UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

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

For the quarterly period ended ~~Date: September~~March 3031, ~~2005~~2006

¨	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 0000-14050

THE SANDS REGENT

(exact name of registrant as specified in charter)

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


345 North Arlington Avenue, Reno, Nevada		89501
(Address of principal executive offices)		(Zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ~~Yes x No ¨~~

~~Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.~~ Yes ~~¨ No~~ x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

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 ~~November~~June 819, ~~2005~~2006, the registrant had outstanding 7,~~107~~126,~~304~~391 shares of its common stock, $.10 par value.

THE SANDS REGENT

FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION	1
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 1.	Financial Statements	3
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)	1
	Condensed Consolidated Statements of Income (unaudited)	3
	CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)	2
	Condensed Consolidated Balance Sheets (unaudited)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	3
	Condensed Consolidated Statements of Cash Flows (unaudited)	5
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	6-9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
Item 4.	Controls and Procedures	22
Item 4.	Controls and Procedures	19
PART II	OTHER INFORMATION	23
PART II OTHER INFORMATION
Item 1.	Legal Proceedings	23
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	23
Item 2.	Changes in Securities	2023
Item 3.	Defaults Upon Senior Securities	2023
Item 4.	Submission of Matters to a Vote of Security Holders	2023
Item 5.	Other Information	2023
Item 6.	Exhibits ~~and Reports on Form 8-K~~	2024
SIGNATURES		2125
CERTIFICATIONS

PART I FINANCIAL INFORMATION

Item 1.

Financial Statements

THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)

	THREE MONTHS ENDEDSEPTEMBER 30,
	THREE MONTHS ENDED MARCH 31,						NINE MONTHS ENDED MARCH 31,
(Dollars in thousands, except per share amounts)	~~2005~~2006			~~2004~~2005			2006			2005
Operating revenues
Gaming	$	13,~~420~~509		$	1211,~~424~~786		$	41,099		$	36,117
Lodging		31,~~187~~926			31,~~054~~692			6,977			6,555
Food and beverage		32,~~046~~942			32,~~047~~845			8,900			8,678
Fuel and convenience store		54,~~964~~082			43,~~703~~562			14,739			12,345
Other		~~503~~471			~~479~~439			1,457			1,388
Gross revenues		2622,~~120~~930			2320,~~707~~324			73,172			65,083
Promotional allowances		1,~~988~~929			1,~~832~~892			5,775			5,419
Net revenues		2421,~~132~~001			2118,~~875~~432			67,397			59,664
Operating expenses
Gaming		5,~~293~~628			4,~~995~~990			16,495			14,791
Lodging		~~1,074~~949			~~1,105~~898			2,975			2,939
Food and beverage		21,~~079~~957			1,~~938~~800			6,111			5,603
Fuel and convenience store		53,~~738~~892			43,~~473~~324			14,158			11,712
Other		~~165~~178			~~157~~160			539			460
Maintenance and utilities		1,~~575~~584			1,~~492~~410			4,670			4,284
General and administrative		34,~~297~~082			3,~~045~~497			11,301			9,966
Depreciation and amortization		1,~~650~~955			1,~~545~~551			5,396			4,612
		20,871			18,750
Loss on early termination of land lease		—			—			419			—
Income from operations		3,261			3,125
		20,225			17,630			62,064			54,367
Other income (expense)
Income from operations		776			802			5,333			5,297
Interest expense		(428	)		(606	)
Other income (expense)
Other, net		9			(46	)
Interest expense		(648	)		(438	)		(1,630	)		(1,843	)
		(419	)		(652	)
Insurance settlement		—			—			—			200
Income before income taxes		2,842			2,473
Other, net		(33	)		—			(66	)		(64	)
Income tax provision		(962	)		(833	)
Other income (expense), net		(681	)		(438	)		(1,696	)		(1,707	)
Net income	$	1,880		$	1,640
Income before income taxes		95			364			3,637			3,590
Net income per share
Income tax provision		(32	)		(105	)		(1,229	)		(1,193	)
Basic	$	0.27		$	0.29
Net income	$	63		$	259		$	2,408		$	2,397
Diluted	$	0.25		$	0.27
Net income per share
Weighted average of shares outstanding
Basic	$	0.01		$	0.04		$	0.34		$	0.38
Basic		6,996,409			5,646,555
Diluted	$	0.01		$	0.03		$	0.32		$	0.35
Diluted		7,459,005			6,118,804
Weighted average of shares outstanding
Basic		7,102,998			6,950,255			7,072,424			6,303,534
Diluted		7,617,855			7,473,039			7,562,020			6,793,100

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

THE SANDS REGENT

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(Dollars in thousands except share data)	~~SEPTEMBER~~MARCH 3031,~~2005~~2006			JUNE 30,2005
ASSETS
Cash and cash equivalents	$	4,748		$	3,272
Current Assets:
Accounts receivable, net		751			580
Cash and cash equivalents	$	6,773		$	3,272
Inventories		682			692
Accounts receivable, net		803			580
Prepaid expenses and other assets		1,824			1,805
Inventories		701			692
Total current assets		8,005			6,349
Federal income tax receivable		709			—
Prepaid expenses and other current assets		1,879			1,805
Total current assets		10,865			6,349
Property and equipment:
Land		1213,~~307~~208			10,007
Buildings and improvements		4647,~~548~~650			43,597
Equipment, furniture and fixtures		2830,~~332~~900			27,264
Leasehold improvements		178			178
Construction in progress		21,~~122~~641			854
Total property and equipment		8993,~~487~~577			81,900
Less accumulated depreciation and amortization		4447,~~270~~567			42,992
Property and equipment, net		4546,~~217~~010			38,908
Other assets:
Goodwill		3233,~~968~~250			28,642
Other intangibles		12,~~760~~099			12,426
Other		~~956~~1,006			1,202
Total other assets		46,~~684~~355			42,270
Total assets	$	99103,~~906~~230		$	87,527
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	$	2,287		$	2,578
Current Liabilities:
Accrued salaries, wages and benefits		2,039			1,884
Accounts payable	$	2,233		$	2,578
Other accrued expenses		1,402			398
Accrued salaries, wages and benefits		2,472			1,884
Federal income tax payable		767			774
Other accrued expenses		1,640			398
Federal income tax payable		—			774
Deferred federal income tax liability		388			338
Current maturities of long-term debt		34,~~459~~131			2,198
Total current liabilities		10,~~342~~864			8,170
Long-term debt		2527,~~360~~240			17,744
Deferred federal income tax liability		2,~~354~~301			2,209
Total liabilities		3840,~~056~~405			28,123
Common stock ($.10 par value, 20,000,000 shares authorized; 9,482,714 and 9,376,766 shares issued)		948			938
Stockholder’s Equity:
Additional paid-in capital		27,844			26,938
Common stock ($.10 par value, 20,000,000 shares authorized; 9,518,204 and 9,376,766 shares issued)		952			938
Unearned compensation—restricted stock		(350	)		—
Additional paid-in capital		27,937			26,938
Retained earnings		5556,~~766~~294			53,886
		84,208			81,762
		85,183			81,762
Treasury stock (at cost; 2,403,000 shares)		(22,358	)		(22,358	)
Total stockholders’ equity		6162,~~850~~825			59,404
Total liabilities and stockholders’ equity	$	99103,~~906~~230		$	87,527

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

THE SANDS REGENT

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

	THREE MONTHS ENDEDSEPTEMBER 30,
	NINE MONTHS ENDED MARCH 31,
(Dollars in thousands)	~~2005~~2006			~~2004~~2005
Operating Activities
Net income	$	12,~~880~~408		$	12,~~640~~397
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		15,~~650~~396			14,~~545~~612
(Gain) loss on disposal of property and equipment		(9	)		46
Share-based compensation expense		451			—
(Increase) decrease in accounts receivable, net		(171	)		81
Amortization of loan fees		194			302
Decrease in inventories		34			38
Loss on early termination of land lease		419			—
(Increase) decrease in prepaid expenses and other current assets		(19	)		239
Excess tax benefits from share-based payment arrangements		(51	)		—
(Increase) decrease in other assets		(40	)		55
Tax benefits from stock option exercises		—			246
Increase (decrease) in accounts payable		(1	)		67
Loss on disposal of property and equipment		66			65
Increase (decrease) in accrued expenses		1,147			(758	)
Changes in operating assets and liabilities:
Change in federal income taxes payable/receivable		(7	)		(62	)
Change in accounts receivable		(223	)		333
Change in deferred federal income taxes		195			95
Change in inventories		15			39
Net cash provided by operating activities		4,658			2,986
Change in prepaid expenses and other current assets		76			379
Change in other assets		66			(356	)
Change in accounts payable		(190	)		(299	)
Change in accrued expenses		1,729			(181	)
Change in federal income taxes payable/receivable		(1,432	)		(331	)
Change in deferred federal income taxes		142			478
Net cash provided by operating activities		9,066			7,684
Investing Activities
Investment in property and equipment		(16,~~729~~765	)		(13,~~069~~399	)
Net cash paid for Dayton Depot Casino		(10,297	)		—
Payment for prior year purchases of property and equipment		—			(295	)
Proceeds from sale of assets		9			3
Net cash paid for wholly-owned subsidiary		(10,323	)		—
Net cash used in investing activities		(12,017	)		(1,066	)
Proceeds from sale of assets		14			32
Net cash used in investing activities		(17,074	)		(3,662	)
Financing Activities
Payments on long-term debt		(15,~~180~~241	)		(214,~~024~~687	)
Issuance of long-term debt		10,050			—
Excess tax benefits from share-based payment arrangements		51			—
Payment of costs relative to the issuance of long-term debt		(35	)		(41	)
Issuance of long-term debt		16,650			—
Issuance of Company common stock		—49			189,612
Net cash provided by (used in) financing activities		8,835			(2,047	)
Payment of costs relative to the issuance of common stock		—			(668	)
Net increase (decrease) in cash and cash equivalents		1,476			(127	)
Net cash provided by (used in) financing activities		11,509			(5,743	)
Net increase (decrease) in cash and cash equivalents		3,501			(1,721	)
Cash and cash equivalents, beginning of period		3,272			5,443
Cash and cash equivalents, end of period	$	46,~~748~~773		$	53,~~316~~722
Supplemental disclosure of cash flow information
Interest paid, net of amount capitalized	$	325		$	606
Federal income taxes paid	$	774		$	800
Supplemental disclosure of non-cash investing and financing activities
Property and equipment acquired by accounts payable	$	290		$	133
Issuance of common stock to acquire Dayton Depot Casino	$	551		$	—
Fair value of assets acquired and liabilities assumed in business combination
Current assets other than cash	$	24
Property and equipment		6,100
Intangibles		4,736
Current liabilities		(12	)
Common stock issued		(551	)
Cash paid net of cash acquired	$	10,297


Supplemental disclosure of cash flow information
Interest paid	$	1,436		$	1,365
Federal income taxes paid	$	2,519		$	800
Supplemental disclosure of non-cash investing and financing activities
Property and equipment acquired by accounts payable	$	135		$	97
Debt to equity conversion	$	—		$	861
Fair value of assets acquired and liabilities assumed in business combination:
Current assets, net of cash acquired	$	235
Property, plant and equipment		5,738
Goodwill and intangibles		4,913
Current liabilities		(12	)
Common stock issued		(551	)

Cash paid, net of cash acquired	$	10,323

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

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (~~Unaudited~~unaudited)

