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

Our sole operating asset, the Atlantis, is a hotel/casino resort located in Reno, Nevada. Our business strategy is to maximize the Atlantis' revenues, operating income and cash flow primarily through our casino, our food and beverage operations and our hotel operations. We capitalize on the Atlantis'

location for tour and travel visitors, conventioneers and local residents by offering exceptional service, value and an appealing theme to our guests. Our hands-on management style focuses on customer service and cost efficiencies.

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

OPERATING RESULTS SUMMARY

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

Amounts in millions, except per share amounts

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

Net Income                                            0.9             2.3         (60.9)

Earnings per share - diluted                         0.06            0.12         (50.0)

Operating margin                                     5.9%            9.6%      (3.7) points

The decline in revenues for the three months ended March 31, 2009 compared to the same period of the prior year reflect the effects of a challenging operating environment. As in many other areas around the country, the economic slowdown in Reno in the fourth quarter of 2007 deepened throughout 2008 and into the first quarter of 2009. Additionally, aggressive marketing programs by our competitors in 2008 continued through the first quarter of 2009. Income from operations was impacted by an increase in depreciation expense of $1.2 million for the quarter ended March 31, 2009 compared to the same prior year period. This increase in depreciation expense was due to the completion of our expansion, remodel and Atlantis Convention Center Skybridge capital projects (see "CAPITAL SPENDING AND DEVELOPMENT" below). These adverse effects were mitigated somewhat by our ability to reduce sales, general and administrative expense. We anticipate that downward pressure on revenue will persist as long as we continue to experience the adverse effects of the negative macroeconomic environment and the aggressive marketing programs of our competitors.

These factors were the primary drivers of:

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

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

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

CAPITAL SPENDING AND DEVELOPMENT

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

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

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

Capital expenditures at the Atlantis totaled approximately $2.7 and $19.1 million during the first three months of 2009 and 2008, respectively. During the three month periods ended March 31, 2009 and 2008, our capital expenditures consisted primarily of construction costs associated with the Capital Projects, the acquisition of gaming equipment to upgrade and replace existing equipment and continued renovation and upgrades to the Atlantis facility. Additional capital expenditures during the quarter ended March 31, 2008 were for acquisition of land to be used for administrative offices.

In addition to the expenditures incurred to complete Capital Projects during the first quarter of 2009, we anticipate spending approximately $5 to $12 million on capital expenditures in 2009 to upgrade and replace equipment, continue our renovation and upgrading of the Atlantis facility and to acquire the property subject to the Triple J lease (see NOTE 5. to the financial statements "RELATED PARTY TRANSACTIONS"). The timing of these capital expenditures may accelerate or be deferred altogether based on our ongoing assessment of operating cash flow, available borrowing capacity under our Credit Facility (see "THE CREDIT FACILITY" below) and the competitive environment in our market, among other factors.

We believe that our existing cash balances, cash flow from operations and borrowings available under the Credit Facility will provide us with sufficient resources to fund our operations, meet our debt obligations, and fulfill our capital expenditure requirements; however, our operations are subject to financial, economic, competitive, regulatory, and other factors, many of which are beyond our control. If we are unable to generate sufficient cash flow, we could be required to adopt one or more alternatives,

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

STATEMENT ON FORWARD-LOOKING INFORMATION

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

RESULTS OF OPERATIONS

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

For the three months ended March 31, 2009, our net income was $922 thousand, or $0.06 per diluted share, on net revenues of $32.6 million, a decrease from net income of $2.3 million, or $0.12 per diluted share, on net revenues of $34.3 million for the three months ended March 31, 2008. Income from operations for the three months ended March 31, 2009 totaled $1.9 million, a 42.4% decrease when compared to $3.3 million for the same period in 2008. Net revenues and net income decreased 5.0% and 60.9%, respectively, when compared to last year's first quarter.

Casino revenues totaled $22.8 million in the first quarter of 2009, a 4.2% decrease from $23.8 million in the first quarter of 2008, which was primarily due to decreased slot revenues. Casino operating expenses amounted to 39.1% of casino revenues in the first quarter of 2009, compared to 36.8% in the first quarter of 2008; the increase was primarily due to the decreased casino revenue combined with the cost of increased complimentary food, beverages and other services provided to casino patrons.

Food and beverage revenues totaled $9.6 million in the first quarter of 2009, a 2.0% decrease from $9.8 million in the first quarter of 2008, due primarily to a 0.4% increase in the average revenue per food cover partially offset by an 3.9% decrease in the number of covers served. Food and beverage operating expenses amounted to 48.3% of food and beverage revenues during the first quarter of 2009 as compared to 48.0% for the first quarter of 2008.

