MONARCH CASINO & RESORT INC

MONARCH CASINO & RESORT, INC. AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Monarch was incorporated in 1993. Through its wholly-owned subsidiary, Golden Road Motor Inn, Inc. (“Golden Road”), Monarch owns and operates the Atlantis. In addition, Monarch’s wholly owned subsidiaries, High Desert Sunshine, Inc. (“High Desert”), Golden East, Inc. (“Golden East”) and Golden North, Inc. (“Golden North”), each owns separate parcels of land located proximate to the Atlantis. Monarch’s wholly owned subsidiary Monarch Growth Inc. (“Monarch Growth”), formed in 2011, owns and operates the Monarch Black Hawk. In addition, we own separate parcels of land located next to the Atlantis and a parcel of land with an industrial warehouse located between Denver, Colorado and Monarch Black Hawk. We also own Chicago Dogs Eatery, Inc. and Monarch Promotional Association Inc., both of which were formed in relation to licensure requirements for extended hours of liquor operation in Black Hawk, Colorado.

The consolidated financial statements include the accounts of Monarch and its subsidiaries. Intercompany balances and transactions are eliminated. Reference to the number of square feet or acreage are unaudited and considered outside the scope of our independent registered public accounting firm’s audit of our consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board.

Unless otherwise indicated, “Monarch,” “Company,” “we,” “our,” and “us,” refer to Monarch Casino & Resort, Inc. and its subsidiaries.

Use of Estimates

In preparing financial statements in conformity with U.S. Generally Accepted Accounting Principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the year. Some of those estimates are estimate for income tax expense, allowance for doubtful accounts, stock based compensation expense, self-insurance reserve. Actual results could differ from those estimates.

Segment Reporting

The accounting guidance for disclosures about segments of an enterprise and related information requires separate financial information to be disclosed for all reporting segments of a business. The Company determined that the Company’stwo operating segments, Atlantis and Monarch Black Hawk, meet all of the aggregation criteria stipulated by ASC (“Accounting Standards Codification”) 280-10-50-11. The Company views each property as an operating segment and thetwo operating segments have been aggregated intoone reporting segment.

The Company’s Chief Operating Decision Maker (CODM) is our Chief Executive Officer. The CODM assesses performance for our properties and decides how to allocate resources based on net income as reported on our Consolidated Statements of Income. The measure of segment assets is reported on our Consolidated Balance Sheets as total assets.

Our operating revenues are recognized with the delivery of products or when services are performed at either of our operating segments. Our significant segment expenses as monitored by the CODM are shown in the table below. This breakout of expenses is used by the CODM to monitor and assess the financial performance by comparing actual results to prior years and plans (in thousands).

[a] Tax and license includes gaming taxes and licenses, commerce taxes, use taxes and property taxes.

[b] Other operating expenses includes expenses for casino, food and beverage, hotel, other, selling general and administrative expenses excluding payroll and payroll related, cost of sales, tax and license.

[c] Other operating items, net includes construction litigation expenses, insurance claims proceeds, net, and (gain) loss on disposition of assets.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and in bank, as well as money market funds with an original maturity of 90 days or less.

Inventories

Inventories, consisting primarily of food, beverages, and retail merchandise, are stated at the lower of cost and net realizable value. Cost is determined by the weighted average and specific identification methods. Net realizable value is defined by the Financial Accounting Standards Board (“FASB”) as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Physical inventory are periodically taken and the records are adjusted to the physical counts. Items that are not useful due to spoilage or damage, are written off at the time spoilage or damage is observed.

Property and Equipment

Property and Equipment, net consists of the following (in thousands):

Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment is depreciated principally on a straight-line basis over the estimated useful lives. Estimated property and equipment lives are primarily based on expected physical wear and tear, expected technological obsolescence, legal or contractual limits, company’s historical experience and industry’s best practices and is as follows:

The Company recorded $54.1 million, $51.4 million and $47.3 million depreciation expense for the years ended December 31, 2025, 2024 and 2023, respectively.

The Company evaluates property and equipment and other long-lived assets for impairment in accordance with the guidance for accounting for the impairment or disposal of long-lived assets.

For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model.

For assets to be held and used, the Company reviews fixed assets for impairment indicators at the end of the fiscal year and whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, the impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model or market comparable, when available. For the years ended December 31, 2025, 2024 and 2023, there wereno impairment charges.

