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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549



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FORM 10-Q/A



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(Amendment No. 2 to Form 10-Q filed March 22, 2006)



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

For the quarterly period ended December 31, 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 000-14050



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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 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer in Rule 12b-2 of the Exchange Act (Check one).

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer 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 June 19, 2006, the registrant had outstanding 7,126,391 shares of its common stock, $.10 par value.



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Explanatory Note

This Amendment No. 2 to the Quarterly Report on Form 10-Q (the Form 10-Q) of The Sands Regent (the Company) for the quarterly period ended December 31, 2005, which was originally
filed on March 22, 2006, is being filed to reflect the restatement of the Companys condensed consolidated financial statements as of December 31, 2005 and for the three and six month periods then ended, as discussed in Note 10 to the
Companys condensed consolidated financial statements included in Item 1. The Company has also amended the applicable disclosures in Item 2, MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS and Item 4, CONTROLS AND PROCEDURES.

Management has concluded, based on the circumstances involving the
restatement of the aforementioned financial statements that, as of December 31, 2005, material weaknesses in internal control over financial reporting existed with respect to the design and implementation of the Companys internal controls over
financial reporting. As a result of these material weaknesses, the Companys Chief Executive Officer and the Chief Financial Officer have concluded that the Companys disclosure controls and procedures were not effective as of December 31,
2005. See Item 4, CONTROLS AND PROCEDURES.

For more information relating to the effect of the restatement, see the following items in
this report:



| |  |  | Item 1. Financial Information
| | - |  | -----------------------------



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



| |  |  | Item 4. Controls and Procedures
| | - |  | -------------------------------

This Amendment No. 2 amends
and restates the Form 10-Q in its entirety. This Amendment No. 2 does not reflect events occurring after the original filing of the Form 10-Q, and does not modify or update the disclosures therein in any way other than as required to reflect
the amendments as previously described and set forth hereinafter. In addition, the filing of this amendment to the Form 10-Q shall not be deemed an admission that the original filing, when made, included any untrue statement of material fact or
omitted to state a material fact necessary to make a statement made therein not misleading. This Form 10-Q/A (Amendment No. 2) should be read in conjunction with our filings made with the SEC subsequent to the filing of the original Form 10-Q,
including any amendments to those filings.



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##### Table of Contents

THE SANDS REGENT

FORM 10-Q/A

TABLE OF CONTENTS



|               |  |                                                                                       |  |   
|-------------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I         |  | FINANCIAL INFORMATION                                                                 |  | 1 
|               |  |                                                                                      
|Item 1.        |  | Financial Statements                                                                  |  | 1 
|               |  |                                                                                      
|               |  | Condensed Consolidated Statements of Income (unaudited)                               |  | 1 
|               |  |                                                                                      
|               |  | Condensed Consolidated Balance Sheets (unaudited)                                     |  | 2 
|               |  |                                                                                      
|               |  | Condensed Consolidated Statements of Cash Flows (unaudited)                           |  | 3 
|               |  |                                                                                      
|               |  | Notes to Condensed Consolidated Financial Statements (unaudited)                      |  | 4 
|               |  |                                                                                      
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 14
|               |  |                                                                                      
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 23
|               |  |                                                                                      
|Item 4.        |  | Controls and Procedures                                                               |  | 23
|               |  |                                                                                      
|PART II        |  | OTHER INFORMATION                                                                     |  | 25
|               |  |                                                                                      
|Item 1.        |  | Legal Proceedings                                                                     |  | 25
|               |  |                                                                                      
|Item 1a.       |  | Risk Factors                                                                          |  | 25
|               |  |                                                                                      
|Item 2.        |  | Changes in Securities                                                                 |  | 25
|               |  |                                                                                      
|Item 3.        |  | Defaults Upon Senior Securities                                                       |  | 25
|               |  |                                                                                      
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                   |  | 25
|               |  |                                                                                      
|Item 5.        |  | Other Information                                                                     |  | 25
|               |  |                                                                                      
|Item 6.        |  | Exhibits                                                                              |  | 26
|               | 
|SIGNATURES     |  | 27                                                                                   
|               | 
|CERTIFICATIONS |  |                                                                                      



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##### Table of Contents

PART I FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)



|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|------------------------------------------------ |  | ------------------------------ | --------- | - | ---------------------------- | - | --------- | -------------------------- |  | - | --------- | - |  | - | --------- | -
|                                                 |  | THREE MONTHS ENDEDDECEMBER 31, |           |   | SIX MONTHS ENDEDDECEMBER 31, |  
|(Dollars in thousands, except per share amounts) |  | 2005                           |           |   | 2004                         |   |           | 2005                       |  |   | 2004      |  
|                                                 |  | (As restated See Note 10)     |           |   |                              |   |           | (As restated See Note 10) |  |   |           |  
|Operating revenues                               |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Gaming                                           |  | $                              | 14,170    |   |                              | $ | 11,907    |                            |  | $ | 27,589    |   |  | $ | 24,331    |  
|Lodging                                          |  |                                | 1,864     |   |                              |   | 1,809     |                            |  |   | 5,050     |   |  |   | 4,863     |  
|Food and beverage                                |  |                                | 2,912     |   |                              |   | 2,786     |                            |  |   | 5,958     |   |  |   | 5,833     |  
|Fuel and convenience store                       |  |                                | 4,693     |   |                              |   | 4,080     |                            |  |   | 10,658    |   |  |   | 8,783     |  
|Other                                            |  |                                | 483       |   |                              |   | 470       |                            |  |   | 985       |   |  |   | 949       |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Gross revenues                                   |  |                                | 24,122    |   |                              |   | 21,052    |                            |  |   | 50,240    |   |  |   | 44,759    |  
|Promotional allowances                           |  |                                | 1,858     |   |                              |   | 1,695     |                            |  |   | 3,846     |   |  |   | 3,527     |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Net revenues                                     |  |                                | 22,264    |   |                              |   | 19,357    |                            |  |   | 46,394    |   |  |   | 41,232    |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Operating expenses                               |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Gaming                                           |  |                                | 5,574     |   |                              |   | 4,806     |                            |  |   | 10,869    |   |  |   | 9,801     |  
|Lodging                                          |  |                                | 952       |   |                              |   | 936       |                            |  |   | 2,026     |   |  |   | 2,041     |  
|Food and beverage                                |  |                                | 2,075     |   |                              |   | 1,865     |                            |  |   | 4,154     |   |  |   | 3,803     |  
|Fuel and convenience store                       |  |                                | 4,528     |   |                              |   | 3,915     |                            |  |   | 10,266    |   |  |   | 8,388     |  
|Other                                            |  |                                | 196       |   |                              |   | 143       |                            |  |   | 357       |   |  |   | 300       |  
|Maintenance and utilities                        |  |                                | 1,511     |   |                              |   | 1,382     |                            |  |   | 3,084     |   |  |   | 2,874     |  
|General and administrative                       |  |                                | 3,837     |   |                              |   | 3,424     |                            |  |   | 7,222     |   |  |   | 6,469     |  
|Depreciation and amortization                    |  |                                | 1,791     |   |                              |   | 1,516     |                            |  |   | 3,440     |   |  |   | 3,061     |  
|Loss on early termination of land lease          |  |                                | 419       |   |                              |   |          |                            |  |   | 419       |   |  |   |          |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|                                                 |  |                                | 20,883    |   |                              |   | 17,987    |                            |  |   | 41,837    |   |  |   | 36,737    |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Income from operations                           |  |                                | 1,381     |   |                              |   | 1,370     |                            |  |   | 4,557     |   |  |   | 4,495     |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Other income (expense)                           |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Interest expense                                 |  |                                | (554      | ) |                              |   | (799      | )                          |  |   | (983      | ) |  |   | (1,405    | )
|Insurance settlement                             |  |                                |          |   |                              |   | 200       |                            |  |   |          |   |  |   | 200       |  
|Other, net                                       |  |                                | (42       | ) |                              |   | (18       | )                          |  |   | (33       | ) |  |   | (64       | )
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Other income (expense), net                      |  |                                | (596      | ) |                              |   | (617      | )                          |  |   | (1,016    | ) |  |   | (1,269    | )
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Income before income taxes                       |  |                                | 785       |   |                              |   | 753       |                            |  |   | 3,541     |   |  |   | 3,226     |  
|Income tax provision                             |  |                                | (264      | ) |                              |   | (255      | )                          |  |   | (1,196    | ) |  |   | (1,088    | )
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Net income                                       |  | $                              | 521       |   |                              | $ | 498       |                            |  | $ | 2,345     |   |  | $ | 2,138     |  
|                                                 |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Net income per share                             |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Basic                                            |  | $                              | 0.07      |   |                              | $ | 0.08      |                            |  | $ | 0.33      |   |  | $ | 0.36      |  
|Diluted                                          |  | $                              | 0.07      |   |                              | $ | 0.07      |                            |  | $ | 0.31      |   |  | $ | 0.33      |  
|Weighted average shares outstanding              |  |                                |           |   |                              |   |           |                            |  |   |           |   |  |   |           |  
|Basic                                            |  |                                | 7,095,103 |   |                              |   | 6,327,852 |                            |  |   | 7,087,453 |   |  |   | 5,987,204 |  
|Diluted                                          |  |                                | 7,539,993 |   |                              |   | 6,921,535 |                            |  |   | 7,533,118 |   |  |   | 6,529,771 |  