Hotel revenues were $5.4 million for the first quarter of 2009, a decrease of 6.9% from the $5.8 million reported in the 2008 first quarter. This decrease was the result of lower hotel occupancy and a decrease in the average daily room rate ("ADR"). Both 2009 and 2008 first quarter revenues included a $3 per occupied room energy surcharge. During the first quarter of 2009, the Atlantis experienced a 76.9% occupancy rate, as compared to 85.7% during the same period in 2008. The Atlantis' ADR was $66.89 in the first quarter of 2009 compared to $68.55 in the first quarter of 2008. Hotel operating

expenses as a percent of hotel revenues increased to 37.3% for the first quarter of 2009 from 36.1% for the first quarter of 2008 primarily due to the decreased revenue partially offset by a $99 thousand decrease in costs in the hotel operating unit.

Promotional allowances remained flat at $6.3 million for both the first quarters of 2009 and 2008. Promotional allowances as a percentage of gross revenues increased to 16.3% during the first quarter of 2009 as compared to 15.5% in the first quarter of 2008. The increase is attributable to continued promotional efforts to attract guests and generate revenues.

Other revenues remained relatively flat at $1.1 million in the 2009 first quarter as compared to $1.2 million for the first quarter of 2008.

Depreciation and amortization expense was $3.2 million in the first quarter of 2009 as compared to $2.0 million in the first quarter of 2008, an increase of $1.2 million or 60.0%. This increase is the result of the completion of our Capital Projects (see further discussion of the Capital Projects in the "CAPITAL SPENDING AND DEVELOPMENT" section above).

SG&A expenses were $11.6 million in the first quarter of 2009, an 11.5% decrease from $13.1 million in the first quarter of 2008. The decrease was primarily due to reductions in payroll and benefits expense of approximately $780 thousand, $530 thousand of which represents lower bonus expense; lower marketing and promotional expense of approximately $360 thousand; lower legal expense of approximately $180 thousand; lower bad debt expense of approximately $125 thousand and lower other general expenses of approximately $230 thousand all partially offset by higher electricity expense of approximately $190 thousand driven primarily by our expanded facilities (see further discussion of the Capital Projects in the "CAPITAL SPENDING AND DEVELOPMENT" section above). As a percentage of net revenue, SG&A expenses decreased to 35.7% in the first quarter of 2009 from 38.2% in the same period in 2008.

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

At March 31, 2009, we had $55.9 million outstanding under our $60 million credit facility (see the "CREDIT FACILITY" section below). The resultant interest expense recognized during the first quarter of 2009 was approximately $550 thousand, a $546 thousand increase over the first quarter of the prior year when we had no debt outstanding under our credit facility.

LIQUIDITY AND CAPITAL RESOURCES

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

Net cash used in investing activities totaled $6.6 million and $17.1 million in the three months ended March 31, 2009 and 2008, respectively. During the first three months of 2009 and 2008, net cash used in investing activities consisted primarily of construction costs associated with the recent expansion phase of the Atlantis (see further discussion of the Capital Projects in the "CAPITAL SPENDING AND

DEVELOPMENT" section above) and the acquisition of property and equipment. Because the construction was completed in January 2009, we used $10.5 million, or 61.4%, less net cash in investing activities during the three months ended March 31, 2009 compared same period in the prior year.

Net cash provided by financing activities of $5.9 million during the three months ended March 31, 2009 represents borrowings under our Credit Facility (see "THE CREDIT FACILITY" below). During the three months ended March 31, 2008, we used $11.9 million to purchase Monarch common stock pursuant to a stock repurchase plan that was in place in the prior year.

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

OFF BALANCE SHEET ARRANGEMENTS

A driveway was completed and opened on September 30, 2004, that is being shared between the Atlantis and a shopping center (the "Shopping Center") directly adjacent to the Atlantis. The Shopping Center is controlled by an entity whose owners include our controlling stockholders. As part of this project, in January 2004, we leased a 37,368 square-foot corner section of the Shopping Center for a minimum lease term of 15 years at an annual rent of $300,000, subject to increase every 60 months based on the Consumer Price Index. We also use part of the common area of the Shopping Center and pay our proportional share of the common area expense of the Shopping Center. We have the option to renew the lease for three five-year terms, and at the end of the extension periods, we have the option to purchase the leased section of the Shopping Center at a price to be determined based on an MAI Appraisal. The leased space is being used by us for pedestrian and vehicle access to the Atlantis, and we may use a portion of the parking spaces at the Shopping Center. The total cost of the project was $2.0 million; we were responsible for two thirds of the total cost, or $1.35 million. The cost of the new driveway is being depreciated over the initial 15-year lease term; some components of the new driveway are being depreciated over a shorter period of time. We paid approximately $75,000 in lease payments for the leased driveway space at the Shopping Center during the three months ended March 31, 2009.