NOTE 1 - BASIS OF PRESENTATION

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

The accounting policies followed in the preparation of the financial information herein are the same as those summarized in the Company’s 2005 Annual Report on Form 10-K, except for the Company’s adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R on July 1, 2005 (see Notes 4 and 5). The condensed consolidated balance sheet at June 30, 2005 was derived from audited consolidated financial statements at that date. The interim condensed consolidated financial information is unaudited and should be read in conjunction with the Company’s 2005 Form 10-K. In the opinion of management, all adjustments and normally recurring accruals necessary to fairly present the financial condition of the Company as of ~~September~~ March 3031, ~~2005~~2006 and the results of its operations and its cash flows for the three months and nine months ended ~~September~~March 3031, ~~2005~~2006 and ~~2004~~2005 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 isare computed by dividing net income by the weighted average number of shares outstanding during the period. Diluted earnings per share ~~reflects~~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 isshares awere ~~reconciliation~~excluded offrom the ~~number~~calculation of ~~shares~~diluted ~~(denominator)~~earnings ~~used~~per inshare ~~the~~because ~~basic~~their ~~and~~inclusion ~~diluted~~would have ~~earnings~~been ~~per share computations~~anti-dilutive:

	THREE MONTHS ENDED SEPTEMBER 30,
	THREE MONTHS ENDEDMARCH 31,			NINE MONTHS ENDEDMARCH 31,
	2005				2004
	2006	2005		2006	2005
	Shares	Per ShareAmount			Shares	Per ShareAmount
Stock options	—	—		35,000	35,000
Basic net income per share	6,996	$	0.27		5,647	$	0.29
Restricted shares	—	—		—	—
Effect of dilutive securities, convertible debt and warrants	463		(0.02	)	472		(0.02	)
Warrants	—	—		336,000	336,000
Diluted net income per share	7,459	$	0.25		6,119	$	0.27

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 ENDED MARCH 31,				NINE MONTHS ENDED MARCH 31,
	2006		2005		2006		2005
Net income	$	63	$	259	$	2,408	$	2,397

Weighted Average Shares Outstanding:
Common stock		7,103		6,950		7,072		6,304
Common stock equivalents		515		523		490		489

Diluted shares		7,618		7,473		7,562		6,793

Earnings per share:
Basic	$	0.01	$	0.04	$	0.34	$	0.38
Diluted	$	0.01	$	0.03	$	0.32	$	0.35

NOTE 3 - BUSINESS SEGMENTS

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

	THREE MONTHS ENDEDSEPTEMBER 30,
	THREE MONTHS ENDEDMARCH 31						NINE MONTHS ENDEDMARCH 31
(Dollars in thousands)	~~2005~~2006			~~2004~~2005			2006			2005
Net revenues
Net Revenues
Rail City Casino	$	6,~~117~~519		$	6,~~070~~200		$	19,208		$	18,456
Sands Regency Casino/Hotel		97,~~550~~315			97,~~002~~250			24,624			23,658
Gold Ranch Casino and RV Resort		85,~~102~~715			64,~~803~~985			20,251			17,553
Dayton Depot Casino		~~363~~1,452			—			3,314			—
	$	24,132		$	21,875
Corporate		—			(3	)		—			(3	)
Income from operations
	$	21,001		$	18,432		$	67,397		$	59,664
Rail City Casino	$	1,771		$	1,449
Income from operations
Sands Regency Casino/Hotel		1,542			1,323
Rail City Casino	$	1,913		$	1,683		$	5,130		$	4,720
Gold Ranch Casino and RV Resort		486			680
Sands Regency Casino/Hotel		(429	)		(296	)		1,146			1,116
Dayton Depot Casino		92			—
Gold Ranch Casino and RV Resort		58			133			734			1,054
Corporate		(630	)		(327	)
Dayton Depot Casino		284			—			810			—
	$	3,261		$	3,125
Corporate		(1,050	)		(718	)		(2,487	)		(1,593	)
Depreciation and amortization
	$	776		$	802		$	5,333		$	5,297
Rail City Casino	$	488		$	487
Depreciation and amortization
Sands Regency Casino/Hotel		876			876
Rail City Casino	$	544		$	556		$	1,529		$	1,565
Gold Ranch Casino and RV Resort		228			138
Sands Regency Casino/Hotel		947			874			2,783			2,632
Dayton Depot Casino		51			—
Gold Ranch Casino and RV Resort		218			140			637			415
Corporate		7			44
Dayton Depot Casino		243			—			430			—
	$	1,650		$	1,545
Corporate		3			(19	)		17			—
	$	1,955		$	1,551		$	5,396		$	4,612

NOTE 4 - ~~ADOPTION OF~~ RECENTLY ISSUED ACCOUNTING ~~PRONOUNCEMENT~~PRONOUNCEMENTS

In December 31, 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”), replacing SFAS No. 123, “Accounting for ~~Stock~~Share-Based Compensation”, and ~~superceding~~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. SFAS No. 123R is effective as of the first annual reporting period that begins after June 15, 2005 and ~~has~~was ~~been~~ adopted by the Company on July 1, 2005. See Note 5 ~~for further details~~.

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 statement on July 1, 2006 and does not expect its adoption to have a material effect on its financial statements.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”. This statement requires retrospective application to prior periods’ 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 its 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. On November 7, 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	2.5-5.0
Risk-free interest rate	2.8%- 6.3	%

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~NOTE~~A 5summary -of ~~STOCK-BASED~~the ~~COMPENSATION~~Company’s outstanding stock options as of June 30, 2005 and changes during the nine months ended March 31, 2006 is presented below:

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


Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Yrs)	Aggregate Intrinsic Value
Outstanding at June 30, 2005	672,500		$	3.48	5.9	$	4,235,504
Granted	—			—			—
Exercised December 2005	(20,500	)	$	2.39		$	156,794
Forfeited or expired	—			—			—

Outstanding at March 31, 2006	652,000		$	3.51	5.2	$	5,555,615

Exercisable at March 31, 2006	535,750		$	2.91	4.6	$	4,884,965

~~Prior~~A ~~to July~~summary 1,of ~~2005,~~ the Company’s accounted for these plans under the intrinsic value method described in APB Opinion No. 25, “Accounting for Stock Issued to Employees”, and related interpretation. The Company, applying the intrinsic value method, did not record stocknon-~~based~~vested ~~compensation cost in net income because the exercise price of its~~ stock options ~~equaled the market price of the underlying stock~~ at ~~the~~June 30, ~~date~~2005, ofand ~~grant.~~changes ~~Compensation~~during ~~costs for~~ the ~~portion~~nine ~~of unvested stock options for which~~months ~~the~~ended ~~required service period has not been rendered that are outstanding as of July 1~~March 31, ~~2005~~2006 ~~shall be recognized as the remaining required services are rendered. The compensation costs relating to unvested awards~~ is ~~based~~presented onbelow: ~~the grant date fair value of those awards as calculated under SFAS No. 123R.~~

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


Options	Shares		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Non-vested at June 30, 2005	162,500		$	7.31	$	430,800
Granted	—			—		—
Vested December 2005	(37,500	)	$	9.75		—
Forfeited or exercised	—			—		—

Non-vested at December 31, 2005	125,000		$	6.57	$	469,500
Vested March 2006	(8,750	)	$	10.71	$	11,288
Forfeited or exercised	—			—		—

Non-vested at March 31, 2006	116,250		$	6.26	$	670,650

AsAt ~~of September 30~~March 31, ~~2005~~2006, there was $~~256~~152,000 of total unrecognized compensation ~~costs~~cost related to non-vested ~~nonvested~~share-based ~~stock~~compensation ~~options~~arrangements granted pursuant to this plan. The cost is expected to be recognized over ~~future~~a ~~periods~~weighted-average period of four years. For the three months and nine months ended March 31, 2006, compensation expense of $45,000 and $190,000 related to stock options issued prior to July 1, 2005 is included in general and administrative expenses.

~~SFAS No.~~Prior ~~123R~~to ~~requires~~July 1, 2005, the Company toaccounted ~~present~~for ~~proforma~~these ~~information~~plans under the intrinsic value method described in APB Opinion No. 25, “Accounting for ~~periods~~Stock ~~prior~~Issued to ~~the~~Employees” ~~adoption~~and asrelated ifinterpretation. itThe ~~had~~Company, ~~accounted~~applying ~~for~~the ~~all~~intrinsic ~~stock~~value method, did not record share-based compensation ~~under~~cost in net income because the ~~fair~~exercise ~~value~~price ~~method.~~of ~~Had~~its ~~compensation~~stock ~~costs~~options ~~under~~equaled the ~~Company’s~~market ~~plans~~price ~~been~~of ~~recorded last~~the ~~year,~~underlying stock at the ~~effect~~date onof grant. Compensation costs for the ~~Company’s~~portion ~~net~~of ~~income~~unvested ~~and~~stock ~~earnings~~options ~~per~~for ~~share~~which ~~would~~the required ~~have~~service period has not been asrendered ~~follows~~that ~~(in~~are ~~thousands~~outstanding as of July 1, ~~except~~2005 ~~per~~shall ~~share~~be ~~amounts):~~recognized as the remaining required services are rendered. The compensation costs relating to unvested awards is based on the grant date fair value of those awards as calculated under SFAS No. 123R.

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

NOTE 6 - ACQUISITIONS

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

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

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

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

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

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

NOTE 7 - INTANGIBLES AND GOODWILL

Intangible Balances

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

THE SANDS REGENT

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Amortization~~SFAS ofNo. 123R ~~Intangibles~~requires the Company to present pro forma 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):

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


	Three Months Ended March 31, 2005			Nine Months Ended March 31, 2005
Net Income, as reported	$	259		$	2,397
Total share-based employee compensation expense determined under fair value method for all awards, net of income tax benefits		(75	)		(141	)

Pro forma net income	$	184		$	2,256

Earnings per share:
Basic-as reported	$	0.04		$	0.38

Basic-pro forma	$	0.03		$	0.36

Diluted- as reported	$	0.03		$	0.35

Diluted- pro forma	$	0.02		$	0.33

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

The 2004 Plan

~~Goodwill~~On ~~Changes~~September 1, ~~and~~2005, ~~Balance~~the byCompany 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 ~~Segment~~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 nine months ended March 31, 2006 is presented below:

(Dollars in thousands)	Rail City		GoldRanch		DaytonDepot			Total
Restricted Shares	Shares		WeightedAverageGrant-DateMarket Value		WeightedAverageRemainingContractualTerm (Yrs)		AggregateIntrinsic Value
Balance at beginning of period	$	17,624	$	11,018	$	—		$	28,642
Outstanding at June 30, 2005	—			—	—			—
Dayton Depot Casino acquisition		—				4,326			4,326
Granted September 1, 2005	36,600		$	10.00	5.0		$	366,000
Balance at September 30, 2005	$	17,624	$	11,018	$	4,326		$	32,968
Exercised	—			—	—			—
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
Exercised	—			—	—			—
Forfeited	(2,600	)	$	10.00				(26,000	)
Outstanding at December 31, 2005	51,500		$	9.86	3.4		$	508,000
Outstanding at March 31, 2006	51,500		$	9.86	3.1		$	508,000

~~NOTE~~September 1, 82005, –was ~~RECENTLY~~the ~~AMENDED~~first ~~AND RESTATED~~date ~~CREDIT~~of ~~FACILITIES~~issuance of restricted shares under this Plan.