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



1



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##### Table of Contents

THE SANDS REGENT

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)



|                                                                                                   |  |                            |         |   |              |   |         |  
|-------------------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------ | - | ------- | -
|(Dollars in thousands except share data)                                                           |  | DECEMBER 31,2005           |         |   | JUNE 30,2005 |  
|                                                                                                   |  | (As restated See Note 10) |         |   |              |  
|ASSETS                                                                                             |  |                            |         |   |              |   |         |  
|Current Assets:                                                                                    |  |                            |         |   |              |   |         |  
|Cash and cash equivalents                                                                          |  | $                          | 6,285   |   |              | $ | 3,272   |  
|Accounts receivable, net                                                                           |  |                            | 876     |   |              |   | 580     |  
|Inventories                                                                                        |  |                            | 685     |   |              |   | 692     |  
|Prepaid expenses and other current assets                                                          |  |                            | 2,080   |   |              |   | 1,805   |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total current assets                                                                               |  |                            | 9,926   |   |              |   | 6,349   |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Property and equipment:                                                                            |  |                            |         |   |              |   |         |  
|Land                                                                                               |  |                            | 13,208  |   |              |   | 10,007  |  
|Buildings and improvements                                                                         |  |                            | 47,323  |   |              |   | 43,597  |  
|Equipment, furniture and fixtures                                                                  |  |                            | 29,222  |   |              |   | 27,264  |  
|Leasehold improvements                                                                             |  |                            | 178     |   |              |   | 178     |  
|Construction in progress                                                                           |  |                            | 1,848   |   |              |   | 854     |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total property and equipment                                                                       |  |                            | 91,779  |   |              |   | 81,900  |  
|Less accumulated depreciation and amortization                                                     |  |                            | 45,933  |   |              |   | 42,992  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Property and equipment, net                                                                        |  |                            | 45,846  |   |              |   | 38,908  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Other assets:                                                                                      |  |                            |         |   |              |   |         |  
|Goodwill                                                                                           |  |                            | 33,273  |   |              |   | 28,642  |  
|Other intangibles                                                                                  |  |                            | 12,168  |   |              |   | 12,426  |  
|Other                                                                                              |  |                            | 1,094   |   |              |   | 1,202   |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total other assets                                                                                 |  |                            | 46,535  |   |              |   | 42,270  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total assets                                                                                       |  | $                          | 102,307 |   |              | $ | 87,527  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                               |  |                            |         |   |              |   |         |  
|Current Liabilities:                                                                               |  |                            |         |   |              |   |         |  
|Accounts payable                                                                                   |  | $                          | 2,509   |   |              | $ | 2,578   |  
|Accrued salaries, wages and benefits                                                               |  |                            | 2,138   |   |              |   | 1,884   |  
|Other accrued expenses                                                                             |  |                            | 1,389   |   |              |   | 398     |  
|Federal income tax payable                                                                         |  |                            | 976     |   |              |   | 774     |  
|Deferred federal income tax liability                                                              |  |                            | 388     |   |              |   | 338     |  
|Current maturities of long-term debt                                                               |  |                            | 3,992   |   |              |   | 2,198   |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total current liabilities                                                                          |  |                            | 11, 392 |   |              |   | 8,170   |  
|Long-term debt                                                                                     |  |                            | 25,953  |   |              |   | 17,744  |  
|Deferred federal income tax liability                                                              |  |                            | 2,330   |   |              |   | 2,209   |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total liabilities                                                                                  |  |                            | 39,675  |   |              |   | 28,123  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Stockholders Equity:                                                                               |  |                            |         |   |              |   |         |  
|Common stock ($.10 par value, 20,000,000 shares authorized; 9,518,204 and 9,376,766 shares issued) |  |                            | 952     |   |              |   | 938     |  
|Additional paid-in capital                                                                         |  |                            | 27,807  |   |              |   | 26,938  |  
|Retained earnings                                                                                  |  |                            | 56,231  |   |              |   | 53,886  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|                                                                                                   |  |                            | 84,990  |   |              |   | 81,762  |  
|Treasury stock (at cost; 2,403,000 shares)                                                         |  |                            | (22,358 | ) |              |   | (22,358 | )
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total stockholders equity                                                                         |  |                            | 62,632  |   |              |   | 59,404  |  
|                                                                                                   |  |                            |         |   |              |   |         |  
|Total liabilities and stockholders equity                                                         |  | $                          | 102,307 |   |              | $ | 87,527  |  
|                                                                                                   |  |                            |         |   |              |   |         |  

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



2



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##### Table of Contents

THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)



|                                                                                  |  |                              |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | SIX MONTHS ENDEDDECEMBER 31, |        
|(Dollars in thousands)                                                            |  | 2005                         |         |   | 2004 |  
|                                                                                  |  | (As restated See Note 10)   |         |   |      |  
|Operating Activities                                                              |  |                              |         |  
|Net income                                                                        |  | $                            | 2,345   |   |      | $ | 2,138   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                              |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                              | 3,440   |   |      |   | 3,061   |  
|Share-based compensation expense                                                  |  |                              | 296     |   |      |   |        |  
|Loss on early termination of land lease                                           |  |                              | 419     |   |      |   |        |  
|Loss on disposal of property and equipment                                        |  |                              | 34      |   |      |   | 64      |  
|Excess tax benefits from share-based payment arrangements                         |  |                              | (51     | ) |      |   |        |  
|Changes in operating assets and liabilities:                                      |  |                              |         |   |      |   |         |  
|Decrease (increase) in accounts receivable, net                                   |  |                              | (296    | ) |      |   | 223     |  
|Decrease in inventories                                                           |  |                              | 31      |   |      |   | 17      |  
|Increase in prepaid expenses and other current assets                             |  |                              | (125    | ) |      |   | (26     | )
|Decrease (increase) in other assets                                               |  |                              | 167     |   |      |   | (137    | )
|Increase (decrease) in accounts payable                                           |  |                              | (137    | ) |      |   | 302     |  
|Increase (decrease) in accrued expenses                                           |  |                              | 1,169   |   |      |   | (591    | )
|Change in federal income taxes payable                                            |  |                              | 253     |   |      |   | (243    | )
|Change in deferred federal income taxes                                           |  |                              | 171     |   |      |   | 532     |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                              | 7,716   |   |      |   | 5,340   |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Investing Activities                                                              |  |                              |         |   |      |   |         |  
|Investment in property and equipment                                              |  |                              | (4,455  | ) |      |   | (2,011  | )
|Payment for prior year purchases of property and equipment                        |  |                              |        |   |      |   | (295    | )
|Net cash paid for wholly-owned subsidiary                                         |  |                              | (10,346 | ) |      |   |        |  
|Proceeds from sale of assets                                                      |  |                              | 6       |   |      |   | 32      |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                              | (14,795 | ) |      |   | (2,274  | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Financing Activities                                                              |  |                              |         |   |      |   |         |  
|Payments on long-term debt                                                        |  |                              | (3,408  | ) |      |   | (12,932 | )
|Amortization of debt discount                                                     |  |                              |        |   |      |   | 47      |  
|Excess tax benefits from share-based payment arrangements                         |  |                              | 51      |   |      |   |        |  
|Issuance of long-term debt                                                        |  |                              | 13,400  |   |      |   |        |  
|Issuance of Company common stock                                                  |  |                              | 49      |   |      |   | 9,562   |  
|Payment of costs relative to the issuance of common stock                         |  |                              |        |   |      |   | (668    | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                               |  |                              | 10,092  |   |      |   | (3,991  | )
|                                                                                  |  |                              |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                              |  |                              | 3,013   |   |      |   | (925    | )
|Cash and cash equivalents, beginning of period                                    |  |                              | 3,272   |   |      |   | 5,443   |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                            | 6,285   |   |      | $ | 4,518   |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Supplemental disclosure of cash flow information                                  |  |                              |         |   |      |   |         |  
|Interest paid                                                                     |  | $                            | 865     |   |      | $ | 999     |  
|Federal income taxes paid                                                         |  | $                            | 774     |   |      | $ | 800     |  
|Supplemental disclosure of non-cash investing and financing activities            |  |                              |         |   |      |   |         |  
|Property and equipment acquired by accounts payable                               |  | $                            | 357     |   |      | $ | 99      |  
|Issuance of common stock to acquire subsidiary                                    |  | $                            | 551     |   |      | $ |        |  
|Fair value of assets acquired and liabilities assumed in business combinations    |  |                              |         |   |      |   |         |  
|Current assets, net of cash acquired                                              |  | $                            | 235     |   |      |   |         |  
|Property, plant and equipment                                                     |  |                              | 5,738   |   |      |   |         |  
|Goodwill and intangibles                                                          |  |                              | 4,936   |   |      |   |         |  
|Current liabilities                                                               |  |                              | (12     | ) |      |   |         |  
|Common stock issued                                                               |  |                              | (551    | ) |      |   |         |  
|                                                                                  |  |                              |         |   |      |   |         |  
|Cash paid, net of cash acquired                                                   |  | $                            | 10,346  |   |      |   |         |  
|                                                                                  |  |                              |         |   |      |   |         |  

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



3



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##### 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 December 31, 2005 and
the results of its operations and its cash flows for the three months and six months ended December 31, 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 No. 128 provides for the reporting of basic, or undiluted earnings per share, and
diluted earnings per share. Basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share reflect the addition of potentially dilutive
securities, which for the Company, consist of stock options, restricted shares, 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, restricted shares, convertible debt and outstanding warrants unless the associated
strike price(s) exceeds the average closing price in the period.

The following shares were excluded from the calculation of diluted earnings per share
because their inclusion would have been anti-dilutive:



|                  |  |                                 |  |                               |  |         |  |        
|----------------- |  | ------------------------------- |  | ----------------------------- |  | ------- |  | -------
|                  |  | THREE MONTHS ENDED DECEMBER 31, |  | SIX MONTHS ENDED DECEMBER 31,
|                  |  | 2005                            |  | 2004                          |  | 2005    |  | 2004   
|Stock options     |  | 72,500                          |  |                              |  | 35,000  |  | 37,500 
|Restricted shares |  | 34,000                          |  |                              |  | 34,000  |  |       
|Warrants          |  | 336,000                         |  |                              |  | 336,000 |  | 336,000



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



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



|                                     |  |                                |       |                              |   |       |  |      |       |  |   |      
|------------------------------------ |  | ------------------------------ | ----- | ---------------------------- | - | ----- |  | ---- | ----- |  | - | -----
|                                     |  | THREE MONTHS ENDEDDECEMBER 31, |       | SIX MONTHS ENDEDDECEMBER 31,
|                                     |  | 2005                           |       | 2004                         |   | 2005  |  | 2004
|Net income                           |  | $                              | 521   |                              | $ | 498   |  | $    | 2,345 |  | $ | 2,135
|                                     |  |                                |       |                              |   |       |  |      |       |  |   |      
|Weighted Average Shares Outstanding: |  |                                |       |                              |   |       |  |      |       |  |   |      
|Common stock                         |  |                                | 7,095 |                              |   | 6,328 |  |      | 7,087 |  |   | 5,987
|Common stock equivalents             |  |                                | 445   |                              |   | 594   |  |      | 446   |  |   | 543  
|                                     |  |                                |       |                              |   |       |  |      |       |  |   |      
|Diluted shares                       |  |                                | 7,540 |                              |   | 6,922 |  |      | 7,533 |  |   | 6,530
|                                     |  |                                |       |                              |   |       |  |      |       |  |   |      
|Earnings per share:                  |  |                                |       |                              |   |       |  |      |       |  |   |      
|Basic                                |  | $                              | 0.07  |                              | $ | 0.08  |  | $    | 0.33  |  | $ | 0.36 
|Diluted                              |  | $                              | 0.07  |                              | $ | 0.07  |  | $    | 0.31  |  | $ | 0.33 

