Monarch Casino & Resort, Inc., through its wholly-owned subsidiary, Golden Road Motor Inn, Inc. ("Golden Road"), owns and operates the Atlantis Casino Resort Spa, a hotel/casino facility in Reno, Nevada (the "Atlantis"). Monarch's wholly owned subsidiaries, High Desert Sunshine, Inc. ("High Desert") and Golden North, Inc. ("Golden North"), each own separate parcels of land located proximate to the Atlantis.

Monarch's wholly owned subsidiary Monarch Growth Inc. ("Monarch Growth"), formed in 2011, entered into a definitive stock purchase agreement on September 29, 2011 to purchase Riviera Black Hawk, Inc. owner of the Riviera Black Hawk Casino (collectively, "Black Hawk"). Monarch Growth's acquisition of Black Hawk was completed on April 26, 2012. Monarch Growth also owns a parcel of land in Black Hawk, Colorado contiguous to the Riviera Black Hawk Casino. Monarch was incorporated in 1993 under Nevada law for the purpose of acquiring all of the stock of Golden Road.

Monarch's wholly owned subsidiary Monarch Interactive, Inc. ("Monarch Interactive") was formed on January 4, 2012 and submitted an interactive gaming license application with the Nevada Gaming Control Board and is undergoing the licensure process. Monarch Interactive is not currently engaged in any operating activities.

Our operating assets are the Atlantis and the Riviera Black Hawk Casino. Our business strategy is to maximize revenues, operating income and cash flow primarily through our casino, food and beverage operations and at the Atlantis, our hotel operations. The Riviera Black Hawk Casino does not have a hotel. We focus on delivering exceptional service and value 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 subsidiaries.

OPERATING RESULTS SUMMARY

Our operating results may be affected by, among other things, competitive factors, gaming tax increases, the commencement of new gaming operations, construction at our facilities, general public sentiment regarding travel, overall economic conditions affecting the disposable income of our patrons and weather conditions affecting our properties. In particular, our results for the quarter ended June 30, 2012 were impacted by non-recurring expenses in connection with the acquisition of Riviera Black Hawk, Inc. Consequently, our operating results for any quarter or year are not necessarily comparable and may not be indicative of future periods' results.

The following significant factors and trends should be considered in analyzing our operating performance:

Atlantis:

As in many other areas around the country, the impacts of the economic decline and weakness in Reno that began in the fourth quarter of 2007 continue to be felt in 2012. Aggressive marketing programs by our competitors have also posed challenges to us during that time. Furthermore, based on statistics released by the Nevada Gaming Control Board, the Reno gaming revenue market has shrunk in the aggregate. We anticipate that the ongoing macroeconomic weakness nationally and in the Reno market, combined with aggressive marketing programs of our competitors, will continue to apply downward pressure on Atlantis revenue.

Riviera Black Hawk:

On April 26, 2012, we acquired Riviera Black Hawk, Inc., the owner of the Riviera Black Hawk Casino in Black Hawk, Colorado which is located approximately 40 miles from Denver, Colorado. Our initial focus with the Riviera Black Hawk Casino is to maximize casino and food and beverage revenues. There is currently no hotel on the property. We have begun to evaluate all aspects of operations and to implement certain operational and management changes which we believe will enhance operations. We have also begun to develop a master plan of future improvements to the Riviera Black Hawk Casino, which we expect to include, among other things, a property-wide renovation, including renovations of all casino, restaurant, public areas, improvement of casino games, and, subject to our final evaluation, construction of a new multi-story parking facility, a hotel and related property amenities.

CAPITAL SPENDING AND DEVELOPMENT



We seek to continuously upgrade and maintain our facilities in order to present
a fresh, high quality product to our guests.  Capital expenditures during the
first six months of 2012 and 2011 were as follows:



                           Six Months Ended June 30,
                              2012            2011
Capital Expenditures:
Atlantis                 $    2,431,917    $ 2,465,795
Riviera Black Hawk (a)        2,670,325              -
                         $    5,102,242    $ 2,465,795

During the six month period ended June 30, 2012 and 2011, capital expenditures at the both the Atlantis and Riviera Black Hawk consisted primarily of the acquisition of gaming equipment to upgrade and replace existing equipment and other general upgrades to their respective facilities.