InAt ~~connection~~March 31, ~~with the acquisition of Dayton Depot Casino~~2006, ~~the~~there ~~Company~~was ~~executed~~$ ~~an amended and restated syndicated financing arrangement (“Credit Agreement”) through Wells Fargo Bank. The Credit Agreement provides for a 5-year~~359, ~~$22,~~000~~,000~~ ~~term loan collateralized by substantially all property and equipment~~ of ~~Zante,~~unrecognized ~~Inc.,~~compensation ~~Plantation~~cost ~~Investments,~~related ~~Inc.,~~to ~~and~~non-vested ~~Dayton~~share-based ~~Gaming,~~compensation ~~Inc.,~~arrangements granted ~~and~~under the ~~furniture, fixtures and equipment of Last Chance, Inc~~Plan. ~~The~~Compensation ~~balance~~expense of ~~the term loan was~~ $~~21.2 million at September 30~~85,000 ~~2005~~ and $~~16.1 million at June 30~~172,000 ~~2005.~~and ~~The loan has a variable interest rate based on LIBOR or the U.S. Prime Index plus an applicable margin as detailed in the Credit Agreement. The interest rate at September 30, 2005 was LIBOR plus 2.~~$25~~% or Prime plus .75%. The interest rate at June 30~~,000 ~~2005 was LIBOR plus 2% or Prime plus .5%. At September 30, 2005~~ and June 30, 2005 the weighted average interest rate on the term loan was 6.06% and 5.38% respectively. The weighted average interest rate on the revolving credit facility at September 30, 2005 and June 30, 2005 was 6.88% and 6.50% respectively. The loan has a 5-year amortization schedule, and matures on September 1, 2010, with interest and any unpaid principal due and payable on that date. Additionally, as part of the Credit Agreement, the Company secured a Wells Fargo Bank syndicated, 5-year $2589,000~~,000~~ ~~revolving~~related ~~credit facility with collateralization and terms which are substantially similar~~ to the ~~term~~grant ~~loan. The balance~~ of ~~the revolving~~restricted ~~credit~~stock ~~facility was $ 3.4 million at June 30, 2005~~ and $performance ~~7.2 million~~bonus atincentive ~~September 30,~~plan ~~2005.~~are ~~The~~included credit facility requires interest-only payments and matures September 1, 2010, with interest and any unpaid principal due and payable on that date. Together, the bank term loan and revolving credit facility requires the Company to be in ~~compliance~~general ~~with certain financial~~ and ~~other~~administrative ~~covenants,~~expenses ~~restricts~~for ~~future encumbrances, and limits situations where a change in control in~~ the ~~Company~~three ~~may~~months ~~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~~nine itmonths ~~is in compliance with all covenants and restrictions at September 30, 2005. For a more complete description of the credit facilities, refer to the Company’s Annual Report on Form 10-K for the year~~ ended ~~June~~March 3031, ~~2005~~2006.

NOTE 6 - ACQUISITIONS

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 at 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

THE SANDS REGENT

~~MANAGEMENT’S~~NOTES ~~DISCUSSION~~TO ~~AND~~CONDENSED ~~ANALYSIS~~CONSOLIDATED OF FINANCIAL ~~CONDITION~~STATEMENTS ~~AND~~(Unaudited) ~~RESULTS OF OPERATIONS~~

~~Item 2.~~trading ~~Management’s~~restriction ~~Discussion~~from ~~and~~the ~~Analysis~~date of ~~Financial~~the ~~Condition~~acquisition. ~~and~~The ~~Results~~value of ~~Operations~~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 ~~Sands~~acquisition ~~Regent~~has ~~and~~been ~~its~~accounted ~~subsidiaries~~for ~~(the~~as ~~“Company”,~~a ~~“we”,~~purchase ~~“our”~~and accordingly, ~~or “us”) operate~~ the ~~Rail~~purchase ~~City~~price ~~Casino~~has ~~(“Rail City”)~~been inallocated ~~Sparks,~~to ~~Nevada (“Dayton Depot Casino”),~~ the ~~Sands~~assets ~~Regency~~acquired ~~Casino Hotel (the “Sands”) in downtown Reno, Nevada, the Gold Ranch Casino~~ and ~~RV Resort (~~the ~~“Gold~~liabilities ~~Ranch”)~~assumed onbased ~~Interstate-80~~upon inestimated ~~Verdi,~~fair ~~Nevada~~values ~~and,~~at ~~effective September 1, 2005,~~ the ~~Dayton~~date ~~Depot~~of ~~Casino and Red Hawk Sports Bar in Dayton, Nevada~~acquisition. The ~~Sands~~Company ~~has~~is ~~833~~still ~~hotel~~in ~~rooms and 5 restaurants, including Tony Roma’s Famous for Ribs, Mel’s~~ the ~~Original~~process ~~diner, and Arby’s. It has a full selection~~ of ~~gaming~~valuing ~~options,~~certain ~~including 544 slot machines~~assets, 17which ~~table~~we ~~games,~~expect ~~keno,~~to ~~bingo,~~complete ~~and a sportsbook operated~~ by athe ~~third~~end ~~party.~~of ~~Additionally,~~ the ~~Sands~~fourth ~~has~~quarter aof the ~~Just~~fiscal ~~for~~year ~~Laughs’ comedy club, a cabaret lounge, and a health spa~~2006.

~~Gold~~The ~~Ranch’s~~following ~~gaming~~table ~~options~~summarizes ~~include~~the ~~243~~preliminary ~~slot~~purchase ~~machines,~~price aand ~~California lottery station on Gold Ranch’s property which straddles~~ the ~~Nevada/California~~estimated ~~border,~~fair ~~and~~values aof ~~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),~~ aassets ~~Bar~~acquired and ~~an ARCO~~liabilities ~~gas~~assumed ~~station~~at ~~and~~the ~~convenience~~date ~~store.~~of acquisition:

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.


Purchase Price:
Cash	$	374
Proceeds from credit facility		10,050
Issuance of common stock		551
Costs of acquisition		231

	$	11,206

Assets Acquired and Liabilities assumed:
Current assets	$	567
Property, plant and equipment		5,738
Goodwill and intangibles		4,913
Current liabilities		(12	)

	$	11,206

OnThe ~~September 1,~~pro ~~2005,~~forma ~~the~~consolidated ~~Company~~results ~~acquired~~of ~~Dayton Depot Casino in Dayton~~operations, ~~Nevada.~~as ~~Dayton~~if ~~Depot~~the ~~has~~acquisition ~~16,000 square feet~~ of ~~casino~~Dayton ~~and a family-style restaurant, two bars, 250 slot machines and a sportsbook operated by a third party. The Red Hawk Sports Bar, located across Highway 50 from the~~ Depot Casino, ~~houses~~had 33occurred ~~slot machines and a convenience store. The results of operations for the quarter ended~~on ~~September~~July 301, ~~2005~~2004, ~~include~~are ~~the~~as ~~results~~follows of(in ~~Dayton~~thousands ~~Depot~~except ~~Casino~~per ~~beginning~~share ~~September 1,~~data): ~~2005.~~

Critical Accounting Policies and Estimates


	Nine months ended March 31, 2006		Nine months ended March 31, 2005
Net revenues	$	68,310	$	63,772
Net income		2,489		2,764
Basic net income per share		0.35		0.44
Diluted net income per share		0.33		0.41
Basic Shares Outstanding		7,072		6,304
Diluted Shares Outstanding		7,562		6,793

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Certain of the Company’s policies, including the estimated lives assigned to long-lived assets, asset impairment, goodwill and other intangibles impairment, the adequacy of our allowance for uncollectible receivables, self insurance reserves, litigation reserves, and customer rewards program liability requires that the Company apply significant judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company’s judgments are based on historical experience, terms of existing contracts, observations of trends in the industry, information provided by customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from Company estimates.

Table of Contents

THE SANDS REGENT

~~MANAGEMENT’S DISCUSSION~~NOTES ~~AND~~TO ~~ANALYSIS~~CONDENSED OFCONSOLIDATED FINANCIAL ~~CONDITION~~STATEMENTS ~~AND~~(Unaudited) ~~RESULTS OF OPERATIONS~~

~~Results~~NOTE of7 ~~Operations~~ - ~~Quarter~~INTANGIBLES ~~ended~~AND ~~September 30,~~GOODWILL ~~2005, as compared to the quarter ended September 30, 2004.~~

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

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


	March 31, 2006						June 30, 2005
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization		Net		Gross Carrying Amount		Accumulated Amortization		Net
Finite-lived intangible assets:
Customer list/relationships	$	1,190	$	910	$	280	$	1,190	$	709	$	481
Under-market land lease (1)		—		—		—		448		21		427
Non-compete agreement		45		5		40		—		—		—

		1,235		915		320		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	$	915	$	12,099	$	13,156	$	730	$	12,426

~~Corporate~~(1) ~~expenses~~With ~~increased to $630,000 for~~ the ~~quarter~~purchase ~~ended September 30, 2005, compared to $327,000 for the same quarter~~ of ~~the prior year~~2.58 ~~Increases~~acres ~~from the prior period reflect the implementation in the current quarter~~ of ~~the~~land ~~requirements~~adjacent ofto ~~SFAS~~Rail ~~123R~~City ~~“Share-Based~~Casino ~~Payment”~~on ofDecember ~~$85~~20,~~000~~ ~~for stock options issued prior to July 1~~2005, ~~2005~~for ~~and~~ $16901,000, ~~for~~the ~~current~~Company ~~year~~recorded ~~grants~~a ofnon-cash ~~restricted~~charge ~~stock~~of ~~and~~ $34419,000 ~~accrued~~ ~~for management incentive awards~~ to ~~be awarded in~~ the ~~future~~unamortized ~~based~~value onof ~~fiscal 2006 performance. In addition,~~ the ~~Company~~under-market ~~incurred~~land ~~$178,000~~lease ofrelating ~~costs related~~ to ~~preparation~~early totermination ~~meet~~of the ~~new~~lease ~~internal~~on ~~control~~the ~~requirements~~land offrom the ~~Sarbanes-Oxley~~State ~~Act~~ of ~~2002~~Nevada.

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

~~RAIL~~The ~~CITY~~aggregate ~~CASINO~~amortization expense was $69,000 and $154,000 for the three months ended March 31, 2006 and 2005, respectively. The aggregate amortization expense was $213,000 and $463,000 for the nine months ended March 31, 2006 and 2005, respectively. Included in the nine months ended March 31, 2006 is $8,000 for amortization of the under market lease at Rail City prior to the purchase of the land from the State of Nevada. Estimated amortization expense for the current and succeeding fiscal years is as follows:

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


(Dollars in thousands)	Fiscal Year	Amortization
	2006	$	70	(3 Months	)
	2007		147
	2008		81
	2009		13
	2010		9

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

Goodwill Changes and Balance by Segment

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


(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		—		—		4,608		4,608

Balance at March 31, 2006	$	17,624	$	11,018	$	4,608	$	33,250

~~Gaming~~NOTE ~~operating~~8 ~~expenses~~- ~~for~~RECENTLY ~~the~~AMENDED ~~first~~AND ~~quarter~~RESTATED ofCREDIT ~~2005~~FACILITIES ~~were $2.0 million, decreasing $86,000 from $2.1 million for the first quarter of 2004, due to reduced rental agreements, maintenance contracts and expense for slot machine parts.~~

~~Food~~In connection with the acquisition of Dayton Depot Casino, the Company executed an amended and restated syndicated financing arrangement (“Credit Agreement”) ~~beverage~~through ~~revenue~~Wells ofFargo $1Bank.2 ~~million~~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 ~~first~~furniture, ~~quarter~~fixtures and equipment of ~~2005~~Last ~~decreased~~Chance, Inc. As the term loan is paid down, no additional borrowings may be taken on the loan. The balance of the term loan was $9519.5 million at March 31,~~000~~ ~~from~~2006 and $116.31 million ~~for~~at June 30, 2005. The loan has a variable interest rate based on LIBOR or the ~~same~~U.S. ~~quarter~~Prime ofIndex ~~2004~~plus an applicable margin as detailed in the Credit Agreement. ~~Cover~~The ~~counts~~interest ~~(number~~rate ofat ~~meals~~March 31, ~~served)~~2006 ~~for~~was LIBOR plus 2.25% or Prime plus 1%. The interest rate at June 30, 2005 was LIBOR plus 2% or Prime plus .5%. At March 31, 2006 and June 30, 2005, the ~~first~~weighted average interest rate on the term loan was 7.18% 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 months and the nine months ended March 31, 2006, the Company has paid down $825,000 and $2,475,000 on the term loan. Additionally, as part of ~~2005~~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 10substantially similar to the term loan.0% ~~less~~The ~~than~~balance ~~for~~of the ~~same~~revolving ~~period~~credit ~~one year~~facility ~~ago~~was $ 11.4 million at

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

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

THE SANDS REGENT

~~MANAGEMENT’S~~NOTES ~~DISCUSSION~~TO ~~AND~~CONDENSED ~~ANALYSIS~~CONSOLIDATED OF FINANCIAL ~~CONDITION~~STATEMENTS ~~AND~~(Unaudited) ~~RESULTS OF OPERATIONS~~

~~SANDS~~ March ~~REGENCY~~31, ~~HOTEL~~2006 ~~AND~~and ~~CASINO~~$ 3.4 million at June 30, 2005. The weighted average interest rate on the revolving credit facility at March 31, 2006 and June 30, 2005 was 7.11% 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 March 31, 2006.