NOTE 3 - BUSINESS SEGMENTS

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



|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                |  | THREE MONTHS ENDEDDECEMBER 31, |        |   | SIX MONTHS ENDEDDECEMBER 31, |  
|(Dollars in thousands)          |  | 2005                           |        |   | 2004                         |   |        | 2005 |  |   | 2004   |  
|Net Revenues                    |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Rail City Casino                |  | $                              | 6,572  |   |                              | $ | 6,186  |      |  | $ | 12,690 |   |  | $ | 12,256 |  
|Sands Regency Casino/Hotel      |  |                                | 7,759  |   |                              |   | 7,406  |      |  |   | 17,307 |   |  |   | 16,408 |  
|Gold Ranch Casino and RV Resort |  |                                | 6,434  |   |                              |   | 5,765  |      |  |   | 14,536 |   |  |   | 12,568 |  
|Dayton Depot Casino             |  |                                | 1,499  |   |                              |   |       |      |  |   | 1,861  |   |  |   |       |  
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|                                |  | $                              | 22,264 |   |                              | $ | 19,357 |      |  | $ | 46,394 |   |  | $ | 41,232 |  
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Income from operations          |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Rail City Casino                |  | $                              | 1,446  |   |                              | $ | 1,588  |      |  | $ | 3,218  |   |  | $ | 3,037  |  
|Sands Regency Casino/Hotel      |  |                                | 33     |   |                              |   | 89     |      |  |   | 1,573  |   |  |   | 1,412  |  
|Gold Ranch Casino and RV Resort |  |                                | 190    |   |                              |   | 241    |      |  |   | 676    |   |  |   | 921    |  
|Dayton Depot Casino             |  |                                | 434    |   |                              |   |       |      |  |   | 525    |   |  |   |       |  
|Corporate                       |  |                                | (722   | ) |                              |   | (548   | )    |  |   | (1,435 | ) |  |   | (875   | )
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|                                |  | $                              | 1,381  |   |                              | $ | 1,370  |      |  | $ | 4,557  |   |  | $ | 4,495  |  
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Depreciation and amortization   |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|Rail City Casino                |  | $                              | 497    |   |                              | $ | 522    |      |  | $ | 984    |   |  | $ | 1,009  |  
|Sands Regency Casino/Hotel      |  |                                | 960    |   |                              |   | 882    |      |  |   | 1,836  |   |  |   | 1,758  |  
|Gold Ranch Casino and RV Resort |  |                                | 191    |   |                              |   | 137    |      |  |   | 419    |   |  |   | 275    |  
|Dayton Depot Casino             |  |                                | 136    |   |                              |   |       |      |  |   | 187    |   |  |   |       |  
|Corporate                       |  |                                | 7      |   |                              |   | (25    | )    |  |   | 14     |   |  |   | 19     |  
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  
|                                |  | $                              | 1,791  |   |                              | $ | 1,516  |      |  | $ | 3,440  |   |  | $ | 3,061  |  
|                                |  |                                |        |   |                              |   |        |      |  |   |        |   |  |   |        |  



5



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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

In March 2005, the FASB issued Interpretation 47 (FIN
47) Accounting for Conditional Asset Retirement Obligations  an interpretation of FASB Statement No. 143. This interpretation clarified the term conditional asset retirement obligation and also clarified the
requirement to recognize a liability for the fair value of such an obligation when incurred if the liabilitys fair value can be reasonably estimated. The Company is required to adopt this interpretation on July 1, 2006 and does not expect
its adoption to have a material effect on the Companys consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections. This statement requires retrospective application to prior period financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific
effects or the cumulative effect of the change. Additionally, this statement provides guidance on recording and disclosing changes in accounting estimates. The Company is required to adopt this statement on July 1, 2006 and does not expect its
adoption to have a material effect on the Companys consolidated financial statements.

NOTE 5 - SHARE-BASED COMPENSATION

On July 1, 2005, the Company adopted SFAS No. 123R, Share-Based Payment (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 the
unvested portion of existing awards, new awards and to awards modified, repurchased or canceled after the effective date. The Company has two stock option incentive plans: (1) the Second Amended and Restated Stock Option Plan (the Second
Restated Plan) and (2) the 2004 Equity Incentive Plan (the 2004 Plan). The Second Restated Plan provides for the granting of incentive stock options, as well as non-qualified stock options to executives and key independent
(non-employee) directors. 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 pursuant to this plan after June 30, 2005.

The 2004 Plan provides for the granting of incentive and non-qualified stock options as well as restricted stock to executives, key employees, consultants
and independent directors. On September 1, 2005, the Company issued 36,600 shares of restricted stock pursuant to the 2004 plan to employees which vest 25% annually, starting one year from the date of grant. In November 2005, the Company issued
17,500 shares of restricted stock pursuant to the 2004 plan to independent members of the board of directors vesting one year from the date of grant. In November 2005, 2,600 restricted shares of stock previously issued to employees were forfeited
due to cancellation of employment with the Company. The Company recognizes share-based compensation expense over the requisite service period of the individual grants and awards which are generally equal to the vesting period.

The Second Restated Plan

The fair values of share-based compensation
in vested awards at July 1, 2005 were estimated using a Black-Scholes option-pricing model with the following assumptions:



|                        |  |          
|----------------------- |  | ---------
|Expected Volatility     |  | 54%-120% 
|Expected Dividends      |  | 0.00%    
|Expected term, in years |  | 2.2-5.0  
|Risk-free interest rate |  | 2.8%-6.3%



6



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



A summary of the Companys outstanding stock options as of June 30, 2005 and changes during the six months
ended December 31, 2005, is presented below:



|                                 |  |         |   |  |                               |      |                                               |     |                          |   |          
|-------------------------------- |  | ------- | - |  | ----------------------------- | ---- | --------------------------------------------- | --- | ------------------------ | - | ---------
|Options                          |  | Shares  |   |  | WeightedAverageExercise Price |      | WeightedAverageRemainingContractualTerm (Yrs) |     | AggregateIntrinsic Value
|Outstanding at June 30, 2005     |  | 672,500 |   |  | $                             | 3.48 |                                               | 5.9 |                          | $ | 4,253,504
|Granted                          |  |        |   |  |                               |     |                                               |     |                          |   |         
|Exercised December 2005          |  | (20,500 | ) |  | $                             | 2.39 |                                               |     |                          | $ | 156,794  
|Forfeited or expired             |  |        |   |  |                               |     |                                               |     |                          |   |         
|                                 |  |         |   |  |                               |      |                                               |     |                          |   |          
|Outstanding at December 31, 2005 |  | 652,000 |   |  | $                             | 3.51 |                                               | 5.4 |                          | $ | 4,367,965
|                                 |  |         |   |  |                               |      |                                               |     |                          |   |          
|Exercisable at December 31, 2005 |  | 527,000 |   |  | $                             | 2.78 |                                               | 4.8 |                          | $ | 3,898,465
|                                 |  |         |   |  |                               |      |                                               |     |                          |   |          

A summary of the Companys non-vested stock options as of June 30, 2005, and changes during the six
months ended December 31, 2005 is presented below:



|                                |  |         |   |  |                                |      |                          |   |        
|------------------------------- |  | ------- | - |  | ------------------------------ | ---- | ------------------------ | - | -------
|Options                         |  | Shares  |   |  | Weighted-AverageExercise Price |      | AggregateIntrinsic Value
|Non-vested at June 30, 2005     |  | 162,500 |   |  | $                              | 7.31 |                          | $ | 430,800
|Granted                         |  |        |   |  |                                |     |                          |   |       
|Vested                          |  | (37,500 | ) |  | $                              | 9.75 |                          |   |       
|Forfeited/Exercised             |  |        |   |  |                                |     |                          |   |       
|                                |  |         |   |  |                                |      |                          |   |        
|Non-vested at December 31, 2005 |  | 125,000 |   |  | $                              | 6.57 |                          | $ | 469,500
|                                |  |         |   |  |                                |      |                          |   |        

At December 31, 2005, there was $196,000 of total unrecognized compensation cost related to non-vested
share-based compensation arrangements granted pursuant to this Plan. The cost is expected to be recognized over a weighted-average period of 4 years. For the three months and six months ended December 31, 2005, compensation expense of $61,000
and $145,000 related to stock options issued prior to July 1, 2005 was recognized and is included in general and administrative expenses.

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 interpretations. The Company, applying the intrinsic
value method, did not record share-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 will be recognized as the remaining required services are rendered. The compensation costs relating to unvested awards are based on the
grant date fair value of those awards as calculated under SFAS No. 123R.



7



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



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



|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|----------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ---- | - | ------------------------------- | - | ----- | -
|                                                                                                                              |  | Three MonthsEndedDecember 31,2004 |      |   | Six MonthsEndedDecember 31,2004 |  
|Net Income, as reported                                                                                                       |  | $                                 | 498  |   |                                 | $ | 2,138 |  
|Total share-based employee compensation expense determined under fair value method for all awards, net of income tax benefits |  |                                   | (33  | ) |                                 |   | (79   | )
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|Pro forma net income                                                                                                          |  | $                                 | 465  |   |                                 | $ | 2,059 |  
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|Earnings per share:                                                                                                           |  |                                   |      |   |                                 |   |       |  
|Basic-as reported                                                                                                             |  | $                                 | 0.08 |   |                                 | $ | 0.36  |  
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|Basic-pro forma                                                                                                               |  | $                                 | 0.07 |   |                                 | $ | 0.34  |  
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|Diluted- as reported                                                                                                          |  | $                                 | 0.07 |   |                                 | $ | 0.33  |  
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  
|Diluted- pro forma                                                                                                            |  | $                                 | 0.07 |   |                                 | $ | 0.32  |  
|                                                                                                                              |  |                                   |      |   |                                 |   |       |  

The 2004 Plan

On September 1, 2005, the Company issued 36,600 restricted shares of stock to employees which vest 25% annually, starting one year from the date of grant. On November 7, 2005, the Company issued 17,500 shares of restricted stock
to independent members of the board of directors vesting one year from the date of grant. The fair values of share-based compensation for fiscal year 2006 were estimated using the market price on the date of grant. A summary of the Companys
outstanding restricted shares as of June 30, 2005, and changes during the three and six months ended December 31, 2005 is presented below:



|                                  |  |        |   |  |                                       |       |                                               |     |                          |   |         |  
|--------------------------------- |  | ------ | - |  | ------------------------------------- | ----- | --------------------------------------------- | --- | ------------------------ | - | ------- | -
|Restricted Shares                 |  | Shares |   |  | WeightedAverageGrant-DateMarket Value |       | WeightedAverageRemainingContractualTerm (Yrs) |     | AggregateIntrinsic Value |  
|Outstanding at June 30, 2005      |  |       |   |  |                                       |      |                                               |    |                          |   |        |  
|Granted September 1, 2005         |  | 36,600 |   |  | $                                     | 10.00 |                                               | 5.0 |                          | $ | 366,000 |  
|Vested                            |  |       |   |  |                                       |      |                                               |    |                          |   |        |  
|Forfeited or expired              |  |       |   |  |                                       |      |                                               |    |                          |   |        |  
|                                  |  |        |   |  |                                       |       |                                               |     |                          |   |         |  
|Outstanding at September 30, 2005 |  | 36,600 |   |  | $                                     | 10.00 |                                               | 4.9 |                          |   | 366,000 |  
|Granted November 7, 2005          |  | 17,500 |   |  | $                                     | 9.60  |                                               | 1.0 |                          |   | 168,000 |  
|Vested                            |  |       |   |  |                                       |      |                                               |    |                          |   |        |  
|Forfeited                         |  | (2,600 | ) |  | $                                     | 10.00 |                                               |    |                          |   | (26,000 | )
|                                  |  |        |   |  |                                       |       |                                               |     |                          |   |         |  
|Outstanding at December 31, 2005  |  | 51,500 |   |  | $                                     | 9.86  |                                               | 3.4 |                          | $ | 508,000 |  
|                                  |  |        |   |  |                                       |       |                                               |     |                          |   |         |  

September 1, 2005 was the first date of issuance of restricted shares under the 2004 Plan.