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, integration of our new property, 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 June 30, 2012 and 2011

Atlantis Operations:

For the three months ended June 30, 2012, net revenue decreased to $36.3 million from $37.2 million for the same period of 2011, approximately $900 thousand or 2.4% due to lower gaming and hotel revenues combined with higher promotional allowances due to an increase in the amount of complimentary food, beverage and other services provided to casino patrons ("Complimentaries").

The decrease in casino revenues was primarily due to lower slot revenues. Casino operating expenses as a percentage of casino revenue increased to 38.8% as compared to 36.8% in the prior year's second quarter primarily due to higher Complimentaries.

Food and beverage revenues increased 1.7% during the quarter driven by a 0.7% decrease in covers served offset by a 1.8% increase in the average revenue per cover. This increase in the average revenue per cover was the result of menu price increases in response to higher food commodity costs. These menu price increases contributed to an improvement in the food and beverage operating expenses as a percentage of food and beverage revenue from 44.9% in prior year's second quarter to 42.7% for the current year's second quarter.

Hotel revenue decreased due to lower hotel occupancy of 90.0% during the second quarter of 2012 compared to 93.8% during the second quarter of 2011. We also experienced a slight increase in the average daily room rate ("ADR") from $72.11 in the second quarter of 2011 to $72.84 in the second quarter of 2012. Revenue per Available Room ("REVPAR"), calculated by dividing total room revenue (less service charges, if any) by total rooms available was $65.55 and $67.59 for the three month periods ended June 30, 2012 and 2011, respectively. Hotel operating expenses as a percent of hotel revenues increased slightly to 29.2% for the second quarter of 2012 as compared to 28.6% for the second quarter of 2011 due to the decreased hotel revenue.

Promotional allowances as a percentage of gross revenues increased to 17.8% during the second quarter of 2012 from 16.4% during the second quarter of 2011. This increase was primarily the result of increased promotional and discount programs in response to the challenging economic environment and ongoing competitor promotional and discount programs.

Riviera Black Hawk Operations:

We acquired the Riviera Black Hawk Casino on April 26, 2012. The amounts of net revenue and operating income of Riviera Black Hawk included in the Company's unaudited condensed consolidated statement of income, after elimination of intercompany transactions, for the three month period ended June 30, 2012 (reflecting only operations since April 26, 2012) are as follows (numbers in thousands except per share amounts):

Net revenues                        $ 9,549
Income from operations              $ 1,643
Net income                          $ 1,018
Basic earnings per common share     $  0.06
Diluted earnings per common share   $  0.06

Corporate and Other Expenses:

Depreciation and amortization expense increased to $4.3 million in the second quarter of 2012 as compared to $3.4 million for the second quarter of 2011 primarily due to depreciation and amortization expense related to the addition of Black Hawk.

Selling, general and administrative expense ("SG&A Expense") for the second quarter of 2012 increased by $4.1 million, $2.8 million of which represents SG&A Expense from the Black Hawk operation for the period from the Acquisition date through June 30, 2012. The primary drivers of the remaining $1.3 million of Atlantis operational increases are: higher marketing expense of $760 thousand, higher bad debt expense of $250 thousand and higher use tax expense of $200 thousand related to a recent ruling from the Nevada Department of Taxation that complimentary meals are subject to use tax effective February 2012. The Company did not recognize use tax on complimentary meals in the prior year.

During the second quarter of 2012, we incurred $1.6 million of non-recurring acquisition expense, comprised primarily of professional fees, directly related to the acquisition of Black Hawk.

Because of borrowings required to complete the Black Hawk acquisition, the balance outstanding under our New Credit Facility increased from $17.0 million at June 30, 2011 to $88.0 million at June 30, 2012. As a result, interest expense increased from $195 thousand in the second quarter of 2011 to $577 in the second quarter of 2012.

Comparison of Operating Results for the Six-Month Periods Ended June 30, 2012 and 2011

Atlantis Operations:

For the six months ended June 30, 2012, net revenue increased slightly to $70.9 million from $70.5 million for the same period of the prior year, approximately $500 thousand or 0.7%. A 7.8% decrease in hotel revenue and higher promotional allowances were offset by increases in casino, food and beverage and other revenues.