~~The~~NOTE ~~following~~9 ~~table~~– ~~highlights~~SUBSEQUENT ~~the~~EVENTS ~~Sands’ sources of revenues and expenses for the periods indicated:~~

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

Rail City Land Acquisition

~~SANDS~~Plantation ~~REGENCY~~Investments, ~~HOTEL AND CASINO~~Inc., ~~Net revenue~~a ~~for~~subsidiary of the ~~Sands~~Company, ~~Regency~~has ~~was~~contracted $9to purchase a 0.65 ~~million~~acre ~~for~~site that is adjacent to the ~~quarter~~Rail ~~ended~~City ~~September~~Casino ~~30,~~which ~~2005,~~currently ~~represented~~has a ~~6.1%~~27 ~~increase~~unit ~~over~~motel on the ~~net~~site ~~revenue~~for of $91.03 million. ~~for~~The ~~the~~Company ~~quarter~~plans ~~ended~~to ~~September~~demolish ~~30,~~substantially ~~2004.~~all ~~Gaming~~of ~~revenue~~the motel units for ~~the~~additional ~~quarter~~customer ~~increased~~parking ~~10.3%~~during ~~over~~construction and ~~the~~continuing ~~prior~~once ~~period.~~the ~~The~~expansion ~~increase~~at inRail ~~gaming~~City ~~revenue~~Casino is ~~comprised~~completed. ofClosing aescrow ~~$296,000~~occurred ~~increase~~on inApril 3, ~~slot revenue to $4~~2006.6 ~~million~~With ~~for~~ the ~~current~~purchase ~~quarter~~of asthe ~~compared~~0.5 toacre ~~$4.3~~site, ~~million~~the ~~for~~scope of the ~~prior~~expansion ~~year~~of ~~quarter.~~the ~~Live~~Rail ~~poker~~City ~~generated~~Casino ~~revenue~~has ofbeen ~~$117,000~~increased inand the ~~quarter~~ ~~ended~~budgeted ~~September~~project costs ~~30,~~have ~~2005~~been ~~and~~revised ~~was~~to ~~not~~approximately ~~offered~~$13.8 inmillion versus the ~~prior~~previous ~~year~~estimate ~~quarter~~of $8.5 ~~Keno~~million. ~~revenue~~Increased ~~for~~construction ~~the~~costs, ~~quarter~~refinements ~~was~~to ~~$55~~the project scope,~~000,~~ ansequencing ~~increase~~of ~~from~~construction ~~$39,000~~activity into minimize the ~~prior~~impact ~~year~~of ~~quarter.~~construction ~~Keno~~and isthe acquisition ~~currently~~of ~~operated~~additional byland ~~the~~for ~~Company~~customer ~~compared~~parking, toduring ~~having~~and ~~been~~after athe ~~leased operation~~expansion, inare the ~~prior~~primary ~~year~~drivers ~~quarter~~of the increased cost estimates.

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

~~Lodging~~On ~~revenue~~May 16, ~~for~~2006, the ~~quarter~~Company ~~ended~~entered ~~September~~into 30an Agreement and Plan of Merger (the “Merger Agreement”) with Herbst Gaming, ~~2005~~Inc. (“Herbst”) ~~was~~and $3HGI-Casinos, Inc.0, ~~million~~a ~~increased~~Nevada ~~$158~~corporation and wholly-owned subsidiary of Herbst (“Merger Subsidiary”),~~000~~ pursuant to which, subject to the terms and conditions of the Merger Agreement, Merger Subsidiary will merge with orand ~~5.5%~~into ~~over~~the Company, with the ~~prior~~Company ~~year~~continuing ~~quarter~~as the surviving corporation and as a wholly-owned subsidiary of Herbst. ~~Hotel~~Under ~~room~~the ~~occupancy~~terms ~~was~~of 70the Merger Agreement each outstanding share of the Company’s common stock will be converted into the right to receive $15 in cash, without interest.7% Each option to purchase the Company’s common stock that is outstanding and unexercised immediately prior to the effective time of the merger shall be cancelled in exchange for the ~~quarter~~right ~~ended~~to ~~September~~receive from ~~30,~~the ~~2005,~~surviving ~~compared~~corporation a lump sum cash payment (without interest) equal to ~~69.9%~~the product of (x) the excess (if any) of (A) $15 over (B) the exercise price per share of the Company’s common stock for such option and (y) the ~~same~~number ~~quarter~~of shares of the ~~prior~~Company’s ~~year.~~common ~~Average~~stock ~~daily~~underlying ~~room~~such ~~rate~~option, ~~increased~~less 2applicable withholding taxes.5% ~~from~~Subject to the consent of the warrant holders, each warrant to purchase the Company’s common stock that is outstanding and unexercised immediately prior ~~year~~to ~~quarter.~~the effective time of the merger shall be cancelled in exchange for the right to receive from the surviving corporation a lump sum cash payment (without interest) equal to the product of (x) the excess (if any) of (A) $15 over (B) the exercised price per share of the Company’s common stock for such warrant and (y) the number of shares of the Company’s common stock underlying such warrant, less applicable withholding taxes.

The completion of the merger is subject to several conditions, including the receipt of applicable approvals from the Company’s stockholders, the absence of any material adverse effect on the Company’s business, the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Act of 1976, as amended, and the receipt of gaming approvals. However, no assurance can be given that all conditions to the consummation of the merger will be satisfied or that the merger will be consummated.

On May 31, 2006, a purported stockholder class action lawsuit was filed on behalf of the holders of the Company’s common stock in Nevada district court, in the county of Washoe. The complaint names the Company and its board of directors as defendants, and alleges that the board of directors breached its fiduciary duties by adopting the merger agreement and approving the merger.

THE SANDS REGENT

~~MANAGEMENT’S~~NOTES ~~DISCUSSION~~TO ~~AND~~CONDENSED ~~ANALYSIS~~CONSOLIDATED OF FINANCIAL ~~CONDITION~~STATEMENTS ~~AND~~(Unaudited)

~~RESULTS~~ seeks OFthe ~~OPERATIONS~~immediate disclosure of the Company’s quarterly results for the quarter ended March 31, 2006, imposition of a constructive trust, and other unspecified costs and damages, including reasonable attorneys’ fees and experts’ fees. The Company believes that the lawsuit is without merit and intends to vigorously defend the action.

GOLD RANCH CASINO AND RV RESORT.

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

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

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

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

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

THE SANDS REGENT ~~AND SUBSIDIARIES~~

~~MANAGEMENT’S~~Item ~~DISCUSSION~~2. ~~AND~~Management’s ~~ANALYSIS~~Discussion OFand ~~FINANCIAL~~Analysis ~~CONDITION~~of ~~AND~~Financial ~~RESULTS~~Condition OFand ~~OPERATIONS~~Results of Operations

~~DAYTON~~The ~~DEPOT~~Sands ~~CASINO~~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.

~~The~~Rail ~~operating~~City ~~results~~has ofapproximately ~~Dayton~~16,600 ~~Depot~~square ~~and~~feet ~~Red~~of ~~Hawk~~gaming ~~Sports~~space ~~Bar~~housing ~~(“Dayton~~650 ~~Depot Casino”)~~slots, ~~which~~6 ~~was~~table ~~acquired on September 1~~games, ~~2005~~ keno, ~~are~~a ~~reflected~~sportsbook ~~below.~~operated ~~First month~~by ~~results~~a ofthird ~~operations~~party, ~~under~~a ~~new~~24-hour ~~ownership~~family-style ~~may~~restaurant ~~not~~and bea ~~indicative of future results~~bar.

The ~~following~~Sands ~~table~~has ~~highlights~~833 ~~Dayton~~hotel ~~Depot~~rooms ~~Casino~~and 5 restaurants, including Tony Roma’s ~~sources~~Famous for Ribs, Mel’s the Original diner, and Arby’s. It has a full selection of ~~revenues~~gaming options, including 544 slot machines, 17 table games, poker, keno, bingo, and ~~expenses~~a ~~for~~sportsbook ~~the~~operated ~~three~~by ~~months~~a ~~ended~~third ~~September~~party. 30Additionally, ~~2005:~~the Sands Regency has a Just for Laughs’ comedy club, a cabaret lounge, and a health spa.

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

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.

WeOn ~~are~~September 1, ~~implementing~~2005, athe ~~new~~Company ~~operating strategy~~acquired atDayton Depot Casino in Dayton, Nevada. Dayton Depot Casino ~~that~~has ~~includes~~16,000 ~~upgrading~~square ~~slot~~feet ~~products~~of casino, ~~implementing~~a ~~marketing~~family-style restaurant, two bars, 250 slot machines and ~~promotional~~a ~~programs~~sportsbook ~~that~~operated ~~have~~by ~~been~~a ~~successful~~third ~~for~~party. ~~the~~The ~~other~~Red ~~properties~~Hawk ~~within~~Sports Bar, located across Highway 50 from the ~~Company~~Depot Casino, ~~finalizing~~houses ~~design~~33 slot machines and ~~remodeling~~a convenience store. The results of operations for the ~~restaurant~~three months and ~~moving~~ ~~ahead~~nine ~~with~~months ~~plans~~ended toMarch 31, ~~implement~~2006 ainclude ~~slot~~the ~~player~~results ~~tracking~~of ~~system~~Dayton Depot Casino beginning September 1, 2005.