At December 31, 2005, there was $444,000 of unrecognized compensation costs related to non-vested share-based compensation arrangements granted pursuant to the 2004
Plan. Compensation expense of $71,000 and $87,000 related to the grant of restricted stock and $30,000 and $64,000 related to the performance incentive plan are included in general and administrative expenses for the three months and six months
ended December 31, 2005.

NOTE 6  ACQUISITIONS

On September 1, 2005, the Company completed its acquisition of the assets of Dayton Depot Casino 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).



8



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



The preliminary purchase price of $10.9 million (including acquisition costs and excluding cash acquired) 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 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 with a fair market value equal to $9.91 per share on the date of issuance. 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 acquisition has
been accounted for as a purchase and accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based upon estimated fair values at the date of acquisition. The Company is still in the process of valuing
certain assets, which we expect to complete by the end of the fourth quarter of the fiscal year 2006.

The following tables summarize the preliminary
purchase price and the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.



|                                         |  |   |        |  
|---------------------------------------- |  | - | ------ | -
|Purchase Price:                          |  |   |        |  
|Cash                                     |  | $ | 374    |  
|Proceeds from credit facility            |  |   | 10,050 |  
|Issuance of common stock                 |  |   | 551    |  
|Costs of acquisition                     |  |   | 255    |  
|                                         |  |   |        |  
|                                         |  | $ | 11,230 |  
|                                         |  |   |        |  
|Assets Acquired and Liabilities assumed: |  |   |        |  
|Current assets                           |  | $ | 568    |  
|Property, plant and equipment            |  |   | 5,738  |  
|Goodwill and intangibles                 |  |   | 4,936  |  
|Current liabilities                      |  |   | (12    | )
|                                         |  |   |        |  
|                                         |  | $ | 11,230 |  
|                                         |  |   |        |  

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):



|                             |  |                                    |        |                                    |   |       
|---------------------------- |  | ---------------------------------- | ------ | ---------------------------------- | - | ------
|                             |  | Six months ended December 31, 2005 |        | Six months ended December 31, 2004
|Net revenues                 |  | $                                  | 47,308 |                                    | $ | 43,971
|Net income                   |  |                                    | 2,426  |                                    |   | 1,885 
|Basic net income per share   |  |                                    | 0.34   |                                    |   | 0.32  
|Diluted net income per share |  |                                    | 0.32   |                                    |   | 0.29  
|Basic Shares Outstanding     |  |                                    | 7,087  |                                    |   | 5,987 
|Diluted Shares Outstanding   |  |                                    | 7,533  |                                    |   | 6,530 



9



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##### Table of Contents

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



NOTE 7 - INTANGIBLES AND GOODWILL

Intangible Balances



|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|----------------------------------- |  | -------------------- | ------ | ----------------------- | - | --- |  | -------------------- | ------ | ----------------------- | - | ------ |  | - | --- |  | - | ------
|                                    |  | December 31, 2005    |        | June 30, 2005          
|(Dollars in thousands)              |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net |  | Gross CarryingAmount |        | AccumulatedAmortization |   | Net   
|Finite-lived intangible assets:     |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|Customer list/relationships         |  | $                    | 1,190  |                         | $ | 843 |  | $                    | 347    |                         | $ | 1,190  |  | $ | 709 |  | $ | 481   
|Under-market land lease (1)         |  |                      |       |                         |   |    |  |                      |       |                         |   | 448    |  |   | 21  |  |   | 427   
|Non-compete agreement               |  |                      | 45     |                         |   | 3   |  |                      | 42     |                         |   |       |  |   |    |  |   |      
|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|                                    |  |                      | 1,235  |                         |   | 846 |  |                      | 389    |                         |   | 1,638  |  |   | 730 |  |   | 908   
|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|Indefinite-lived intangible assets: |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|Grandfathered gaming license        |  |                      | 7,205  |                         |   |    |  |                      | 7,205  |                         |   | 7,205  |  |   |    |  |   | 7,205 
|Trademark/tradename                 |  |                      | 4,479  |                         |   |    |  |                      | 4,479  |                         |   | 4,303  |  |   |    |  |   | 4,303 
|Other                               |  |                      | 95     |                         |   |    |  |                      | 95     |                         |   | 10     |  |   |    |  |   | 10    
|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|                                    |  |                      | 11,779 |                         |   |    |  |                      | 11,779 |                         |   | 11,518 |  |   |    |  |   | 11,518
|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       
|                                    |  | $                    | 13,014 |                         | $ | 846 |  | $                    | 12,168 |                         | $ | 13,156 |  | $ | 730 |  | $ | 12,426
|                                    |  |                      |        |                         |   |     |  |                      |        |                         |   |        |  |   |     |  |   |       



|(1) | With the purchase of 2.58 acres of land adjacent to Rail City Casino on December 20, 2005, for $901,000, the Company recorded a non-cash charge of $419,000 to the unamortized
value of the under-market land lease relating to early termination of the lease on the land from the State of Nevada.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amortization of
Intangibles

The aggregate amortization expense was $64,000 and $154,000 for the three months ended December 31, 2005 and 2004. The aggregate
amortization expense was $144,000 and $309,000 for the six months ended December 31, 2005 and 2004, respectively. Estimated amortization expense for the current and succeeding fiscal years is as follows:



|                       |  |            |  |              |     |  |           |  
|---------------------- |  | ---------- |  | ------------ | --- |  | --------- | -
|(Dollars in thousands) |  | FiscalYear |  | Amortization |     |  |          
|                       |  | 2006       |  | $            | 139 |  | (6 Months | )
|                       |  | 2007       |  |              | 147 |  |           |  
|                       |  | 2008       |  |              | 81  |  |           |  
|                       |  | 2009       |  |              | 13  |  |           |  
|                       |  | 2010       |  |              | 9   |  |           |  

Goodwill Changes and Balance by Segment



|                                |  |           |        |            |   |              |  |       |       |  |   |       
|------------------------------- |  | --------- | ------ | ---------- | - | ------------ |  | ----- | ----- |  | - | ------
|(Dollars in thousands)          |  | Rail City |        | Gold Ranch |   | Dayton Depot |  | Total
|Balance at beginning of period  |  | $         | 17,624 |            | $ | 11,018       |  | $     |      |  | $ | 28,642
|Dayton Depot Casino acquisition |  |           |       |            |   |             |  |       | 4,631 |  |   | 4,631 
|                                |  |           |        |            |   |              |  |       |       |  |   |       
|Balance at December 31, 2005    |  | $         | 17,624 |            | $ | 11,018       |  | $     | 4,631 |  | $ | 33,273
|                                |  |           |        |            |   |              |  |       |       |  |   |       

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 provided 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 $20.4 million at December 31, 2005 and $16.1 million at June 30,



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



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 December 31, 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 December 31, 2005 and June 30, 2005, the weighted average interest rate on the
term loan was 7.08% and 5.38% respectively. The loan has a 5-year amortization schedule, and matures on September 1, 2010, with any remaining interest and unpaid principal due and payable on that date. For the three month and six month period
ended December 31, 2005, the Company has paid back principal on the term loan of $825,000 and $1,650,000. 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 $9.2 million at December 31, 2005 and $3.4 million at June 30, 2005. The weighted
average interest rate on the revolving credit facility at December 31, 2005 and June 30, 2005 was 7.02% and 6.50% respectively. The credit facility requires interest-only payments and matures September 1, 2010, with any remaining
interest and 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 December 31, 2005.

NOTE 9 - SUBSEQUENT EVENTS

As of the filing of this report, the scope of the expansion of the Rail City Casino has been increased and the budgeted project costs have been revised
to approximately $13.8 million versus the previous estimate of $8.5 million. Increased construction costs, refinements to the project scope, sequencing of construction activity to minimize the impact of construction and the acquisition of additional
land for customer parking, during and after the construction of the expansion, are the primary drivers of the increased cost estimates. Plantation Investments, Inc., a subsidiary of the Company, has contracted to purchase a 0.5 acre site that is
adjacent to the casino which currently has a 27 unit motel on the site for $1.3 million. The company plans to demolish substantially all of the motel units for additional customer parking during construction, which will remain once the expansion is
completed. Closing of the transaction occurred on April 3, 2006.