Casino operating expenses amounted to 39.1% for the six months ended June 20, 2012 compared to 38.7% of casino revenues for the six months ended June 30, 2011. The increase was primarily due to the cost of increased Complimentaries. Complimentaries expense increased primarily due to increased promotional and discount programs in response to the challenging economic environment and greater competitor promotional and discount programs.

Food and beverage revenues increased 3.3% due to a 1.9% decrease in the number of covers served offset by 4.9% increase in the average revenue per cover. Food and beverage operating expenses amounted to 43.6% of food and beverage revenues during the 2012 six-month period, a decrease when compared to 45.6% for the same period in 2011. This decrease was primarily the result of higher menu prices in response to higher food commodity costs.

The decrease in hotel revenues was due to lower hotel occupancy and average daily room rate ("ADR"). Hotel occupancy decreased to 85.7% during the first six months of 2012, as compared to 88.8% during the same period in 2011. We also experienced a decrease in the ADR from $73.23 during the first six months of 2011 to $69.63 in the same period of 2012. Revenue per Available Room ("REVPAR"), calculated by dividing total room revenue (less service charges, if any) by total rooms available was $59.66 and $65.03 for the six month periods ended June 30, 2012 and 2011, respectively. Hotel operating expenses as a percent of hotel revenues increased to 29.4% for the first six months of 2012 from 28.6% for the same period of 2011 due to the decreased hotel revenue.

Promotional allowances as a percentage of gross revenues increased to 17.9% for the first six months of 2012 compared to 16.8% for the same period in 2011. This increase was primarily the result of increased promotional and discount programs that we initiated in response to the challenging economic environment and ongoing competitor promotional and discount programs.

Riviera Black Hawk Operations:

We acquired Riviera Black Hawk on April 26, 2012. The amounts of net revenue and operating income of Riviera Black Hawk included in the Company's unaudited condensed consolidated statement of income, after elimination of intercompany transactions, for the three month period ended June 30, 2012 (reflecting only operations since April 26, 2012) are as follows (numbers in thousands except per share amounts):

Net revenue                         $ 9,549
Income from operations              $ 1,643
Net income                          $ 1,018
Basic earnings per common share     $  0.06
Diluted earnings per common share   $  0.06

Corporate and Other Expenses:

Depreciation and amortization expense was $7.6 million in the first six months of 2012, $800 thousand higher than the $6.8 million in the same period last year primarily due to depreciation and amortization expense related to the addition of Black Hawk.

SG&A Expense for the first six months of 2012 increased by $4.9 million, $2.8 million of which represents SG&A Expense from the Riviera Black Hawk operation for the period from the date of the Black Hawk acquisition (April 26, 2012) through June 30, 2012. The primary drivers of the remaining $2.1 million of Atlantis operational increases are: higher marketing expense of $1.1 million, higher bad debt expense of $400 thousand and higher use tax expense of $200 thousand related to a recent ruling from the Nevada Department of Taxation that complimentary meals are subject to use tax effective February 2012. The Company did not recognize use tax on complimentary meals in the prior year.

During the first six months of 2012, we incurred $1.7 million of non-recurring acquisition expense, comprised primarily of professional fees, directly related to the acquisition of Black Hawk.

During the six month period ended June 30, 2012, we incurred net borrowings under our credit facility of approximately $63 million which increased the total amount outstanding under the credit facility to $88 million. The increase was attributable to borrowings required to complete our acquisition of Riviera Black Hawk and increased interest expense during the six month period ended June 30, 2012 to $906 thousand as compared to $483 thousand during the same period of 2011.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2012, net cash provided by operating activities totaled $11.3 million, an increase of $1.0 million or 10.0% compared to the same period last year. This increase was primarily the result of higher accounts payable, lower prepaid expenses, changes in deferred income taxes and higher provision for bad debts all partially offset by lower net income and lower accrued expenses during the first six months of 2012 as compared to the first six months of the prior year.

Net cash used in investing activities totaled $71.8 million and $2.5 million in the six months ended June 30, 2012 and 2011, respectively. The increase was primarily due to net cash paid to acquire Riviera Black Hawk and cash spent to acquire property and equipment.