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

~~The $303~~On May 16,~~000~~ ~~increase~~2006, inthe ~~corporate~~Company ~~costs~~entered isinto ~~primarily~~an Agreement ~~the~~and ~~result~~Plan of ~~$178~~Merger (the “Merger Agreement”) with Herbst Gaming,~~000~~ Inc. (“Herbst”) and HGI-Casinos, Inc., a Nevada corporation and wholly-owned subsidiary of ~~costs~~Herbst ~~directly~~(“Merger ~~attributable~~Subsidiary”), pursuant to ~~fees~~which, subject to ~~outside~~the ~~professionals~~terms ~~retained~~and toconditions ~~assist~~of inthe ~~compliance~~Merger Agreement, Merger Subsidiary will merge with and into the ~~new~~Company, ~~internal~~with ~~controls~~the ~~requirements~~Company ofcontinuing as the ~~Sarbanes~~surviving corporation and as a wholly-owned ~~Oxley~~subsidiary ~~Act~~of Herbst. Under the terms of ~~2002~~the Merger ~~(“SOX”),~~Agreement ~~specifically~~each ~~SOX~~outstanding ~~section~~share ~~404.~~of ~~There~~the ~~were~~Company’s nocommon ~~outside~~stock ~~costs~~will ~~relating~~be toconverted ~~SOX~~into ~~compliance~~the inright ~~the~~to ~~quarter~~receive ~~ended~~$15 ~~September~~in 30cash, ~~2004~~without interest. ~~The~~Each ~~Company~~option ~~currently~~to ~~qualifies~~purchase asthe aCompany’s ~~non-accelerated~~common ~~filer.~~stock ~~The~~that ~~Securities~~is outstanding and ~~Exchange~~unexercised ~~Commission~~immediately ~~recently~~prior ~~extended~~to the ~~required~~effective ~~compliance~~time ~~dates~~of ~~for~~the ~~non-accelerated~~merger ~~filers,~~shall ~~and~~be wecancelled ~~are~~in ~~now~~exchange ~~required~~for the right to ~~report~~receive onfrom ~~our~~the ~~systems~~surviving ofcorporation ~~internal~~a ~~controls~~lump sum cash payment (~~SOX~~without ~~404~~interest) asequal to the product of ~~June~~(x) the ~~30,~~excess ~~2008.~~(if ~~The~~any) of (A) $15 over (B) the exercise price per share of the Company’s ~~has~~common ~~begun~~stock tofor ~~shift~~such option and (y) the ~~emphasis~~number of shares of the ~~SOX~~Company’s ~~404~~common ~~effort~~stock underlying such option, less applicable withholding taxes. Subject to bethe consent of the ~~more~~warrant ~~focused~~holders, oneach ~~internal~~warrant ~~resources~~to ~~and~~purchase ~~reduced~~the ~~use~~Company’s ofcommon ~~outside~~stock ~~professionals.~~that ~~Management~~is ~~compensation~~outstanding ~~expense~~and ~~related~~unexercised immediately prior to the ~~adoption~~effective time of ~~SFAS~~the ~~123R~~merger ~~“Share-Based~~shall ~~Payment”~~be ~~totaled~~cancelled ~~$85,000~~in exchange for the ~~quarter~~right ~~ended~~to ~~September~~receive ~~30,~~from ~~2005.~~the ~~There~~surviving corporation ~~was~~a ~~no management~~lump ~~compensation~~sum ~~expense~~cash ~~related~~payment (without interest) equal to ~~SFAS~~the ~~123R~~product inof (x) the ~~same~~excess ~~period~~(if any) of (A) $15 over (B) the ~~prior~~exercised ~~year~~price per share of the Company’s common stock for such warrant and (y) the number of shares of the Company’s common stock underlying such warrant, less applicable withholding taxes.

~~INTEREST~~The ~~EXPENSE.~~completion ~~Interest~~of ~~expense~~the ~~was~~merger ~~$428~~is subject to several conditions,~~000~~ ~~for~~including the ~~quarter~~receipt ~~ended~~of ~~September 30,~~applicable ~~2005,~~approvals ~~compared~~from tothe ~~$606~~Company’s stockholders,~~000~~ ~~for~~ the ~~quarter~~absence ~~ended~~of ~~September 30,~~any ~~2004.~~material ~~Our~~adverse ~~long-term~~effect ~~debt~~on ~~balance~~the atCompany’s ~~September 30~~business, ~~2005~~the expiration or termination of the applicable waiting period under the ~~was~~Hart-Scott-Rodino ~~$28.8~~Antitrust ~~million~~Act of 1976, ~~which~~as ~~includes~~amended, ~~$10.3~~and ~~million~~the ~~advanced~~receipt onof ~~September~~gaming 1,approvals. ~~2005~~However, inno ~~connection~~assurance ~~with~~can be given that all conditions to the ~~acquisition~~consummation of ~~Dayton~~the ~~Depot~~merger ~~Casino.~~will ~~This~~be ~~represents~~satisfied aor ~~decrease~~that ~~from~~the ~~$34.9~~merger ~~million~~will atbe ~~September 30, 2004~~consummated.

THE SANDS REGENT

~~MANAGEMENT’S~~ and ~~DISCUSSION~~members ~~AND~~its ~~ANALYSIS~~board OFof ~~FINANCIAL~~directors ~~CONDITION~~as ~~AND~~defendants, ~~RESULTS~~and OFalleges ~~OPERATIONS~~that the board of directors breached its fiduciary duties by adopting the merger agreement and approving the merger.

~~Capital~~The ~~Resources~~complaint seeks an injunction preventing the completion of the merger, invalidating the merger agreement, and ~~Liquidity~~directing the board of directors to obtain a higher per share price for the Company’s common stock. It further seeks the immediate disclosure of the Company’s quarterly results for the quarter ended March 31, 2006, imposition of a constructive trust, and other unspecified costs and damages, including reasonable attorneys’ fees and experts’ fees, The Company believes that the lawsuit is without merit and intends to vigorously defend the action.

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

~~Cash~~The ~~flow~~Company ~~from~~prepares ~~operations~~its consolidated ~~provided~~financial ~~$4.7~~statements ~~million~~in ~~during~~conformity ~~the~~with ~~three~~accounting ~~month~~principles ~~period~~generally ~~ended~~accepted ~~September 30,~~in ~~2005,~~the ~~compared~~United toStates $3of America.0 ~~million~~Certain ~~for~~of the ~~corresponding~~Company’s ~~period~~policies, ofincluding the ~~prior~~ ~~year.~~estimated ~~This~~lives ~~was~~assigned ~~primarily attributable~~ to along-lived ~~$1.1~~assets, ~~million~~asset ~~increase~~impairment, goodwill inand ~~accrued~~other ~~expenses~~intangibles ~~not~~impairment, ~~paid~~the ~~compared~~adequacy ~~with~~of ~~the~~our ~~corresponding~~allowance ~~period~~for ofuncollectible ~~the~~receivables, ~~prior~~self ~~year.~~insurance Toreserves, ~~facilitate~~litigation areserves, ~~transition~~and tocustomer arewards ~~new~~program ~~accounting~~liability ~~system~~requires onthat ~~July~~the 1,Company ~~2005,~~apply ~~all~~significant ~~invoice~~judgment ~~payments~~in ~~were~~defining ~~expedited~~the atappropriate ~~June~~assumptions ~~30,~~for ~~2005.~~calculating ~~This~~financial ~~resulted~~estimates. inBy ~~lower~~their ~~accrued~~nature, ~~expenses~~these atjudgments ~~June~~are ~~30,~~subject ~~2005.~~to Toan ~~appropriately~~inherent ~~gain~~degree ~~visibility~~of ~~into~~uncertainty. ~~the~~The ~~true~~Company’s ~~net~~judgments ~~change~~are ~~between~~based ~~June~~on 30historical experience, ~~2005~~terms of existing contracts, and ~~September~~observations ~~30,~~of ~~2005~~trends in the industry, ~~combining~~information ~~accounts~~provided ~~payable~~by customers and ~~other~~information ~~accrued~~available ~~expenses provides~~from aother ~~net~~outside ~~increase~~sources, ofas ~~$713,000~~appropriate. ~~primarily~~There ~~attributable~~can tobe ~~the~~no ~~purchase~~assurance ofthat ~~new~~actual ~~gaming~~results ~~equipment~~will ~~during~~not ~~the~~differ ~~quarter.~~from Company estimates.

~~Investing~~Results ~~activities accounted for a $12.0 million use~~ of ~~cash~~Operations ~~for~~– ~~the~~Comparisons ~~three months ended September 30, 2005, compared with $1.1 million for the three months ended September 30, 2004. The difference represents the net cash paid for the purchase~~ of ~~Dayton~~Three ~~Depot~~Months ~~Casino~~and onNine ~~September 1,~~Months ~~2005. Financing activities accounted for $8.8 million of cash inflows during the three month period~~ ended ~~September 30,~~ ~~2005 compared to $2.2 million cash outflow for the three month period ended September~~March 3031, ~~2004.~~2006 ~~The change from the prior period related to borrowing of $10.1 million on the amended~~ and ~~restated credit facility to fund the purchase of Dayton Depot Casino~~2005.

~~Our~~CONSOLIDATED ~~amended~~RESULTS. ~~and~~For ~~restated~~the ~~bank~~three ~~term~~months ~~loan~~ and ~~revolving~~ ~~credit~~nine ~~facility,~~months ~~which~~ended ~~totaled~~March 31, ~~$47.0 million as of September 2005~~2006, ~~requires~~ the Company’s toconsolidated benet inrevenues ~~compliance~~increased ~~with~~13.9% ~~certain financial~~ and ~~other~~13.0% ~~covenants,~~from ~~restricts future encumbrances and limits situations where a change in control in the~~$18.4 ~~Company~~million ~~may~~to ~~occur~~$21.0 ~~The~~million ~~financial covenants include the requirement that a minimum EBITDA (earnings before interest expense, taxes, depreciation~~ and ~~amortization)~~from ~~and~~$59.7 million ~~certain~~to ~~other financial ratios be maintained~~$67.4 ~~The~~respectively, ~~Company~~compared ~~believes~~to ~~that~~the itsame isperiods ~~in compliance~~of ~~with~~the ~~all~~prior ~~covenants and restrictions at September 30, 2005~~year.

~~The Company~~On ~~believes~~a ~~that~~by-property ~~its~~basis, ~~cash~~the net ~~funds,~~revenue ~~cash~~for ~~generated~~Rail ~~from~~City ~~operations,~~increased 5.1% and ~~available~~4.1% ~~borrowing~~from ~~capacity~~the ~~will~~corresponding bethree ~~sufficient~~months toand ~~fund~~nine ~~its~~months ~~operations~~of the prior year, ~~meet~~while ~~current~~net ~~debt~~revenue ~~obligations,~~for ~~and~~the ~~fulfill~~Sands ~~its~~increased ~~capital~~0.9% ~~expenditure~~and ~~obligations~~4.1% ~~for~~from the ~~next~~corresponding 12three months~~; however,~~ ~~the~~and ~~Company’s~~nine ~~operations~~months ~~are~~of ~~subject~~the toprior ~~financial,~~year. Gold ~~economic,~~Ranch ~~competitive,~~net ~~regulatory,~~revenue increased 14.6% and ~~other~~15.4% ~~factors,~~from ~~many~~the ofcorresponding ~~which~~three ~~are~~month ~~beyond~~and ~~its~~nine ~~control.~~months Ifof the ~~Company~~prior isyear, ~~unable~~primarily attributable to ~~generate~~increases ~~sufficient~~in ~~cash~~the ~~flow,~~retail itprice ~~could~~of begasoline. ~~required~~Consolidated tonet ~~adopt~~revenues ~~one or~~include ~~more~~Dayton ~~alternatives,~~Depot ~~such~~Casino aswhich was ~~reducing~~acquired orby ~~delaying~~the ~~planned~~Company ~~capital~~on ~~expenditures~~September 1, ~~selling~~2005. ~~assets,~~The ~~restructuring~~factors ~~debt,~~that orare ~~obtaining~~attributed ~~additional~~to ~~equity~~the ~~capital~~financial results of the business are discussed below.