NOTE 10 - RESTATEMENT

Subsequent to the issuance of the Companys quarterly report on Form 10-Q for the three and six months ended December 31, 2005, the Company determined that
errors were made with respect to (i) expenses for stock options which were not recorded for $85,000, and a corresponding understatement of additional paid-in capital, (ii) classification of $115,000 of other assets, previously recorded as
goodwill, as a result of a misallocation of the purchase price among the assets acquired in the purchase of Dayton Depot Casino, (iii) the calculation of accrued interest on the Companys credit agreement and a corresponding understatement
of interest expense for the three and six months ended December 31, 2005, (iv) the reclassification of $60,000 from accrued salaries, wages and benefits to additional paid-in capital for restricted shares under the manager bonus plan,
(v) the reclassification of $51,000 from taxes payable to additional paid-in capital for the tax benefit of exercised stock options and (vi) certain computations and classifications on the Statement of Cash Flows. As a result, the
accompanying Condensed Consolidated Balance Sheet as of December 31, 2005, Condensed Consolidated Statement of Income for the three and six months ended December 31, 2005 and Condensed Consolidated Statement of Cash Flows for the six
months ended December 31, 2005 have been restated to correct these errors.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



Effects of the Restatement

A summary of the effects of the restatement is as follows:



|                                           |  |                       |         |                   |   |        
|------------------------------------------ |  | --------------------- | ------- | ----------------- | - | -------
|                                           |  | December 31, 2005     |         | December 31, 2005
|(Dollars in thousands)                     |  | As previouslyreported |         | As restated      
|ASSETS                                     |  |                       |         |                   |   |        
|Prepaid expenses and other current assets  |  | $                     | 2,240   |                   | $ | 2,080  
|Total current assets                       |  |                       | 10,086  |                   |   | 9,926  
|Goodwill                                   |  |                       | 33,388  |                   |   | 33,273 
|Other assets                               |  |                       | 979     |                   |   | 1,094  
|Total assets                               |  |                       | 102,467 |                   |   | 102,307
|LIABILITIES AND STOCKHOLDERS EQUITY       |  |                       |         |                   |   |        
|Accrued salaries, wages and benefits       |  |                       | 2,198   |                   |   | 2,138  
|Other accrued expenses                     |  |                       | 1,431   |                   |   | 1,389  
|Federal income tax payable                 |  |                       | 1,092   |                   |   | 976    
|Total current liabilities                  |  |                       | 11,610  |                   |   | 11,392 
|Total liabilities                          |  |                       | 39,893  |                   |   | 39,675 
|Additional paid-in capital                 |  |                       | 27,610  |                   |   | 27,807 
|Retained earnings                          |  |                       | 56,370  |                   |   | 56,231 
|Stockholders equity subtotal              |  |                       | 84,932  |                   |   | 84,990 
|Total stockholders equity                 |  |                       | 62,574  |                   |   | 62,632 
|Total liabilities and stockholders equity |  |                       | 102,467 |                   |   | 102,307



|                                                |  |                                      |        |   |                                   |   |        |                       |  |   |             |   |  |   |        |  
|----------------------------------------------- |  | ------------------------------------ | ------ | - | --------------------------------- | - | ------ | --------------------- |  | - | ----------- | - |  | - | ------ | -
|                                                |  | THREE MONTHS ENDED DECEMBER 31, 2005 |        |   | SIX MONTHS ENDEDDECEMBER 31, 2005 |  
|(Dollars in thousands except per share amounts) |  | As previouslyreported                |        |   | As restated                       |   |        | As previouslyreported |  |   | As restated |  
|General and administrative                      |  | $                                    | 3,837  |   |                                   | $ | 3,837  |                       |  | $ | 7,137       |   |  | $ | 7,222  |  
|Total operating expense                         |  |                                      | 20,883 |   |                                   |   | 20,883 |                       |  |   | 41,752      |   |  |   | 41,837 |  
|Income from operations                          |  |                                      | 1,381  |   |                                   |   | 1,381  |                       |  |   | 4,642       |   |  |   | 4,557  |  
|Interest expense                                |  |                                      | (434   | ) |                                   |   | (554   | )                     |  |   | (862        | ) |  |   | (983   | )
|Other income (expense), net                     |  |                                      | (477   | ) |                                   |   | (596   | )                     |  |   | (896        | ) |  |   | (1,016 | )
|Income before income taxes                      |  |                                      | 904    |   |                                   |   | 785    |                       |  |   | 3,746       |   |  |   | 3,541  |  
|Income tax provision                            |  |                                      | (301   | ) |                                   |   | (264   | )                     |  |   | (1,262      | ) |  |   | (1,196 | )
|Net Income                                      |  |                                      | 603    |   |                                   |   | 521    |                       |  |   | 2,484       |   |  |   | 2,345  |  
|Net Income per share                            |  |                                      |        |   |                                   |   |        |                       |  |   |             |   |  |   |        |  
|Basic                                           |  |                                      | 0.09   |   |                                   |   | 0.07   |                       |  |   | 0.35        |   |  |   | 0.33   |  
|Diluted                                         |  |                                      | 0.08   |   |                                   |   | 0.07   |                       |  |   | 0.33        |   |  |   | 0.31   |  



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



|                                                                                  |  |                                   |         |   |             |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------------- | ------- | - | ----------- | - | ------- | -
|                                                                                  |  | Six Months EndedDecember 31, 2005 |        
|(dollars in thousands)                                                            |  | As previouslyreported             |         |   | As restated |  
|Operating Activities                                                              |  |                                   |         |   |             |   |         |  
|Net income                                                                        |  | $                                 | 2,484   |   |             | $ | 2,345   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                   |         |   |             |   |         |  
|Share-based compensation expense                                                  |  |                                   |        |   |             |   | 296     |  
|Loss on early termination of land lease                                           |  |                                   | (419    | ) |             |   | 419     |  
|Decrease (increase) in inventories                                                |  |                                   | (30     | ) |             |   | 31      |  
|Increase in prepaid expenses and other current assets                             |  |                                   | (359    | ) |             |   | (125    | )
|Excess tax benefits from share-based payment arrangements                         |  |                                   |        |   |             |   | (51     | )
|Decrease in other assets                                                          |  |                                   | 970     |   |             |   | 167     |  
|Decrease in accounts payable                                                      |  |                                   | (80     | ) |             |   | (137    | )
|Increase in accrued expenses                                                      |  |                                   | 1,348   |   |             |   | 1,169   |  
|Change in federal income taxes payable                                            |  |                                   | (318    | ) |             |   | 253     |  
|Change in deferred federal income taxes                                           |  |                                   | (171    | ) |             |   | 171     |  
|Net cash provided by operating activities                                         |  |                                   | 6,603   |   |             |   | 7,716   |  
|Investing Activities                                                              |  |                                   |         |   |             |   |         |  
|Investment in property and equipment                                              |  |                                   | (3,114  | ) |             |   | (4,455  | )
|Net cash paid for wholly-owned subsidiary                                         |  |                                   | (10,490 | ) |             |   | (10,346 | )
|Proceeds from sale of assets                                                      |  |                                   |        |   |             |   | 6       |  
|Net cash used in investing activities                                             |  |                                   | (13,604 | ) |             |   | (14,795 | )
|Financing Activities                                                              |  |                                   |         |   |             |   |         |  
|Payments on long-term debt                                                        |  |                                   | (3,100  | ) |             |   | (3,408  | )
|Amortization of debt discount                                                     |  |                                   | 16      |   |             |   |        |  
|Excess tax benefits from share-based payment arrangements                         |  |                                   |        |   |             |   | 51      |  
|Issuance of long-term debt                                                        |  |                                   | 13,100  |   |             |   | 13,400  |  
|Payment of costs relative to the issuance of long term debt                       |  |                                   | (51     | ) |             |   |        |  
|Net cash provided by financing activities                                         |  |                                   | 10,014  |   |             |   | 10,092  |  



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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 following Managements Discussion and Analysis of Financial Condition and Results of Operations gives effect to the restatement discussed in Note 10 to the condensed consolidated financial statements included
in Item 1.

Subsequent to the issuance of the Companys quarterly report on Form 10-Q for the three and six months ended December 31, 2005,
the Company determined that errors were made with respect to (i) expenses for stock options which were not recorded for $85,000, and a corresponding understatement of additional paid-in capital, (ii) classification of $115,000 of other
assets, previously recorded as goodwill, as a result of a misallocation of the purchase price among the assets acquired in the purchase of Dayton Depot Casino, (iii) the calculation of accrued interest on the Companys credit agreement and
a corresponding understatement of interest expense for the three and six months ended December 31, 2005, (iv) the reclassification of $60,000 from accrued salaries, wages and benefits to additional paid-in capital for restricted shares
under the manager bonus plan, (v) the reclassification of $51,000 from taxes payable to additional paid-in capital for the tax benefit of exercised stock options, and (vi) certain computations and classifications on the Statement of Cash
Flows. As a result, the accompanying Condensed Consolidated Balance Sheet as of December 31, 2005, Condensed Consolidated Statement of Income for the three and six months ended December 31, 2005 and Condensed Consolidated Statement of Cash
Flows for the six months ended December 31, 2005 have been restated to correct these errors. See Note 10 to the Condensed Consolidated Financial Statements for a comparison of the Companys restated results to previously reported results.

The Sands Regent and its subsidiaries (the Company, we, our, or us) operate the Rail City Casino
(Rail City) in Sparks, Nevada, 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 (Dayton Depot Casino) in Dayton, Nevada.

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.

The Sands Regency 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,
poker, keno, bingo, and a sportsbook operated by a third party. Additionally, the Sands Regency 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.

On September 1, 2005, the Company acquired Dayton Depot Casino in Dayton, Nevada. Dayton Depot has 16,000 square feet of casino, 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 three months and six months ended December 31, 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



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



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, however, there have been no changes in critical accounting policies reflected in the annual report of the Companys Form 10-K. There can be no assurance that actual results will not differ from Company estimates.

Results of Operations  Comparisons of Three Months and Six Months ended December 31, 2005 and 2004.

CONSOLIDATED RESULTS. For the three months and six months ended December 31, 2005, the Companys consolidated net revenues increased 15.0% and 12.5% from $19.4
million to $22.3 million and from $41.2 million to $46.4 million compared to the same periods of the prior year.

On a by-property basis, the net revenue
for Rail City increased 6.2% and 3.5% from the corresponding three months and six months of the prior year, while net revenue for the Sands increased 4.8% and 5.5% from the corresponding three months and six months of the prior year. Gold Ranch net
revenue increased 11.6% and 15.7% from the corresponding three month and six months of the prior year, attributable to increases in the retail price of gasoline. Consolidated net revenues include Dayton Depot Casino which was acquired by the Company
on September 1, 2005. The factors that are attributed to the financial results of the business are discussed below.

The Companys consolidated
income from operations was $1.4 million for the quarter ended December 31, 2005 and $4.6 million for the six months ended December 31, 2005 compared to $1.4 million and $4.5 million for the respective periods of the prior year. Rail City
achieved income from operations of $1.4 million and $3.2 million for the three and six months ended December 31, 2005, an 8.9% decrease and 6.0% increase compared to the same periods of the prior year. The Sands achieved income from operations
of $33,000 and $1.6 million, a 62.9% decrease and 11.4% increase from the same periods of the prior year. Income from operations at Gold Ranch was $190,000 for the three months and $676,000 for the six months ended December 31, 2005
representing a 21.1% and 26.6% decrease for the same three months and six month periods of the prior year. 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 despite increases in 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 $722,000 and $1,435,000 for the three and six months ended December 31, 2005, compared to $548,000 and $875,000 for the same periods
of the prior year. Increases from the prior period reflect the implementation in the current quarter and six months ended of the requirements of SFAS 123R Share-Based Payment of $61,000 and $145,000 for stock options issued prior to
July 1, 2005 and $71,000 and $87,000 for current year grants of restricted stock and $30,000 and $64,000 for accrued management incentive awards to be awarded in the future based on fiscal 2006 performance. The following amounts, net of tax
effects, were allocated to the various properties and are included in General and Administrative Expenses: Sands Regency - $27,000; Gold Ranch - $6,200; Rail City Casino - $12,250; and Dayton Depot Casino - $5,100. In addition, the Company incurred
$121,000 and $263,000 for the three months and six months ended December 31, 2005 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 $521,000 and $2.3 million, or $.07 per share ($.07 diluted) and $.33 per share ($.31 diluted), for the three months and six
months ended December 31, 2005, compared to $498,000 and $ 2.1 million, or $.08 per share ($.07 diluted) and $.36 per share ($.33 diluted), for the three months and six months December 31, 2004.



