Monarch Casino & Resort (MCRI) Risk Analysis

Changes in regulations on land use requirements with regard to development of new hotel casinos in the proximity of the Atlantis and the Monarch Black Hawk could have an adverse impact on our business, results of operations, and financial condition. A relaxation in such regulations could make it easier for competitors to enter our markets. A tightening of such regulations could adversely impact our future expansion opportunities.

Regulations governing the conduct of gaming activities and the obligations of gaming companies in any jurisdiction in which we have or in the future may have gaming operations are subject to change and could impose additional operating, financial, competitive or other burdens on the way we conduct our business. In particular, certain areas of law governing new gaming activities, such as the federal and state law applicable to sports betting, are new or developing in light of emerging technologies. New and developing areas of law may be subject to the interpretation of the government agencies tasked with enforcing them. In some circumstances, a government agency may interpret a statute or regulation in one manner and then reconsider its interpretation at a later date. No assurance can be provided that government agencies will interpret or enforce new or developing areas of law consistently, predictably, or favorably. Moreover, legislation to prohibit, limit or add burdens to our business may be introduced in the future in states where gaming has been legalized. In addition, from time to time, legislators and special interest groups have proposed legislation that would expand, restrict or prevent gaming operations or which may otherwise adversely impact our operations in the jurisdictions in which we operate. Any expansion of gaming or restriction on or prohibition of our gaming operations or enactment of other adverse regulatory changes could have a material adverse effect on our operating results.

The Atlantis is the closest hotel-casino to the Reno-Sparks Convention Center and the enclosed pedestrian sky bridge, that connects the Atlantis directly with the Reno-Sparks Convention Center, has afforded us a distinct competitive advantage in attracting its conventioneers, who typically pay higher average room rates than non-conventioneers. However, if the Reno-Sparks Convention Center does not succeed in booking the anticipated level of conventions, we will not, in turn, benefit from the patronage of such conventioneers. As a result, our results of operations could be adversely impacted.

Although not the major focus of our marketing efforts, we have selectively targeted high-end players. Should one or more of these high-end players win large sums in our casino, or should a material amount of credit extended to such players not be repaid, our results of operations could be adversely impacted.

Our development and renovation projects we may undertake will be subject to the many risks inherent in the expansion or renovation of an existing enterprise or construction of a new enterprise, including unanticipated design, construction, regulatory, environmental and operating problems and lack of demand for our projects. We have numerous disagreements with our Monarch Black Hawk general contractor, including disagreements over costs, schedule delays, and other construction related matters. Such disagreements have resulted in litigation with our Monarch Black Hawk general contractor, as discussed in this annual report. The disputes with the Monarch Black Hawk Expansion general contractor have resulted in and may continue to result in: - disputes and claims over the quality and management of the construction;- disputes and claims over design and construction defects;- disputes and claims over payments, construction costs, staffing costs, damages and other financial responsibility; and - disruptions of relationships with the general contractor, subcontractors, vendors and others. In addition, our current and future projects could also experience: - delays and significant cost increases;- delays in obtaining or inability to obtain necessary permits, licenses and approvals;- lack of sufficient, or delays in the availability of, financing;- shortages of materials;- shortages of skilled labor, work stoppages or labor disputes;- poor performance or nonperformance by any third parties on whom we place reliance;- unforeseen construction scheduling, engineering, environmental, permitting, construction or geological problems, including defective plans and specifications;- weather interference, floods, fires or other casualty losses; and - COVID-19 related delays. The completion dates of any of our projects could differ significantly from expectations for construction-related or other reasons. In connection with the expansion of the Monarch Black Hawk and the related disputes described above, our general contractor PCL and certain subcontractors have provided Monarch with notice of purported liens against the Monarch Black Hawk and some subcontractors have recorded such liens. An action to enforce such liens against the Monarch Black Hawk was filed in the District Court for Gilpin County, CO, as discussed in more detail herein, which may impact our operations on the property and result in us incurring significant expenses relating to defending against such actions. ? Actual costs and construction periods for any of our projects can differ significantly from initial expectations. Our initial project costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared at inception of the project in consultation with architects and contractors. Many of these costs can increase over time as the project is built to completion. We may have a limited amount of capital resources to fund cost overruns. If we cannot pay cost overruns through cash sources or financing on a timely basis, the completion of one or more projects may be delayed until adequate funding is available. We can provide no assurance that any project will be completed on time, if at all, or within established budgets, or that any project will result in increased earnings to us. Significant delays, cost overruns, or failures of our projects to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