~~Commitments~~The Company’s consolidated income from operations was $776,000 for the quarter ended March 31, 2006 and ~~Contingencies~~$5.3 million for the nine months ended March 31, 2006 compared to $802,000 and $5.3 million for the respective periods of the prior year. Rail City achieved income from operations of $1.9 million and $5.1 million for the three and nine months ended March 31, 2006, a 13.7% increase and 8.7% increase compared to the same periods of the prior year. Rail City income from operations for the nine months ended March 31, 2006 was impacted by a $419,000 non-cash charge for loss on early termination of land lease. The Sands income from operations was ($429,000) and $1.1 million, a 44.6% decrease and 2.7% increase from the same periods of the prior year. Income from operations at Gold Ranch of $58,000 and $734,000 for the three months and nine months ended March 31, 2006 represents a 56.4% and 30.4% decrease for the same three month and nine 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~~Corporate ~~following~~expenses ~~table~~increased ~~summarizes~~to $1.1 million and $2.5 million for the ~~Company’s~~three ~~contractual~~and ~~obligations~~nine asmonths ended March 31, 2006, compared to $718,000 and $1.6 million for the same periods of ~~September~~the prior year. Increases from the prior period reflect the implementation in the current quarter and nine months ended March 3031, 2006, of the requirements of SFAS No.123R “Share-Based Payment” of $45,000 and $190,000 for stock options issued prior to July 1, 2005 and $85,000 and $172,000 for current year grants of restricted stock and $25,000 and $89,000 for accrued management incentive awards to be awarded in the future based on fiscal 2006 performance. For the nine months ended March 31, 2006, the following amounts, were allocated to the various properties and are included in General and Administrative Expenses: Sands Regency - $24,800 and $59,000; Gold Ranch - $5,300

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

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

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

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

Cautionary Note Regarding Forward-looking Statements

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

THE SANDS REGENT

~~MANAGEMENT’S~~ and ~~DISCUSSION~~$13,000; ~~AND~~Rail ~~ANALYSIS~~City OFCasino ~~FINANCIAL~~- ~~CONDITION~~$9,300 ~~AND~~and ~~RESULTS~~$24,000; OFand ~~OPERATIONS~~Dayton Depot Casino - $4,900 and $11,000 for the three months and nine months ended March 31, 2006. In addition, the Company incurred $21,000 and $283,000 for the three months and nine months ended March 31, 2006 of costs related to preparation to meet the new internal control requirements of the Sarbanes-Oxley Act of 2002. Included in corporate expenses for the three months ended March 31, 2006 is $256,000 for costs associated with an independent investigation requested by the Audit Committee in February, 2006 and $100,000 of costs associated with the merger with Herbst Gaming, Inc. See Note 9.

~~established~~The byCompany ~~the~~had ~~Private~~consolidated ~~Securities~~net ~~Litigation~~income ~~Reform~~of ~~Act~~$63,000 ofand ~~1995~~$2.4 ~~You~~million, ~~can identify these statements by the fact that they do not relate strictly to historical~~ or ~~current~~ ~~facts~~$.01 ~~These~~per ~~statements~~share ~~contain~~($.01 ~~words~~diluted) ~~such~~and as$.34 ~~“may,”~~per ~~“will,”~~share ~~“project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,”~~($.32 ~~“would~~diluted),” ~~“estimate,”~~for ~~“continue” or “pursue,” or~~ the ~~negative~~three ormonths ~~other~~and ~~variations~~nine ~~thereof~~months orended ~~comparable~~March 31, ~~terminology. In particular~~2006, ~~they~~compared ~~include statements relating~~ to, ~~among other things~~$259,000 ~~future~~and ~~actions, strategies,~~$ ~~future performance~~2.4 million, ~~and~~or ~~future financial results~~$.04 Weper ~~have~~share ~~based~~($.03 ~~these~~diluted) ~~forward-looking statements on our current expectations~~ and ~~projections~~$.38 ~~about~~per ~~future~~share ~~events~~($.35 ~~Any~~diluted), ~~forward-looking~~for ~~statements are made pursuant to~~ the ~~Private~~three ~~Securities Litigation~~months ~~Reform Act of 1995~~ and, asnine ~~such,~~months ~~speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements~~March 31, ~~whether as a result of new information, future events or otherwise~~2005.

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

~~Risks~~The following ~~Relating~~table tohighlights ~~our~~Rail ~~Business~~City Casino’s sources of revenues and expenses for the periods indicated:

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


	THREE MONTHS ENDED MARCH 31								NINE MONTHS ENDED MARCH 31
(Dollars in thousands)	2006			2005			PERCENT CHANGE		2006			2005			PERCENT CHANGE
Gaming revenues	$	6,053		$	5,644		7.2	%	$	17,773		$	16,709		6.4	%
Gaming expenses	$	2,124		$	2,069		2.6	%	$	6,276		$	6,192		1.4	%
Expense margin		35.1	%		36.7	%				35.3	%		37.1	%
Food and beverage revenues	$	1,147		$	1,255		-8.6	%	$	3,515		$	3,809		-7.7	%
Food and beverage expenses	$	778		$	785		-0.9	%	$	2,424		$	2,399		1.0	%
Expense margin		67.8	%		62.5	%				69.0	%		63.0	%
Total net revenues	$	6,519		$	6,200		5.1	%	$	19,208		$	18,456		4.1	%
Total operating expenses	$	4,606		$	4,517		2.0	%	$	13,659		$	13,736		-0.6	%
Expense margin		70.7	%		72.9	%				71.1	%		74.4	%
Maintenance and utilities	$	343		$	330		3.9	%	$	1,060		$	1,027		3.2	%
Percent of net revenues		5.3	%		5.3	%				5.5	%		5.6	%
General and administrative	$	796		$	758		5.0	%	$	2,322		$	2,512		-7.6	%
Percent of net revenues		12.2	%		12.2	%				12.1	%		13.6	%

~~Our~~Rail ~~business~~City ~~may~~gaming berevenue was $6.1 million and $17.8 million for the three months and nine months ended ~~adversely~~March 31, ~~impacted~~2006, ifa 7.2% and 6.4% increase from the ~~Reno~~three ~~economy~~months ~~declines~~and nine months ended March 31, 2005. The total coin-in, an indicator of total slot machine wagering, increased 5.3% and 4.9% for the three months and nine months ended March 31, 2006. Gaming operating expenses for the three and nine months ended March 31, 2006 were $2.1 million and $6.3 million, compared to $2.1 million and $6.2 million for the same periods a year ago, an increase of $54,000 and $84,000 respectively.

WeFood ~~heavily~~and ~~market~~beverage torevenue of $1.1 million and ~~rely~~ ~~upon~~$3.5 ~~business~~million ~~from~~for ~~Reno~~the ~~area~~three ~~residents.~~and Innine ~~recent~~months ~~years~~ended March 31, ~~Reno~~2006 compared ~~has~~to ~~enjoyed~~$1.2 ~~robust~~million ~~business~~and ~~growth~~$3.8 ~~and~~million ~~has~~for ~~attracted~~the asame ~~number~~periods ofin ~~technology,~~the ~~product~~prior ~~distribution~~year. ~~and~~Cover ~~marketing~~counts ~~companies.~~(number ~~These~~of ~~businesses~~meals ~~have~~served) ~~created~~for ~~jobs~~the three months and ~~helped~~nine ~~fuel residential~~months ~~development~~ended March 31, ~~including~~2006, ~~the~~are ~~Reno~~decreased ~~metropolitan~~as ~~area.~~a ~~Should~~result ~~there~~of bemore ~~negative~~focused ~~changes~~food inpromotional programs. General and administrative expenses for the ~~business~~three months and ~~job~~nine ~~conditions~~months inended ~~Reno~~March 31, ~~our~~2006 ~~locals~~were ~~business~~$796,000 ~~which~~and is$2.3 amillion ~~substantial~~compared ~~part~~to ~~of our overall business~~$758,000 ~~could~~and be$2.5 ~~adversely impacted~~million.

On December 20, 2005, Plantation Investments Inc., a subsidiary of the Company purchased 2.58 acres of land adjacent to the Rail City Casino for a total price of $901,000. The ~~gaming~~land ~~industry~~will isbe ~~highly~~utilized ~~competitive~~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 ~~competition~~to ~~could~~850, ~~have~~with ultimate plans for a ~~material~~total ~~adverse~~of ~~effect~~1,000 ongames. ~~our~~Pending ~~future~~completion ~~operations~~of the permit process with the City of Sparks, the Company 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.

The gaming industry is highly competitive. As competitive pressures from California Native American casinos increase, other Reno area casinos may intensify their targeting of the Reno area resident market, which is one of our key markets. Increased competitive pressures in the local market could adversely impact our ability to continue to attract local residents to our facilities, or require us to use more expensive and therefore less profitable promotions to compete more efficiently. In addition, Native American gaming facilities in California and other jurisdictions in some instances operate under regulatory requirements less stringent than those imposed on Nevada licensed casinos, which could afford them a competitive advantage in our markets.

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

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

Adverse winter weather conditions in the Sierra Nevada Mountains and Reno-Lake Tahoe area could have a material adverse effect on our results of operations and financial condition.

Adverse winter weather conditions, particularly snowfall, can deter our customers from traveling or make it difficult for them to

THE SANDS REGENT

~~MANAGEMENT~~There can be no assurance that the construction process will proceed as currently planned due to factors outside the Company’Ss ~~DISCUSSION~~control. ~~AND~~The ~~ANALYSIS~~scope OFof ~~FINANCIAL~~the ~~CONDITION~~expansion ~~AND~~has ~~RESULTS~~been OFincreased ~~OPERATIONS~~and the budgeted project costs have been revised to be approximately $13.8 million compared to 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 continuing once the expansion is completed. The escrow closed on April 3, 2006.

~~frequent~~SANDS ~~our~~REGENCY ~~facilities.~~HOTEL ~~Adverse~~AND ~~winter~~CASINO weather would most significantly affect our drive-in customers from northern California and the Pacific Northwest. If the Reno area itself were to experience prolonged adverse winter weather conditions, our results of operations and financial condition could also be materially adversely affected.

~~Terrorist~~The ~~attacks~~following ~~may~~table ~~seriously~~highlights ~~harm~~the ~~our~~Sands’ ~~business.~~sources of revenues and expenses for the periods indicated:

The terrorist attacks that took place in the United States on September 11, 2001 were unprecedented events that created economic and business uncertainties, especially for the travel and tourism industry. The potential for future terrorist attacks, the national and international responses, and other acts of war or hostility have created economic and political uncertainties that could materially adversely affect our business, results of operations, and financial condition in ways we currently cannot predict.