Critical Accounting Policies

A description of our critical accounting policies and estimates can be found in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the year ended December 31, 2008 ("2008 Form 10-K"). For a more extensive discussion of our accounting policies, see Note 1, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements in our 2008 Form 10-K filed on March 13, 2009.

OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS

The economy in northern Nevada and our feeder markets, like many other areas around the country, are experiencing the effects of several negative macroeconomic trends, including a broad economic recession, higher home mortgage defaults and declining residential real estate values. These negative trends could adversely impact discretionary incomes of our target customers, which, in turn could adversely impact our business. We believe that as recessionary pressures increase or continue for

an extended period of time, target customers may further curtail discretionary spending for leisure activities and businesses may reduce spending for conventions and meetings, both of which would adversely impact our business. Management continues to monitor these trends and intends, as appropriate, to adopt operating strategies to attempt to mitigate the effects of such adverse conditions. We can make no assurances that such strategies will be effective.

The constitutional amendment approved by California voters in 1999 allowing the expansion of Native American casinos in California has had an impact on casino revenues in Nevada in general, and many analysts have continued to predict the impact will be more significant on the Reno-Lake Tahoe market. If other Reno-area casinos continue to suffer business losses due to increased pressure from California Native American casinos, such casinos may intensify their marketing efforts to northern Nevada residents as well, greatly increasing competitive activities for our local customers.

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

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

Other factors that may impact current and future results are set forth in detail in Part II - Item 1A "Risk Factors" of this Form 10-Q and in Item 1A "Risk Factors" of our 2008 Form 10-K.

COMMITMENTS AND CONTINGENCIES



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



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

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

(2) The amount represents outstanding draws against our Credit Facility (see "THE CREDIT FACILITY" below) as of March 31, 2009.

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

(4) Because interest payments under our Credit Facility are subject to factors that in our judgment vary materially, the amount of future interest payments is not presently determinable. These factors include: 1) future short-term interest rates; 2) our future leverage ratio which varies with EBITDA and our borrowing levels and 3) the speed with which we deploy capital and other spending which in turn impacts the level of future borrowings. The interest rate under our Credit Facility is LIBOR, or a base rate (as defined in the Credit Facility agreement), plus an interest rate margin ranging from 2.00% to 3.375% depending on our leverage ratio. The interest rate is adjusted quarterly based on our leverage ratio which is calculated using operating results over the previous four quarters and borrowings at the end of the most recent quarter. At March 31, 2009 our leverage ratio was such that pricing for borrowings was LIBOR plus 3.125%. At March 31, 2009, the one-month LIBOR rate was 0.50%.

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

THE CREDIT FACILITY

Until February 20, 2004, we had a reducing revolving term loan credit facility with a consortium of banks (the "First Credit Facility"). On February 20, 2004, the Original Credit Facility was refinanced (the "Second Credit Facility") for $50 million. The maturity date of the Second Credit Facility was to be April 18, 2009; however, on January 20, 2009, the Second Credit Facility was amended and refinanced (the "New Credit Facility") for $60 million. The New Credit Facility may be utilized by us for working capital needs, general corporate purposes and for ongoing capital expenditure requirements.

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

The New Credit Facility contains covenants customary and typical for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of our assets and covenants restricting our ability to merge, transfer ownership of Monarch, incur additional indebtedness, encumber assets and make certain investments. The New Credit Facility contains covenants requiring that we maintain certain financial ratios and achieve a minimum level of Earnings-Before-Interest-Taxes-Depreciation and Amortization (EBITDA) on a two-quarter rolling basis. It also contains provisions that restrict cash transfers between Monarch and its affiliates and contains provisions requiring the achievement of certain financial ratios before we can repurchase our common stock or pay dividends. Management does not consider the covenants to restrict normal functioning of day-to-day operations.

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

We may prepay borrowings under the New Credit Facility without penalty (subject to certain charges applicable to the prepayment of LIBOR borrowings prior to the end of the applicable interest period). Amounts prepaid may be reborrowed so long as the total borrowings outstanding do not exceed the maximum principal available.

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

At March 31, 2009, we had $55.9 million outstanding under the New Credit Facility, $900 thousand of which was classified as short-term debt which represents the mandatory principal reduction, based on the amount outstanding at March 31, 2009, required under the New Credit Facility on December 31, 2009. The interest rate under our Credit Facility is LIBOR, or a base rate (as defined in the Credit Facility agreement), plus an interest rate margin ranging from 2.00% to 3.375% depending on our leverage ratio. The interest rate is adjusted quarterly based on our leverage ratio calculated using operating results over the previous four quarters and borrowings at the end of the most recent quarter. At March 31, 2009 our leverage ratio was such that pricing for borrowings was LIBOR plus 3.125%. At March 31, 2009, the one-month LIBOR rate was 0.50%.