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



RAIL CITY CASINO

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



|                           |  |                               |       |   |                             |   |       |               |  |      |      |  |   |        |   |  |               |        |   |  |       |  
|-------------------------- |  | ----------------------------- | ----- | - | --------------------------- | - | ----- | ------------- |  | ---- | ---- |  | - | ------ | - |  | ------------- | ------ | - |  | ----- | -
|                           |  | THREE MONTHS ENDEDDECEMBER 31 |       |   | SIX MONTHS ENDEDDECEMBER 31 |  
|(Dollars in thousands)     |  | 2005                          |       |   | 2004                        |   |       | PERCENTCHANGE |  |      | 2005 |  |   | 2004   |   |  | PERCENTCHANGE |       
|Gaming revenues            |  | $                             | 6,120 |   |                             | $ | 5,572 |               |  | 9.8  | %    |  | $ | 11,719 |   |  | $             | 11,065 |   |  | 5.9   | %
|Gaming expenses            |  | $                             | 2,128 |   |                             | $ | 2,012 |               |  | 5.8  | %    |  | $ | 4,153  |   |  | $             | 4,123  |   |  | 0.7   | %
|Expense margin             |  |                               | 34.8  | % |                             |   | 36.1  | %             |  |      |      |  |   | 35.4   | % |  |               | 37.3   | % |  |       |  
|Food and beverage revenues |  | $                             | 1,186 |   |                             | $ | 1,278 |               |  | -7.2 | %    |  | $ | 2,367  |   |  | $             | 2,554  |   |  | -7.3  | %
|Food and beverage expenses |  | $                             | 835   |   |                             | $ | 811   |               |  | 3.0  | %    |  | $ | 1,646  |   |  | $             | 1,614  |   |  | 2.0   | %
|Expense margin             |  |                               | 70.4  | % |                             |   | 63.5  | %             |  |      |      |  |   | 69.5   | % |  |               | 63.2   | % |  |       |  
|Total net revenues         |  | $                             | 6,572 |   |                             | $ | 6,186 |               |  | 6.2  | %    |  | $ | 12,690 |   |  | $             | 12,256 |   |  | 3.5   | %
|Total operating expenses   |  | $                             | 5,126 |   |                             | $ | 4,598 |               |  | 11.5 | %    |  | $ | 9,472  |   |  | $             | 9,219  |   |  | 2.7   | %
|Expense margin             |  |                               | 78.0  | % |                             |   | 74.3  | %             |  |      |      |  |   | 74.6   | % |  |               | 75.2   | % |  |       |  
|Maintenance and utilities  |  | $                             | 344   |   |                             | $ | 327   |               |  | 5.2  | %    |  | $ | 717    |   |  | $             | 697    |   |  | 2.9   | %
|Percent of net revenues    |  |                               | 5.2   | % |                             |   | 5.3   | %             |  |      |      |  |   | 5.7    | % |  |               | 5.7    | % |  |       |  
|General and administrative |  | $                             | 892   |   |                             | $ | 917   |               |  | -2.7 | %    |  | $ | 1,526  |   |  | $             | 1,754  |   |  | -13.0 | %
|Percent of net revenues    |  |                               | 13.6  | % |                             |   | 14.8  | %             |  |      |      |  |   | 12.0   | % |  |               | 14.3   | % |  |       |  

Rail City gaming revenues were $ 6.1 million and $ 11.7 million for the three months and six months
ended December 31, 2005 an increase or $548,000 and $654,000 or 9.8% and 5.9% from the three months and six months ended December 31, 2004. The slot machine win percentage remained constant for the three months and six months ended
December 31, 2005 and 2004. However, the total coin-in, an indicator of total slot machine wagering, increased $9.9 million and $12 million for the three months and six months ended December 31, 2005 to $112.2 million and $216.4 million
compared to the same periods in 2004. The win percentage which remained consistent with the prior year quarter on increased total coin-in, represents the total increased gaming revenue for three months and six months ended December 31, 2005.

Gaming operating expenses for the three and six months ended December 31, 2005 were $2.1 million and $4.1 million, compared to $2.0 and $4.1 for
the same periods a year ago, an increase of $116,000 and $30,000 respectively. Food and beverage revenues were $1.2 million and $2.4 million for the three and six months ended December 31, 2005 compared to $1.3 million and $2.6 million for the
same periods in 2004. Cover counts (number of meals served) for the three months and six months ended December 31, 2005 were 12.5% and 10.8% less than for the same periods one year ago.

General and administrative expenses for the three months and six months ended December 31, 2005 were $892,000 and $1.5 million compared to $917,000 and $1.8 million
for same period a year ago, a decrease of $25,000 and $228,000 respectively. The decrease was primarily attributable to payroll and related tax and benefit reductions of $116,000. Since the beginning of the current 2006 fiscal year, the property had
several temporary vacancies in management positions that have been subsequently filled.

On December 20, 2005, Plantation Investments Inc., a
subsidiary of The Sands Regent purchased 2.58 acres of land adjacent to the Rail City Casino for a total price of $901,000. The land will be utilized in the expansion of the casino and food and beverage operations at Rail City, with plans to expand
floor space by 23,500 square feet under a revised budget of $13.8 million. Initially, the propertys current 650 slot machines will be increased to 850, with ultimate plans for a total of 1,000 games. Pending completion of the permit process
with the City of Sparks, management plans to begin a six-month, phased construction process in mid calendar year 2006. Included in the scope of the expansion will be an additional restaurant and bar venue. Upon close of the acquisition, the Company



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



recorded a $419,000 non-cash charge to income for the unamortized value of the intangible asset relating to the early termination of the lease from the State
of Nevada.

There can be no assurance that the construction process will proceed as currently planned due to factors outside the Companys control. As
of the filing of this report, the scope of the expansion has been increased and the budgeted project costs have been revised to be approximately $13.8 million versus the previous estimate of $8.5 million. Increased construction costs, refinement of
the project scope, sequencing of construction activity to minimize customer inconvenience and the acquisition of additional land for customer parking are the primary drivers of the increased cost estimates. As previously announced, Plantation
Investments, Inc., a subsidiary of the Company, has contracted to purchase a .5 acre site that is adjacent to the casino which currently has a 27 unit motel on the site for $1.3 million. The Company plans to demolish substantially all of the motel
units for additional customer parking during construction and which will remain once the expansion is completed. Closing of the transaction occurred on before April 3, 2006.

SANDS REGENCY HOTEL AND CASINO

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



|                           |  |                               |       |   |                             |   |       |               |  |      |      |  |   |        |   |  |               |        |   |  |      |  
|-------------------------- |  | ----------------------------- | ----- | - | --------------------------- | - | ----- | ------------- |  | ---- | ---- |  | - | ------ | - |  | ------------- | ------ | - |  | ---- | -
|                           |  | THREE MONTHS ENDEDDECEMBER 31 |       |   | SIX MONTHS ENDEDDECEMBER 31 |  
|(Dollars in thousands)     |  | 2005                          |       |   | 2004                        |   |       | PERCENTCHANGE |  |      | 2005 |  |   | 2004   |   |  | PERCENTCHANGE |       
|Gaming revenues            |  | $                             | 5,409 |   |                             | $ | 5,069 |               |  | 6.7  | %    |  | $ | 11,356 |   |  | $             | 10,459 |   |  | 8.6  | %
|Gaming expenses            |  | $                             | 2,505 |   |                             | $ | 2,323 |               |  | 7.8  | %    |  | $ | 5,113  |   |  | $             | 4,747  |   |  | 7.7  | %
|Expense margin             |  |                               | 46.3  | % |                             |   | 45.8  | %             |  |      |      |  |   | 45.0   | % |  |               | 45.4   | % |  |      |  
|Lodging revenues           |  | $                             | 1,794 |   |                             | $ | 1,718 |               |  | 4.4  | %    |  | $ | 4,799  |   |  | $             | 4,565  |   |  | 5.1  | %
|Lodging expense            |  | $                             | 914   |   |                             | $ | 894   |               |  | 2.2  | %    |  | $ | 1,936  |   |  | $             | 1,934  |   |  | 0.1  | %
|Expense margin             |  |                               | 50.9  | % |                             |   | 52.0  | %             |  |      |      |  |   | 40.3   | % |  |               | 42.4   | % |  |      |  
|Food and beverage revenues |  | $                             | 1,011 |   |                             | $ | 1,097 |               |  | -7.8 | %    |  | $ | 2,286  |   |  | $             | 2,407  |   |  | -5.0 | %
|Food and beverage expenses |  | $                             | 763   |   |                             | $ | 784   |               |  | -2.7 | %    |  | $ | 1,678  |   |  | $             | 1,601  |   |  | 4.8  | %
|Expense margin             |  |                               | 75.5  | % |                             |   | 71.5  | %             |  |      |      |  |   | 73.4   | % |  |               | 66.5   | % |  |      |  
|Total net revenues         |  | $                             | 7,759 |   |                             | $ | 7,406 |               |  | 4.8  | %    |  | $ | 17,307 |   |  | $             | 16,408 |   |  | 5.5  | %
|Total operating expenses   |  | $                             | 7,726 |   |                             | $ | 7,317 |               |  | 5.6  | %    |  | $ | 15,734 |   |  | $             | 14,996 |   |  | 4.9  | %
|Expense margin             |  |                               | 99.6  | % |                             |   | 98.8  | %             |  |      |      |  |   | 90.9   | % |  |               | 91.4   | % |  |      |  
|Maintenance and utilities  |  | $                             | 927   |   |                             | $ | 882   |               |  | 5.1  | %    |  | $ | 1,923  |   |  | $             | 1,822  |   |  | 5.5  | %
|Percent of net revenues    |  |                               | 11.9  | % |                             |   | 11.9  | %             |  |      |      |  |   | 11.1   | % |  |               | 11.1   | % |  |      |  
|General and administrative |  | $                             | 1,522 |   |                             | $ | 1,424 |               |  | 6.7  | %    |  | $ | 2,978  |   |  | $             | 2,868  |   |  | 3.9  | %
|Percent of net revenues    |  |                               | 19.6  | % |                             |   | 19.2  | %             |  |      |      |  |   | 17.2   | % |  |               | 17.5   | % |  |      |  

Sands Regency net revenue for the Sands Regency was $7.8 million and $17.3 million for the three months and six
months ended December 31, 2005. This represents a 4.8% increase and 5.5% increase over the net revenue of $7.4 million and $16.4 million for the three months and six months ended December 31, 2004. Gaming revenue for the three months and
six months ended December 31, 2005 increased 6.7% and 8.6% over the prior year periods. The increase in gaming revenue is comprised of an increase of $178,000 and $474,429 in slot revenue to $4.1 million and $8.7 million for the three months
and six months ended December 31, 2005, compared to $4.0 million and $8.3 million for the prior year periods. Live poker generated revenue of $121,000 and $238,000 for the three months and six months ended December 31, 2005. Live poker was
initiated in December 2004. Keno revenue for the three months and six months ended December 31, 2005, was $82,000 and $140,000. Keno is currently operated by the Company compared to having been a leased operation in the prior year period.