Goodwill

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles-Goodwill and Other (“ASC Topic 350”). ASC Topic 350 gives companies the option to perform a qualitative assessment that may allow them to skip the quantitative test as appropriate. The Company tests its goodwill for impairment annually during the fourth quarter of each year, or whenever events or circumstances make it more likely than not that impairment may have occurred. Impairment testing for goodwill is performed at the reporting unit level, and each of the Company’s casino properties is considered to be a reporting unit.

Goodwill consists of the excess of the acquisition cost over the fair value of the net assets acquired in business combinations in April 2012. As of December 31, 2025, we had goodwill totaling $25.1 million related to the purchase of Monarch Black Hawk.

The Company performed its annual goodwill impairment assessment. Based on the impairment assessment, we do not believe that it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Accordingly, the two-step impairment test is not necessary.

Self-insurance Reserves

We are currently self-insured up to certain stop loss amounts for Atlantis workers’ compensation and certain medical benefit costs provided to all of our employees. As required by the state of Colorado, we are fully insured for Monarch Black Hawk workers’ compensation costs. The Company reviews self-insurance reserves at least quarterly. The reserve is determined by reviewing the actual expenditures for the previous twelve-month period and reports prepared by the third-party plan administrator for any significant unpaid claims. The Company engages a third-party actuarial firm at least once per year for a more precise reserves review and calculation. The reserve is an amount estimated to pay both reported and unreported claims as of the balance sheet date, which management believes is adequate.

Revenue Recognition

The majority of the Company’s revenue is recognized when products are delivered or services are performed. For certain revenue transactions (when a patron uses a club loyalty card), in accordance with Accounting Standard Update (“ASU”) No. 2014-09 (“ASC 606”), a portion of the revenue is deferred until the points earned by the patron are redeemed or expire.

Casino Revenue: Casino revenues represent the net win from gaming activity, which is the difference between the amounts won and lost, which represents the transaction price. Jackpots, other than the incremental amount of progressive jackpots, are recognized at the time they are won by customers. Funds deposited by customers in advance and outstanding chips and slot tickets in the customers’ possession are recognized as a liability until such amounts are redeemed or used in gaming play by the customer. Additionally, net win is reduced by the performance obligations for the players’ club program, progressive jackpots and any pre-arranged marker discounts. Progressive jackpot provisions are recognized in two components: 1) as wagers are made for the share of players’ wagers that are contributed to the progressive jackpot award, and 2) as jackpots are won for the portion of the progressive jackpot award contributed by the Company. Cash discounts and other cash incentives to guests related to gaming play are recorded as a reduction to gaming revenue.

Players’ Club Program: The Company operates a players’ club program under which, as players perform gaming activities they earn and accumulate points, which may be redeemed for a variety of goods and services. Given the significance of the players’ club program and the ability for members to bank such points based on their past play, the Company has determined that players’ club program points granted in conjunction with gaming activity constitute a material right and, as such, represent a performance obligation associated with the gaming contracts. At the time points are earned, the Company recognizes deferred revenue at the standalone selling prices (“SSP”) of the goods and services that the points are expected to be redeemed for, with a corresponding decrease in gaming revenue. The points estimated SSP is computed as the cash redemption value of the points expected to be redeemed, which is determined through an analysis of all redemption activity over the preceding twelve-month period.

As of December 31, 2025, and 2024, the Company had estimated the obligations related to the players’ club program at $7.5 million and $8.1 million, respectively, which is included in Accrued Expenses in the Liabilities and Stockholders’ Equity section in the Consolidated Balance Sheets.

Food and Beverage, Hotel and Other (retail) Revenues: Food and Beverage, Hotel and Other Revenues have been determined to be separate, stand-alone performance obligations and in general the revenue is recognized when products are delivered or services are performed and is the net amount collected from the customer for such goods and services. The Company recognizes revenue related to the products and services associated with the players points’ redemptions at the time products are delivered or services are performed, with corresponding reduction in the deferred revenue, at SSP. Other complimentaries in conjunction with the gaming and other business are also valued at SSP. The cost of providing these complimentary goods and services is included as expenses within their respective categories. Hotel revenue is presented net of rebates and commissions provided directly to the convention groups.

Other Revenues: Other revenues (excluding retail) primarily consist of commissions received on ATM transactions and cash advances, which are recorded on a net basis as the Company represents the agent in its relationship with the third-party service providers, and commissions and fees received in connection with pari-mutuel wagering, which are also recorded on a net basis.

