8-K, filed on September 6, 2005).                           
|             | 
|Exhibit 31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                               
|             | 
|Exhibit 31.2 |  | Certification of Chief Financial and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                      
|             | 
|Exhibit 32   |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                          



( b ) Reports on Form 8-K



None



20



---

##### Table of Contents

THE SANDS REGENT AND SUBSIDIARIES

SIGNATURES



Pursuant to the requirements 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.



|                        |  |                  |  |                                                                     
|----------------------- |  | ---------------- |  | --------------------------------------------------------------------
|                        |  | THE SANDS REGENT
|                        |  | (Registrant)    
|                        |  |                 
|Date: November 21, 2005 |  | By:              |  | /S/ Ferenc B. Szony                                                 
|                        |  |                  |  | Ferenc B. Szony, President and Chief Executive Officer              
|                        |  |                 
|Date: November 21, 2005 |  | By:              |  | /S/ Cornelius T. Klerk                                              
|                        |  |                  |  | Cornelius T. Klerk, Chief Financial and Principal Accounting Officer



21