	THREE MONTHS ENDED MARCH 31								NINE MONTHS ENDED MARCH 31
(Dollars in thousands)	2006			2005			PERCENT CHANGE		2006			2005			PERCENT CHANGE
Gaming revenues	$	4,875		$	5,049		-3.4	%	$	16,231		$	15,508		4.7	%
Gaming expenses	$	2,545		$	2,478		2.7	%	$	7,658		$	7,225		6.0	%
Expense margin		52.2	%		49.1	%				47.2	%		46.6	%
Lodging revenues	$	1,871		$	1,646		13.7	%	$	6,670		$	6,211		7.4	%
Lodging expense	$	906		$	867		4.5	%	$	2,842		$	2,801		1.5	%
Expense margin		48.4	%		52.7	%				42.6	%		45.1	%
Food and beverage revenues	$	1,142		$	1,216		-6.1	%	$	3,428		$	3,623		-5.4	%
Food and beverage expenses	$	770		$	750		2.7	%	$	2,448		$	2,351		4.1	%
Expense margin		67.4	%		61.7	%				71.4	%		64.9	%
Total net revenues	$	7,315		$	7,250		0.9	%	$	24,624		$	23,658		4.1	%
Total operating expenses	$	7,744		$	7,546		2.6	%	$	23,478		$	22,542		4.2	%
Expense margin		105.8	%		104.1	%				95.3	%		95.3	%
Maintenance and utilities	$	985		$	916		7.5	%	$	2,908		$	2,738		6.2	%
Percent of net revenues		13.5	%		12.6	%				11.8	%		11.6	%
General and administrative	$	1,471		$	1,539		-4.4	%	$	4,449		$	4,407		1.0	%
Percent of net revenues		20.1	%		21.2	%				18.1	%		18.6	%

IfSands weRegency ~~lose~~net ~~key~~revenue ~~personnel~~was $7.3 million and $24.6 million for the three months and nine months ended March 31, ~~our~~2006. ~~business~~This ~~could~~represents bea ~~materially~~0.9% increase and 4.1% increase over the net revenue of $7.3 million and $23.7 million for the three months and nine months ended March 31, 2005. The tourist segment of Sands Regency revenue base was adversely ~~affected~~impacted by frequent weather related road restrictions that had the effect of discouraging visitation, particularly during the month of March.

WeGaming ~~depend~~revenue onfor the ~~continued~~three ~~performance~~months ofended ~~our~~March 31, ~~Chief~~2006 ~~Executive~~decreased ~~Officer~~3.4% and ~~his~~increased ~~management team~~4.7% Iffor wethe ~~lose~~nine ~~the~~months ~~services~~ended ofMarch 31, ~~our~~2006. ~~senior management~~Slot ~~personnel~~Revenues in this quarter declined $171,000 and ~~cannot~~slot ~~replace~~win ~~such~~as ~~persons~~a inpercent aof ~~timely~~coin-in ~~manner,~~decreased ~~our~~to 5.7% ~~business~~from ~~could~~6.1% befrom ~~materially~~the ~~adversely~~prior ~~affected~~year period.

~~Our~~Gaming ~~business~~expenses isfor ~~subject~~the tothree ~~restrictions~~months and ~~limitations~~nine ~~imposed~~months byended ~~regulatory~~March 31, ~~authorities~~2006 ~~that~~were ~~could~~$2.5 ~~adversely~~million ~~affect~~and us$7.7 million, an increase of 2.7% and 6.0%, from the prior year periods.

~~The~~Lodging ~~ownership~~revenue ~~and~~for ~~operation~~the ofthree ~~casino~~months ~~gaming~~and ~~facilities~~nine ~~are~~months ~~subject~~ended toMarch 31, ~~extensive~~2006 ~~state and~~were ~~local regulation~~$1.9 ~~The~~million ~~State of Nevada~~ and ~~the~~$6.7 ~~applicable~~million, ~~local~~an ~~authorities~~increase ~~require~~of ~~various~~13.7% ~~licenses, registrations, permits~~ and ~~approvals~~7.4% toover bethe ~~held~~prior byyear usperiods. ~~The~~Average ~~Nevada~~daily ~~Gaming~~room ~~Commission~~rate ~~may,~~for ~~among~~the ~~other~~nine ~~things,~~months ~~limit,~~ended ~~condition~~March 31, ~~suspend~~2006, orincreased ~~revoke or decline to renew a license for any cause deemed reasonably by such licensing authority~~6.0% Ifwhen wecompared ~~violate~~with ~~gaming~~the ~~laws~~prior ornine ~~regulations~~month period, ~~substantial~~primarily ~~fines~~attributable ~~could be levied against us and we could be forced~~ to ~~forfeit a portion of our assets. The suspension,~~ ~~revocation or non-renewal of any of our licenses or~~ the ~~levy~~closing ~~on us~~ of ~~substantial fines or forfeiture of assets would have~~ a ~~material~~competitor ~~and~~in ~~adverse~~December ~~effect on our business, financial condition and results of operations~~2005.

If the State of Nevada or other local municipalities increase gaming taxes and fees, our results of operations could be adversely affected.

State and local authorities raise a significant amount of revenue through taxes and fees on gaming activities. From time to time, legislators and officials have proposed changes in tax laws, or in the administration of such laws, affecting the gaming industry. In addition, worsening economic conditions could intensify the efforts of state and local governments to raise revenues through increases in gaming taxes. If the State of Nevada, the cities of Reno, Sparks or Dayton, or Washoe or Lyon County were to increase gaming taxes and fees, our results of operations could be adversely affected.

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

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

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

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

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

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

• create competitive disadvantages compared to other companies with lower debt levels; and

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

THE SANDS REGENT

~~MANAGEMENT’S~~GOLD ~~DISCUSSION~~RANCH ~~AND~~CASINO ~~ANALYSIS OF FINANCIAL CONDITION~~ AND ~~RESULTS~~RV OFRESORT ~~OPERATIONS~~

WeThe ~~may~~following betable ~~unable~~highlights toGold ~~successfully~~Ranch’s ~~integrate~~sources ~~the operations~~ of ~~our~~revenues ~~recent~~ and ~~future~~expenses ~~acquisitions~~for ~~and/or experience significant charges to earnings as a result of~~ the ~~acquisition~~ ~~that~~periods ~~may~~indicated: ~~adversely affect our stock price and financial condition.~~

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


	THREE MONTHS ENDED MARCH 31								NINE MONTHS ENDED MARCH 31
(Dollars in thousands)	2006			2005			PERCENT CHANGE		2006			2005			PERCENT CHANGE
Gaming revenues	$	1,305		$	1,093		19.4	%	$	4,225		$	3,900		8.3	%
Gaming expenses	$	499		$	443		12.6	%	$	1,544		$	1,374		12.4	%
Expense margin		38.2	%		40.5	%				36.5	%		35.2	%
Lodging revenues	$	55		$	46		19.6	%	$	307		$	344		-10.8	%
Lodging expense	$	43		$	31		38.7	%	$	133		$	138		-3.6	%
Expense margin		78.2	%		67.4	%				43.3	%		40.1	%
Food and beverage revenues	$	397		$	374		6.1	%	$	1,353		$	1,246		8.6	%
Food and beverage expenses	$	257		$	265		-3.1	%	$	837		$	853		-1.9	%
Expense margin		64.5	%		70.9	%				61.9	%		68.5	%
Fuel and convenience store revenues	$	4,082		$	3,562		14.6	%	$	14,739		$	12,345		19.4	%
Fuel and convenience store expenses	$	3,892		$	3,324		17.1	%	$	14,158		$	11,712		20.9	%
Expense margin		95.4	%		93.3	%				96.1	%		94.9	%
Total net revenues	$	5,715		$	4,985		14.6	%	$	20,251		$	17,553		15.4	%
Total operating expenses	$	5,657		$	4,852		16.6	%	$	19,517		$	16,499		18.3	%
Expense margin		99.0	%		97.3	%				96.4	%		94.0	%
Maintenance and utilities	$	172		$	164		4.9	%	$	535		$	519		3.1	%
Percent of net revenues		3.0	%		3.3	%				2.6	%		3.0	%
General and administrative	$	577		$	466		23.8	%	$	1,673		$	1,457		14.8	%
Percent of net revenues		10.1	%		9.3	%				8.3	%		8.3	%

•Gold ~~retaining~~Ranch ~~key~~had ~~employees;~~net revenue for the three months and nine months ended March 31, 2006, of $5.7 million and $20.3 million, compared to $5.0 million and $17.6 million for prior year periods.

•Gaming ~~consolidating~~revenue ~~administrative~~for ~~infrastructures;~~Gold Ranch, comprised principally of slot machine revenue, increased to $1.3 million and $4.2 million in the three months and nine months ended March 31, 2006 compared to $1.1 million and $3.9 million for the prior year periods. During the three months and nine months ended March 31, 2006, the property increased its marketing and promotional activities in an effort to increase tracked customer play. However, the continued increase in the retail price of gasoline and the resulting decrease in weekend highway 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.

•Fuel ~~coordinating~~and ~~sales~~convenience ~~and~~store ~~marketing~~revenue ~~functions;~~continue to reflect the increased price of gasoline as revenue increased 14.6% for the most recent quarter and 19.4% on a year to date basis while the gallons of gasoline pumped were equal to the prior year periods.

•Gold ~~minimizing~~Ranch income from operations for the ~~diversion~~three months and nine months ended March 31, 2006 was $58,000, and $734,000 compared to $133,000 $1,054,000 in the same periods of ~~management~~the prior year. The decline in Gold Ranch’s ~~attention~~income from ~~ongoing~~operations ~~business~~was ~~concerns~~primarily due to an increase for the three months and nine months ended March 31, 2006, 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 customer database. In addition, depreciation expense increased $78,000 and $222,000 for the three months and nine months ended March 31, 2006, resulting from the installation in the spring of 2005 of an automated slot customer tracking system.

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

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

THE SANDS REGENT

~~MANAGEMENT’S~~DAYTON ~~DISCUSSION~~DEPOT ~~AND~~CASINO ~~ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 seven months ended March 31, 2006:


	THREE MONTHS ENDED MARCH 31					SEVEN MONTHS ENDED MARCH 31
(Dollars in thousands)	2006			2005	PERCENT CHANGE	2006			2005	PERCENT CHANGE
Gaming revenues	$	1,276				$	2,870
Gaming expenses	$	460				$	1,018
Expense margin		36.1	%				35.5	%
Food and beverage revenues	$	256				$	604
Food and beverage expenses	$	152				$	401
Expense margin		59.4	%				66.4	%
Total net revenues	$	1,452				$	3,314
Total operating expenses	$	1,168				$	2,504
Expense margin		80.4	%				75.6	%
Maintenance and utilities	$	86				$	167
Percent of net revenues		5.9	%				5.0	%
General and administrative	$	188				$	386
Percent of net revenues		12.9	%				11.7	%

We have implemented a new operating strategy at Dayton Depot Casino that includes upgraded slot products, marketing and promotional programs that have been successful for the other properties within the Company, a new slot player tracking system installed in January 2006, and we are currently finalizing design and remodeling of the restaurant, which we anticipate will be completed in the late summer of 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 $1.1 million and $2.5 million for the three months and nine months ended March 31, 2006, compared to $718,000 and $1.6 million for the prior year periods.

The $335,000 and $894,000 increase for the three months and nine months ended March 31, 2006 is primarily due to $21,000 and $283,000 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 $252,000 and $261,000 in costs relating to SOX compliance in the three months ended March 31, 2005 and nine months ended March 31, 2005. 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 No. 123R “Share Based Payment” totaled $108,000 and $343,000 ($155,000 and $451,000 on a consolidated basis) for the three months and nine months ended March 31, 2006. There was no management compensation expense related to SFAS No. 123R in the same periods of the prior year. For further explanation of the compensation expense related to SFAS No.123R and those that are the recipients under the plans, refer to Note 5. Included in corporate costs for the three months and nine months ended March 31, 2006 is $256,000 for costs associated with an independent investigation requested by the Audit Committee in February 2006, as well as $100,000 of costs associated with the merger with Herbst Gaming, Inc.

THE SANDS REGENT

INTEREST EXPENSE. Interest expense was $648,000 and $1.6 million for the three months and nine months ended March 31, 2006, compared to $438,000 and $1.8 million for the same periods in 2005. The increase of $210,000 for the three months ended March 31, 2006, is primarily due to higher average loan balances in March 2006 and higher interest rates. The $200,000 reduction for the nine months ending March 31, 2006 compared to March 31, 2005 is due to the Company realizing in the second quarter of 2005, $271,000 of accelerated interest on the portion of the convertible debt obligation which was converted to equity in the second quarter of 2005.