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Gaming expenses for the three months and six months ended December 31, 2005 were $2.5 million and $5.1 million,
an increase of 7.8% and 7.7% from the prior year periods. Increased expenses are related to the addition of poker and the return of keno to a Company offered product.

Lodging revenue for the three months and six months ended December 31, 2005 were $1.8 million and $4.8 million, an increase of 5.4% and 5.3% over the prior year periods. Hotel room occupancy was 78.8% and 86.0%
for the three months and six months ended December 31, 2005, compared to 77.6% and 84.6% for the same periods of the prior year. Average daily room rate increased 3.7% and 3.2% from the prior year periods.

GOLD RANCH CASINO AND RV RESORT

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



|                                    |  |                               |       |   |                             |   |       |               |  |       |      |  |   |        |   |  |               |        |   |  |       |  
|----------------------------------- |  | ----------------------------- | ----- | - | --------------------------- | - | ----- | ------------- |  | ----- | ---- |  | - | ------ | - |  | ------------- | ------ | - |  | ----- | -
|                                    |  | THREE MONTHS ENDEDDECEMBER 31 |       |   | SIX MONTHS ENDEDDECEMBER 31 |  
|(Dollars in thousands)              |  | 2005                          |       |   | 2004                        |   |       | PERCENTCHANGE |  |       | 2005 |  |   | 2004   |   |  | PERCENTCHANGE |       
|Gaming revenues                     |  | $                             | 1,359 |   |                             | $ | 1,266 |               |  | 7.3   | %    |  | $ | 2,920  |   |  | $             | 2,807  |   |  | 4.0   | %
|Gaming expenses                     |  | $                             | 515   |   |                             | $ | 471   |               |  | 9.3   | %    |  | $ | 1,045  |   |  | $             | 931    |   |  | 12.2  | %
|Expense margin                      |  |                               | 37.4  | % |                             |   | 37.2  | %             |  |       |      |  |   | 35.8   | % |  |               | 33.2   | % |  |       |  
|Lodging revenues                    |  | $                             | 70    |   |                             | $ | 91    |               |  | -23.1 | %    |  | $ | 252    |   |  | $             | 298    |   |  | -15.4 | %
|Lodging expense                     |  | $                             | 38    |   |                             | $ | 42    |               |  | -9.5  | %    |  | $ | 90     |   |  | $             | 107    |   |  | -15.9 | %
|Expense margin                      |  |                               | 54.3  | % |                             |   | 46.2  | %             |  |       |      |  |   | 35.7   | % |  |               | 35.9   | % |  |       |  
|Food and beverage revenues          |  | $                             | 441   |   |                             | $ | 411   |               |  | 7.3   | %    |  | $ | 957    |   |  | $             | 872    |   |  | 9.7   | %
|Food and beverage expenses          |  | $                             | 262   |   |                             | $ | 270   |               |  | -3.0  | %    |  | $ | 581    |   |  | $             | 588    |   |  | -1.2  | %
|Expense margin                      |  |                               | 59.4  | % |                             |   | 65.7  | %             |  |       |      |  |   | 60.7   | % |  |               | 67.4   | % |  |       |  
|Fuel and convenience store revenues |  | $                             | 4,693 |   |                             | $ | 4,080 |               |  | 15.1  | %    |  | $ | 10,658 |   |  | $             | 8,783  |   |  | 21.3  | %
|Fuel and convenience store expenses |  | $                             | 4,528 |   |                             | $ | 3,915 |               |  | 15.7  | %    |  | $ | 10,266 |   |  | $             | 8,388  |   |  | 22.4  | %
|Expense margin                      |  |                               | 96.5  | % |                             |   | 96.0  | %             |  |       |      |  |   | 96.3   | % |  |               | 95.5   | % |  |       |  
|Total net revenues                  |  | $                             | 6,434 |   |                             | $ | 5,765 |               |  | 11.6  | %    |  | $ | 14,536 |   |  | $             | 12,568 |   |  | 15.7  | %
|Total operating expenses            |  | $                             | 6,244 |   |                             | $ | 5,524 |               |  | 13.0  | %    |  | $ | 13,860 |   |  | $             | 11,647 |   |  | 19.0  | %
|Expense margin                      |  |                               | 97.0  | % |                             |   | 95.8  | %             |  |       |      |  |   | 95.3   | % |  |               | 92.7   | % |  |       |  
|Maintenance and utilities           |  | $                             | 170   |   |                             | $ | 173   |               |  | -1.7  | %    |  | $ | 363    |   |  | $             | 355    |   |  | 2.3   | %
|Percent of net revenues             |  |                               | 2.6   | % |                             |   | 3.0   | %             |  |       |      |  |   | 2.5    | % |  |               | 2.8    | % |  |       |  
|General and administrative          |  | $                             | 547   |   |                             | $ | 510   |               |  | 7.3   | %    |  | $ | 1,096  |   |  | $             | 991    |   |  | 10.6  | %
|Percent of net revenues             |  |                               | 8.5   | % |                             |   | 8.8   | %             |  |       |      |  |   | 7.5    | % |  |               | 7.9    | % |  |       |  

For the three months and six months ended December 31, 2005, Gold Ranch had net revenue of $6.4 million and
$14.5 million, compared to $5.8 million and $12.6 million for prior year periods.

Gaming revenue for Gold Ranch, comprised principally of slot machine
revenue, increased to $1.4 million and $2.9 million in the three months and six months ended December 31, 2005 compared to $1.3 million and $2.8 million for the prior year periods. During the three months and six months ending December 31,
2005, the property increased its marketing and promotional activities in an effort to provide incentives to encourage customers to sign up for the Slot Club. However, the continued escalation in the retail price of gas and the resulting decrease in
weekend 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 three months and six months ended December 31, 2005 was $190,000, and $676,000 compared to $241,000 and $921,000 in the
same periods of the prior year. The decline



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



in Gold Ranchs income from operations was primarily due to a $63,000 increase in marketing costs intended to provide incentives to encourage customers
to sign up for the Slot Club, to use the facilities and to 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.

DAYTON DEPOT CASINO

The operating results of Dayton Depot Casino which was acquired on September 1, 2005, are reflected below.

The following table highlights
Dayton Depot Casinos sources of revenues and expenses for the three months and six months ended December 31, 2005:



|                           |  |                               |       |                             |      |   |               |   |      |   |       |      |  |               |  |  
|-------------------------- |  | ----------------------------- | ----- | --------------------------- | ---- | - | ------------- | - | ---- | - | ----- | ---- |  | ------------- |  | -
|                           |  | THREE MONTHS ENDEDDECEMBER 31 |       | SIX MONTHS ENDEDDECEMBER 31
|(Dollars in thousands)     |  | 2005                          |       |                             | 2004 |   | PERCENTCHANGE |   | 2005 |   |       | 2004 |  | PERCENTCHANGE
|Gaming revenues            |  | $                             | 1,282 |                             |      |  |               |  |      | $ | 1,594 |      |  |              |  | 
|Gaming expenses            |  | $                             | 426   |                             |      |  |               |  |      | $ | 558   |      |  |              |  | 
|Expense margin             |  |                               | 33.3  | %                           |      |   |               |   |      |   | 35.0  | %    |  |               |  |  
|Food and beverage revenues |  | $                             | 274   |                             |      |  |               |  |      | $ | 348   |      |  |              |  | 
|Food and beverage expenses |  | $                             | 215   |                             |      |  |               |  |      | $ | 249   |      |  |              |  | 
|Expense margin             |  |                               | 78.5  | %                           |      |   |               |   |      |   | 71.6  | %    |  |               |  |  
|Total net revenues         |  | $                             | 1,499 |                             |      |  |               |  |      | $ | 1,861 |      |  |              |  | 
|Total operating expenses   |  | $                             | 1,065 |                             |      |  |               |  |      | $ | 1,336 |      |  |              |  | 
|Expense margin             |  |                               | 71.0  | %                           |      |   |               |   |      |   | 71.8  | %    |  |               |  |  
|Maintenance and utilities  |  | $                             | 69    |                             |      |  |               |  |      | $ | 81    |      |  |              |  | 
|Percent of net revenues    |  |                               | 4.6   | %                           |      |   |               |   |      |   | 4.4   | %    |  |               |  |  
|General and administrative |  | $                             | 168   |                             |      |  |               |  |      | $ | 199   |      |  |              |  | 
|Percent of net revenues    |  |                               | 11.2  | %                           |      |   |               |   |      |   | 10.7  | %    |  |               |  |  

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 a new slot player tracking system installed in January 2006.

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 $722,000 and $1.4 million for the three months and six months ended December 31, 2005, compared to $548,000 and $875,000 for the prior year periods.

The $174,000 and $560,000 increase for the three months and six months ended December 31, 2005, are primarily due to $121,000 and $263,000 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 three months ended
December 31, 2004 and $10,000 of costs were incurred for the six months ended December 31, 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. In addition, management compensation expense related to the adoption of SFAS 123R Share Based Payment totaled $101,000 and $235,000 ($162,000 and $296,000 on a consolidated basis) for the three
months and six months ended December 31, 2005. There was no management compensation expense related to SFAS 123R in



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



the same periods of the prior year. For further explanation of the compensation expense related to SFAS 123R and those that are the recipients under the
plans, refer to Note 5.