A majority of our gaming revenue is attributable to slot machines operated at our gaming facilities. It is important, for competitive reasons, that we offer popular and technologically advanced slot machine games to our customers. In recent years, slot machine manufacturers have frequently refused to sell slot machines featuring the most popular games, instead requiring participation lease arrangements. Participation slot machine leasing arrangements typically often require the payment of a fixed daily rental or a percentage payment of coin-in or net win. Generally, a participation lease is substantially more expensive over the long term than the cost to purchase a new machine. For competitive reasons, we may be forced to purchase new slot machines or enter into participation lease arrangements that are more expensive than our current costs associated with the continued operation of our existing slot machines. If the newer slot machines do not result in sufficient incremental revenues to offset the increased investment and participation lease costs, it could hurt our profitability.

The operating expenses associated with our properties could increase due to, among other reasons, the following factors: - current broad-based inflation on the economy;- supply chain issues;- changes in federal, state or local tax or regulations, including state gaming rules and regulations or gaming taxes, could impose additional restrictions or increase our operating costs;- aggressive marketing and promotional campaigns by our competitors for an extended period of time could force us to increase our expenditures for marketing and promotional campaigns in order to maintain our existing customer base or attract new customers;- increases in costs of labor;- expenditures for repairs, maintenance, and to replace equipment necessary to operate our business;- our reliance on slot play revenues and any additional costs imposed on us from vendors;- availability and cost of the products and services we provide our customers, including food, beverages, retail items, entertainment, hotel rooms and spa;- availability and costs associated with insurance;- price increases for electricity, natural gas and other forms of energy;- adverse impacts of outbreaks of infectious diseases on our business, construction projects, financial condition and operating results;- actions by government officials at the federal, state and/or local level with respect to steps to be taken, including, without limitation, temporary or extended shutdowns, travel restrictions, social distancing and shelter-in-place orders, in connection with any infectious disease outbreak;- our ability to manage guest safety concerns caused by any infectious disease outbreak;- our ability to effectively manage and control expenses during temporary or extended shutdown periods;- impact of temporary or extended shutdowns on our ability to maintain compliance with the terms and conditions of our credit facilities and other material contracts;- construction factors, including delays, disruptions, availability of labor and materials, increased costs of labor and materials, contractor disagreements, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, building permit issues and other regulatory approvals or issues;- ongoing disagreements over costs of and responsibility for delays and other construction related matters with our Monarch Black Hawk general contractor, PCL Construction Services, Inc., including, as previously reported, the litigation against us and liens by such contractor;- affirmative and extensive counterclaims for construction defects, breach of contract, breach of warranty, fraud, fraudulent inducement, negligence and other construction related claims that we have filed against the Monarch Black Hawk contractor, PCL Construction Services, Inc., in the above-mentioned litigation in which litigation the parties are currently awaiting the Court's decision following the trial of the matter in September, October, and November of 2023;- our potential need to post bonds or other forms of surety to support our legal remedies;- risks related to development and construction activities (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems and delays; shortages of materials or skilled labor; environmental, health and safety issues; weather and other hazards, site access matters, and unanticipated cost increases);- our ability to generate sufficient operating cash flow to help finance our expansion plans and subsequent debt reduction;- changes in laws mandating increases in minimum wages and employee benefits;- changes in laws and regulations permitting expanded and other forms of gaming in our key markets;- the effects of local and national economic, credit and capital market conditions on the economy in general and on the gaming industry and our business in particular;- the effects of labor shortages on our market position, growth and financial results;- the potential of increases in state and federal taxation to address budgetary and other impacts of the COVID-19 pandemic or other infectious disease outbreaks;- the potential of increased regulatory and other burdens to address the direct and indirect impacts of COVID-19 pandemic or other infectious disease outbreaks; and - guest acceptance of our expanded facilities once completed and the resulting impact on our market position, growth and financial results. If our operating expenses increase without any offsetting increase in our revenues, our results of operations would suffer.