The balance outstanding on our credit facility at March 31, 2006 of $31.4 million includes $10.1 million incurred on September 1, 2005, in connection with the acquisition of Dayton Depot Casino. This represents an increase of $11.5 million from the same date in 2005.

Capital Resources and Liquidity

At March 31, 2006, the Company’s cash and cash equivalents were $6.8 million, an increase of $3.5 million from June 30, 2005. We had nominal working capital as of March 31, 2006. At March 31, 2006, the Company had $13.6 million of borrowings available under its revolving credit facility.

Cash flow from operating activities provided $9.1 million during the nine month period ended March 31, 2006. Net income of $2.4 million was increased by non-cash items of depreciation ($5.4 million), compensation expense for share-based options ($451,000), the loss on early termination of a land lease ($419,000) and amortization of loan fees ($194,000).

Investing activities accounted for a $17.1 million use of cash for the nine months ended March 31, 2006, primarily consisting of the acquisition of Dayton Depot Casino on September 2005 ($10.3 million). On September 1, 2005, the Company acquired Dayton Depot Casino for $605,000 in cash, an increase of borrowing under our credit facility of $10.1 million and 69,438 shares of Company stock including an additional $231,000 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 nine month period by $6.8 million for renovations among the properties, plus investments incurred to date for the Rail City expansion as well as improvements to the recently purchased Dayton Depot Casino. 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 $6.8 million increase.

Financing activities provided $11.5 million of cash flow. Long-term debt of $16.7 million was issued primarily to fund the purchase of the Dayton Depot Casino and working capital. Long-term debt was reduced by payments of $5.2 million during the nine months ended March 31, 2006.

Our amended and restated bank term loan and revolving credit facility, which totaled $44.5 million as of March 31, 2006, 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 March 31, 2006.

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 March 31, 2006.


			Payments due by period
	Total		Less than 1 year		1 - 3 years		4 - 5 years		After 5 years
Long term debt	$	31,371,372	$	4,131,098	$	9,102,774	$	18,137,500	$	—
Interest on long-term debt(1)		9,153,073		2,346,407		4,086,041		2,720,625		—
Operating Leases(2)		9,056,313		575,004		1,150,008		1,150,008		6,181,293
Other(3)		5,653,421		253,170		697,495		524,982		4,177,774

	$	55,234,179	$	7,305,679	$	15,036,318	$	22,533,115	$	10,359,067

(1)	Interest is calculated by assuming a weighted average interest rate of 7.5% of the current March 31, 2006 balance less payout until maturity. All long-term debt matures within 5 years.

THE SANDS REGENT

(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. Interest rates have increased as of March 31, 2006, and those changes have been included in the above table.

Cautionary Note Regarding Forward-looking Statements

This quarterly report on Form 10-Q includes “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, strategies, future performance, and future financial results. We have based these forward-looking statements on our current expectations and projections about future events. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

With our amended and restated Credit Agreement executed in September 2005 in connection with the acquisition of Dayton Depot Casino, the Company has substantial variable interest rate debt. The Company does not use interest rate derivative instruments to manage exposure to interest rate changes. Assuming the reducing credit facilities are fully advanced, ~~a principal amount currently equal~~ to $4745.03 million, the Company would be subject to substantial market interest rate risks. A one percent increase in interest rates would result in an increase in interest expense of approximately $~~470~~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.

THE SANDS REGENT

Item 4.

Controls and Procedures

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

AsWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by ~~SEC~~the Securities ~~rule~~Exchange ~~13a–15(b)~~Act of 1934, weas ~~carried~~amended, ~~out~~is anrecorded, ~~evaluation~~processed, ~~under~~summarized and reported within the ~~supervision~~time ~~and~~periods ~~with~~specified by the ~~participation~~SEC’s ofrules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, ofas ~~the~~appropriate, ~~effectiveness~~to ofallow ~~the~~timely ~~design~~decisions ~~and~~regarding ~~operation~~required ofdisclosures. ~~our~~In designing and evaluating the disclosure controls and procedures, asour ofmanagement ~~the~~recognized ~~end~~that ofany ~~the~~controls and ~~period~~procedures, ~~covered~~no bymatter ~~this~~how ~~report.~~well ~~Based~~designed onand ~~the foregoing~~operated, ~~our~~can ~~Chief~~provide ~~Executive~~only ~~Officer~~reasonable ~~and~~assurance ~~Chief Financial~~of ~~Officer~~achieving ~~concluded~~the ~~that~~desired control objectives, and our ~~disclosure~~management ~~controls~~necessarily ~~and~~was ~~procedures~~required ~~were~~to ~~effective~~apply atits judgment in evaluating the ~~reasonable~~cost-benefit relationship ~~assurance~~of ~~level~~possible controls and procedures.

~~During~~Subsequent to the ~~first~~issuance ~~quarter~~ of ~~fiscal~~the ~~2006~~Company’s quarterly reports on Form 10-Q for the quarters ended September 30, 2005 and December 31, 2005, the Company ~~implemented~~determined ~~the~~that ~~Microsoft~~errors ~~Great~~were ~~Plains~~made ~~financial~~with ~~accounting~~respect ~~and~~to ~~reporting~~(i) ~~system~~expenses atfor ~~all~~stock options which were not recorded and a corresponding understatement of ~~its~~additional ~~business~~paid-in ~~units.~~capital, ~~The~~(ii) classification of ~~Company~~other ~~plans~~assets, topreviously ~~continue~~recorded toas ~~implement~~goodwill, ~~additional~~as ~~modules~~a result of a misallocation of the ~~system~~purchase ~~through~~price ~~fiscal~~among ~~year~~the ~~2006.~~assets ~~Based~~acquired in the purchase of Dayton Depot Casino, (iii) the calculation of accrued interest on ~~managements~~the ~~evaluation~~Company’s credit agreement and a corresponding understatement of interest expense, (iv) the ~~necessary~~reclassification ~~steps~~from ~~have~~accrued ~~been~~salaries, ~~taken~~wages and benefits to ~~monitor~~additional paid-in capital for restricted shares under the manager bonus plan, (v) the reclassification from taxes payable to additional paid-in capital for the tax benefit of exercised stock options, and ~~maintain~~(vi) ~~appropriate~~certain ~~internal~~computations ~~controls~~and ~~during~~classifications on the ~~period~~Statement of ~~change~~Cash Flows, as more fully described in the respective Form 10-Q/A’s dated June 27, 2006.

~~Other~~Management ~~than~~has concluded that the conditions giving rise to the restatements of the financial statements included in the Form 10-Q/A’s for the quarters ended September 30, 2005 and December 31, 2005, each dated June 27, 2006, still exist as ~~disclosed~~of ~~above~~March 31, ~~there~~2006, ~~has~~and ~~been~~the norelated ~~change~~material weaknesses in ~~our~~ internal ~~controls~~ control over financial reporting ~~during~~still ~~our~~exist. ~~most~~Management ~~recent~~has ~~fiscal~~determined ~~quarter~~ that ~~has~~the following ~~materially~~material ~~affected~~weaknesses existed as of March 31, or2006: isthe ~~reasonably~~lack ~~likely~~of sufficient number of personnel with an appropriate level of accounting knowledge related to ~~materially~~the ~~affect,~~application ~~our~~of ~~internal~~generally ~~controls~~accepted ~~over~~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 reported in the Form 10-Q/A’s for the quarters ended September 30, 2005 and December 31, 2005, each of which resulted in adjustments or reclassifications to the condensed consolidated financial statements included in the aforementioned Form 10-Q/A’s, and these weaknesses have not been fully remediated as of March 31, 2006:

19• 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.

•

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

In light of the Company’s identification of material weaknesses, 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 March 31, 2006.

Changes in Internal Control Over Financial Reporting

In conjunction with the preparation of the Form 10-Q for the quarterly period ended March 31, 2006, the Company instituted additional control activities and utilized additional outside resources and personnel it deemed to have the appropriate skill level to assist in the closing and financial reporting process. The Company instituted additional review procedures related to the reconciliation of balance sheet general ledger accounts, the recording and disclosures for share-based payments, and standardized templates for the computations and classifications on the Statement of Cash Flows. Management is continuing to assess the required level of personnel, the thoroughness and related documentation of its closing and financial reporting processes, and the related review processes. Management has discussed the material weaknesses and related actions described above with the Audit Committee.

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

THE SANDS REGENT

PART II OTHER INFORMATION

Item 1.

Legal Proceedings

~~The~~On ~~Company~~May 31, is2006, ~~party~~a topurported ~~various~~stockholder class ~~lawsuits,~~action ~~which~~lawsuit ~~have~~was ~~arisen~~filed inon ~~the~~behalf ~~normal~~of ~~course~~the holders of ~~its~~the ~~business.~~Company’s Atcommon ~~the~~stock ~~time~~in ofNevada ~~this~~district ~~filing~~court, in the ~~liability~~county ~~arising~~of ~~from~~Washoe. ~~unfavorable~~The ~~outcomes~~complaint ofnames ~~lawsuits~~the isCompany ~~not~~and ~~expected~~its toboard ~~have~~of adirectors ~~material~~as ~~impact~~defendants, onand alleges that the board of ~~Company’s~~directors ~~financial~~breached ~~condition~~its orfiduciary ~~financial~~duties ~~results~~by adopting the merger agreement and approving the merger.

The complaint seeks an injunction preventing the completion of the merger, invalidating the merger agreement, and directing the board of directors to obtain a higher per share price for the Company’s common stock. It further seeks the immediate disclosure of the Company’s quarterly results for the quarter ended March 31, 2006, imposition of a constructive trust, and other unspecified costs and damages, including reasonable attorneys’ fees and other expert fees. The Company believes that the lawsuit is without merit and intends to vigorously defend the action.

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

Item 1A.

Risk Factors

Other than as disclosed Part I, 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

None

Item 5.

Other Information

None.

Item 6.

Exhibits

( a ) Exhibits


2.1		Agreement and Plan of Merger, dated as of May 16, 2006 by and among The Sands Regent, Herbst Gaming, Inc. and HGI-Casinos, Inc. (incorporated by reference to Form 8-K filed by the Company on May 17, 2006).

10.1		Proxy and Voting Agreement dated as of May 16, 2006 by and among Herbst Gaming, Inc., HGI-Casinos, Inc. and the other signatories thereto (incorporated by reference to Form 8-K filed by the Company on May 17, 2006).

10.31		Employment agreement, dated February 13, 2006 by and between Cornelius T. Klerk (as Chief Financial Officer) and The Sands Regent (incorporated by reference to Form 8-K filed by the Company on February 14, 2006).

10.32		Contract to purchase additional property for Rail City expansion (incorporated by reference to Form 8-K filed by the Company on March 21, 2006).

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.

99.1		The Sands Regent press release announcing second quarter fiscal year 2006 financial results incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on March 24, 2006.

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

( b ) Reports on Form 8-K

None

THE SANDS REGENT AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~THE SANDS REGENT~~		THE SANDS REGENT
	~~(Registrant)~~		(Registrant)
Date: November 21, 2005	By:	/S/ Ferenc B. Szony
Date: June 23, 2006			By:	/S/ Ferenc B. Szony
		~~Ferenc B. Szony, President and Chief Executive Officer~~		Ferenc B. Szony, President and Chief Executive Officer
Date: November 21, 2005	By:	/S/ Cornelius T. Klerk
Date: June 23, 2006			By:	/S/ Cornelius T. Klerk
		~~Cornelius T. Klerk, Chief Financial and Principal Accounting Officer~~		Cornelius T. Klerk, Chief Financial and Principal Accounting Officer

2125

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