Net cash of $63.3 million was provided by financing activities during the six months ended June 30, 2012 due primarily to borrowings made to complete the acquisition of Riviera Black Hawk, Inc. For the six months ended June 30, 2011, net cash used by financing activities was $11.6 million. During the first six months of 2012 and 2011, we paid $8.9 million and $11.6 million, respectively, of the outstanding balance under our credit facility described below.

On November 15, 2011, the Company amended and restated its $60 million credit facility with a new facility (the "New Credit Facility"). The New Credit Facility was utilized by the Company for financing the acquisition of Riviera Black Hawk, Inc. and may be used for working capital needs, general corporate purposes and for ongoing capital expenditure requirements. The maximum available borrowings under the New Credit Facility are $100 million.

The maturity date of the New Credit Facility is November 15, 2016. Borrowings are secured by liens on substantially all of the real and personal property of Monarch, Golden Road, and Monarch Growth.

The New Credit Facility contains customary covenants for a facility of this nature, including, but not limited to, covenants requiring the preservation and maintenance of the Company's 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 the Company maintain certain financial ratios and achieves a minimum level of Earnings-Before-Interest-Taxes-Depreciation and Amortization (EBITDA) on a trailing four-quarter 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 the Company can repurchase common stock or pay dividends. Management does not consider the covenants to restrict normal functioning of day-to-day operations.

As of June 30, 2012, the Company was required to maintain a leverage ratio, defined as consolidated debt divided by EBITDA, of no more than 3.25:1 and a fixed charge coverage ratio (EBITDA divided by fixed charges, as defined) of at least 1.15:1. As of June 30, 2012, the Company's leverage ratio was 2.3:1, and the fixed charge coverage ratio was 25.9:1.

The maximum principal available under the New Credit Facility is reduced by 1.5% per quarter beginning in the third quarter of 2013. The Company may permanently reduce the maximum principal available at any time so long as the amount of such reduction is at least $500 thousand and a multiple of $50 thousand. Maturities of the Company's borrowings for each of the three years and thereafter as of June 30, 2012 are as follows (amounts in thousands):

Year          Maturities
2012         $          -
2013                    -
2014                    -
Thereafter         88,000
             $     88,000

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

The Company paid various one-time fees and other loan costs upon the closing of the refinancing of the New Credit Facility that are amortized over the facility's term using the straight-line method which approximates the effective interest method.

At June 30, 2012, the Company had $88.0 million outstanding under the New Credit Facility. At that time its leverage ratio was such that pricing for borrowings under the New Facility was LIBOR plus 2.250%. At June 30, 2012 the one-month LIBOR interest rate was 0.25%. The carrying value of the debt outstanding under the New Facility approximates fair value because the interest fluctuates with the lender's prime rate or other market rates of interest.

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 year beginning in the 61st month 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 individual 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 $170,400 in lease payments for the leased driveway space at the Shopping Center during the six month period ended June 30, 2012.

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, 2011 ("2011 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 2011 Form 10-K filed on March 14, 2012.

OTHER FACTORS AFFECTING CURRENT AND FUTURE RESULTS

The economies in northern Nevada, the Denver metropolitan area, 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 has and is expected to continue to 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 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, Denver area, and other drive-in customers from coming to the Atlantis or the Riviera Black Hawk Casino.

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, or in other areas near Denver, Colorado, the Riviera Black Hawk key feeder markets, could have a material adverse effect on our business.

COMMITMENTS AND CONTINGENCIES



Our contractual cash obligations as of June 30, 2012 and the next five years and
thereafter are as follows:



                                                       Payments Due by Period (d)
                                                  less than      1 to 3         4 to 5       more than
                                    Total          1 year         years         years         5 years
Contractual Cash Obligations:
Operating Leases(a)              $  2,728,000    $   415,500    $ 740,000    $    740,000    $  832,500
Borrowings Under New Credit
Facility (b)                       88,000,000              -            -      88,000,000             -
Purchase Obligations(c)             9,095,700      9,095,700            -               -             -
Total Contractual Cash
Obligations                      $ 99,823,700    $ 9,511,200    $ 740,000    $ 88,740,000    $  832,500

(b) The amount represents outstanding draws against our New Credit Facility (see "LIQUIDITY AND CAPITAL RESOURCES" above) as of June 30, 2012.

(c) Purchase obligations represent approximately $4.5 million of commitments related to capital projects and approximately $4.6 million of materials and . . .