INTEREST EXPENSE. Interest expense was $554,000 and $983,000 for the three months and six months ended December 31, 2005,
compared to $799,000 and $1.4 million for the same periods in 2004. The decrease of $245,000 and $422,000 for the three months and six months ended December 31, 2005, are primarily due to the following factors:



| |  |  | Interest expense in the three months and six months ended December 31, 2004 includes $252,000 of accelerated interest on the portion of the convertible debt which was converted
to equity.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Ending balances of long term debt at September 30, 2004 and December 31, 2004 were $34.9 million and $23.2 million compared to $28.8 million and $29.9 million for the same
dates in 2005. The majority of the reduction occurred in November and December 2004 due to issuance of 1,120,000 shares of common stock and conversion of additional debt of $1.1 million by a third party
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Weighted average interest rates on both the term loan and revolving credit facility for the quarters ended September 30, 2004 and December 31, 2004 were 5.40% and 5.44% as
compared to 6.47% and 7.05% for the same periods in 2005.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our long-term debt balance at December 31, 2005 of $29.9 million, includes
$10.4 million incurred on September 1, 2005, in connection with the acquisition of Dayton Depot Casino. This represents an increase of $6.7 million for the same date in 2004.

Capital Resources and Liquidity

At December 31, 2005, the Companys cash and cash equivalents were $6.3
million, an increase of $3 million from June 30, 2005. We had negative working capital of $1.5 million as of December 31, 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 December 31, 2005, the Company had $15.9 million of borrowings available under its revolving credit facility.

Cash flow from operating activities provided $7.7 million during the six month period ended December 31, 2005. Net income of $2.3 million, increased by non-cash items of depreciation ($3.4 million), compensation expense for share-based
options ($296,000) and the loss on early termination of the land lease ($419,000) contributed to the majority of cash flow from operating activities. During the six month period ended December 31, 2005, accrued expenses increased $1.2. The
increase in accrued expenses was a result of the purchase of new gaming equipment, an increase in gaming taxes payable and costs associated with the acquisition of Dayton Depot Casino. In conjunction with a transition to a new accounting system on
July 1, 2005, accounts payable were paid down at June 30, 2005 and selected accounts previously categorized as accounts payable were reclassed to accrued expenses This resulted in higher accrued expenses and lower accounts payable at
December 31, 2005.

Investing activities used $14.8 million in cash for the six months ended December 31, 2005. This was the result of the
purchase of the Dayton Depot Casino in September 2005 ($10.4 million). On September 1, 2005, the Company acquired Dayton Depot Casino for $629,000 in cash, proceeds from credit facility of $10.1 million and 69,438 shares of Company stock at a
share price of $9.91, including an additional $255,000 in acquisition related expenses. The cash paid in connection with the transaction came primarily from an amended and restated credit facility (See Note 8).

The Company increased its investment in plant, property and equipment during the six month period by $4.4 million for renovations among the properties plus investment
incurred for the Rail City expansion. Additionally, on December 20, 2005, the Company purchased 2.58 acres of land adjacent to Rail City Casino for $901,000 which is included in the $4.4 million increase.



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



Financing activities provided $10 million of cash flow. Long-term debt of $13.4 million was issued primarily to fund
the purchase of the Dayton Depot Casino and working capital. Long-term debt was reduced by payments of $3.4 million during the period ended December 31, 2005.

Our amended and restated bank term loan and revolving credit facility, with an outstanding balance of $45.4 million as of December 31, 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 December 31, 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 December 31, 2005.



|                              |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          
|----------------------------- |  | ----- | ---------- | ---------------------- | - | ----------- |  | ----------- | ---------- | ------------- | - | ---------- |  | - | ---------
|                              |  |       |            | Payments due by period
|                              |  | Total |            | Less than 1 year       |   | 1 - 3 years |  | 4 - 5 years |            | After 5 years
|Long term debt                |  | $     | 29,944,845 |                        | $ | 3,992,072   |  | $           | 10,065,273 |               | $ | 15,887,500 |  | $ |         
|Interest on long-term debt(1) |  |       | 8,515,751  |                        |   | 2,239,710   |  |             | 3,892,916  |               |   | 2,383,125  |  |   |         
|Operating Leases(2)           |  |       | 9,775,068  |                        |   | 575,004     |  |             | 1,725,012  |               |   | 1,150,008  |  |   | 6,325,044
|Other(3)                      |  |       | 4,868,869  |                        |   | 236,015     |  |             | 612,062    |               |   | 472,030    |  |   | 3,548,762
|                              |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          
|                              |  | $     | 53,104,533 |                        | $ | 7,042,801   |  | $           | 16,295,263 |               | $ | 19,892,663 |  | $ | 9,873,806
|                              |  |       |            |                        |   |             |  |             |            |               |   |            |  |   |          



|(1) | Interest is calculated by assuming a weighted average interest rate of 7.5% of the current December 31, 2005 balance less payouts 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/A includes forward-looking statements intended to qualify for the safe harbor from liability 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



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THE SANDS REGENT

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



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. The Securities and Exchange Commission has issued amendments to Form 10-K
requiring disclosure of risk factors for filers that have fiscal years ending on or after December 31, 2005. The disclosure required in the Form 10-Q must be included only after the disclosure in the Form10-K. Since the Companys Annual
Form 10-K ends June 30, 2006, we will comply with the amended disclosure requirement in that report and in subsequent Form 10-Qs.



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THE SANDS REGENT



|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 to $45.3 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 $453,000 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
|------- | -----------------------

Evaluation of Disclosure 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 disclosures. 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 controls and procedures.

Subsequent to the issuance of the Companys quarterly report on Form 10-Q for the three and six months ended
December 31, 2005, the Company determined that errors were made with respect to (i) expenses for stock options which were not recorded for $85,000 and a corresponding understatement of additional paid-in capital, (ii) classification of $115,000 of
other assets, previously recorded as goodwill, as a result of a misallocation of the purchase price among the assets acquired in the purchase of Dayton Depot Casino, (iii) the calculation of accrued interest on the Companys credit agreement
and a corresponding understatement of interest expense for the three and six months ended December 31, 2005, (iv) the reclassification of $60,000 from accrued salaries, wages and benefits to additional paid-in capital for restricted shares under the
manager bonus plan, (v) the reclassification of $51,000 from taxes payable to additional paid-in capital for the tax benefit of exercised stock options, and (vi) certain computations and classifications on the Statement of Cash Flows. As a result,
the accompanying Condensed Consolidated Balance Sheet as of December 31, 2005, Condensed Consolidated Statement of Income for the three and six months ended December 31, 2005 and Condensed Consolidated Statement of Cash Flows for the six months
ended December 31, 2005 have been restated to correct these errors.

Management has concluded, based on the circumstances involving the restatement of the
aforementioned financial statements that, as of December 31, 2005, material weaknesses in internal control over financial reporting existed. Management has determined that the following material weaknesses existed as of December 31, 2005: the lack
of a sufficient number of personnel with an appropriate level of accounting knowledge related to the application of generally accepted accounting principles; the lack of a properly designed and implemented closing and financial reporting process to
provide reasonable assurance that the financial statements were prepared in accordance with generally accepted accounting principles; and the lack of effective controls to ensure that a sufficient review of the financial statements was performed.
These weaknesses gave rise to the following material weaknesses, each of which resulted in adjustments or reclassifications to our condensed consolidated financial statements:



| |  |  | Controls over the reconciliation of balance sheet general ledger accounts did not operate effectively.
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | Controls over non-routine and complex transactions were not effective to properly evaluate and account for the acquisition of the Dayton Depot Casino.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | Controls over the preparation and review of the Condensed Consolidated Statement of Cash Flows were not sufficient and effective.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



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THE SANDS REGENT



| |  |  | Controls over the proper recording and disclosure of share-based payments were not effective.
| | - |  | ---------------------------------------------------------------------------------------------

These material weaknesses resulted in the errors described above and the restatement of the condensed consolidated financial statements in this Quarterly Report on Form 10-Q/A for the period ended December 31, 2005.

In light of the Companys decision to restate the financial statements and the identification of material weaknesses, the Company reassessed the
evaluation of the effectiveness of the Companys disclosure controls and procedures that had been made in connection with the original filing of the Companys Quarterly Report on Form 10-Q for the period ended December 31, 2005. Based on
that reassessment, the Companys Chief Executive Officer and Chief Financial Officer concluded that, due to the aforementioned material weaknesses, the Companys disclosure controls and procedures were not effective as of December 31,
2005. To compensate for the control weaknesses described above, the Company performed additional manual procedures in order to prepare the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A.

Changes in Internal Control Over Financial Reporting

There
have been no changes in our internal control over financial reporting during the quarter ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



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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 the original filing, the liability arising from unfavorable outcomes of lawsuits was not expected to have a material impact on the Companys financial condition or
financial results.

Item 1a. Risk Factors

Other than as disclosed in Part 1, Item 2 on Form 10-Q for the quarter ended
September 30, 2005, there have been no material changes in the risk factors previously disclosed in the Companys Form 10-K for the year ended June 30, 2005.

Item 2. Changes in Securities

None

Item 3. Defaults Upon Senior Securities

None

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

On November 7, 2005, the Company
conducted its annual meeting in Reno, Nevada, in which one proposal was put before the shareholders.

Proposal 1

To elect a board of seven directors, each serving for a one-year term or until their respective successors are duly elected and qualified. The proposal
passed as follows:



|                   |  |           |  |         |  |                    
|------------------ |  | --------- |  | ------- |  | -------------------
|Votes Cast         |  | For       |  | Against |  | Abstain or withheld
|Jon N. Bengston    |  | 5,651,363 |  | 23,987  |  |                   
|Louis J. Phillips  |  | 5,291,168 |  | 384,182 |  |                   
|Larry Tuntland     |  | 5,628,917 |  | 46,433  |  |                   
|David R. Grundy    |  | 5,651,063 |  | 24,287  |  |                   
|Douglas M. Hayes   |  | 5,651,363 |  | 23,987  |  |                   
|Ferenc B. Szony    |  | 5,650,063 |  | 25,287  |  |                   
|Pete Cladianos III |  | 5,582,817 |  | 92,533  |  |                   

Item 5. Other Information

None.



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THE SANDS REGENT AND SUBSIDIARIES



|Item 6. | Exhibits
|------- | --------



|     |  |                                                                                                                             
|---- |  | ----------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                         
|     | 
|31.2 |  | Certification of Chief Financial and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32   |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                    



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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: June 23, 2006 |  |  |  | By:                           |  | /S/ Ferenc B. Szony   
|                    |  |  |  |                               |  |                        |  | Ferenc B. Szony, President and Chief Executive Officer              
|                    |  |  | 
|Date: June 23, 2006 |  |  |  | By:                           |  | /S/ Cornelius T. Klerk
|                    |  |  |  |                               |  |                        |  | Cornelius T. Klerk, Chief Financial and Principal Accounting Officer



27