Sales and other taxes: Sales taxes and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. In addition, tips and other gratuities, excluding service charges, collected from customers on behalf of the Company’s employees are also accounted for on a net basis and are not included in revenues or operating expenses.

*Outstanding chip liability:*Outstanding chip liability represents the amounts owed in exchange for gaming chips held by a customer, that can be redeemed by the customers at any time.

Customer advances and other: Customer advances and other primarily consist of funds deposited by customers before gaming play occurs and advance payments on goods and services yet to be provided, such as advance gift cards sales and deposits on rooms and convention space or for unpaid wagers. These liabilities are generally expected to be recognized as revenue within one year of being purchased, earned, or deposited and are recorded within “Accrued expenses” on the consolidated balance sheets.

The following table summarizes the activity related to contract and contract-related liabilities as of December 31, 2025 and 2024 compared to December 31, 2024 and 2023, respectively:

Casino Jackpots

The Company does not accrue a liability for base jackpots because it has the ability to avoid such payment as gaming devices can legally be removed from the gaming floor without payment of the base amount. When the Company is unable to avoid payment of a jackpot such as the incremental jackpot amounts of progressive-type slot machines, due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is accrued over the time period in which the incremental progressive jackpot amount is generated commensurate with a corresponding reduction in casino revenue.

Gaming Taxes

The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes are an assessment on the Company’s gaming revenue and are recorded as casino expense in the accompanying Consolidated Statements of Income. These taxes totaled $70.4 million, $66.7 million and $62.9 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Advertising Costs

All advertising costs are expensed as incurred. Advertising expense, which is included in selling, general and administrative expense in the accompanying Consolidated Statements of Income, was $9.5 million, $9.4 million and $9.0 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Other Operating items, net

Other operating items, net, in general consist of miscellaneous operating charges. For the year ended December 31, 2025, Other operating items, net was $9.2 million and included: $2.7 million in accrued interest expense relating to the principal judgment on the litigation between the Company and Monarch Black Hawk’s general contractor, PCL Construction Services, Inc.; $2.4 million in professional service fees relating to appeal of the principal judgment on the same litigation; $3.9 million in joint stipulation of settlement filed with court in a class action case in which the Company is a defendant; $0.1 million in lobbying and other expense to oppose the expansion of iGaming; and $0.1 million in loss on disposal of assets. For the year ended December 31, 2024, Other operating items, net was $28.7 million and included: $27.6 million loss relating to the principal judgment on the litigation between the Company and Monarch Black Hawk’s general contractor, PCL Construction Services, Inc; $0.8 million in professional service fees relating to the same litigation; and $0.3 million in loss on disposal of assets. For the year ended December 31, 2023, Other operating items, net, was $5.9 million and included: $6.9 million in professional service fees relating to our construction litigation; and $0.2 million in loss on disposal of assets, offset by $1.2 million net proceeds from a sale of a COVID closure related insurance claim.

Income Taxes

Income taxes are recorded in accordance with the liability method pursuant to authoritative guidance. Under the asset and liability approach for financial accounting and reporting for income taxes, the following basic principles are applied in accounting for income taxes at the date of the financial statements: (a) a current liability or asset is recognized for the estimated taxes payable or refundable on taxes for the current year; (b) a deferred income tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences, carryback and carryforwards; (c) the measurement of current and deferred tax liabilities and assets is based on the provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated; and (d) the measurement of deferred income taxes is reduced, if necessary, by the amount of any tax benefits that, based upon available evidence, are not expected to be realized.

Under the accounting guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

Stock-based Compensation

The Company accounts for stock-based compensation in accordance with the authoritative guidance requiring that compensation cost relating to stock-based payment transactions be recognized in the Company’s Consolidated Statements of Income. The cost is measured at the grant date, based on the calculated fair value of the award using the Black-Scholes option pricing model for stock options, and based on the closing share price of the Company’s stock on the grant date for restricted stock awards. The cost is recognized as an expense over the employee’s requisite service period (the vesting period of the equity award). The Company’s stock-based employee compensation plan is more fully discussed in Note 9. Stock-Based Compensation.

Earnings Per Share

Basic earnings per share are computed by dividing reported net earnings by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect the additional dilution for all potentially dilutive securities such as stock options.

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):

The following table represents weighted average number of shares that are antidilutive because the weighted average assumed proceeds per share are greater than the options’ exercise prices:

Fair Value of Financial Instruments

The estimated fair value of the Company’s financial instruments has been determined by the Company, using available market information and valuation methodologies. However, considerable judgment is required to develop the estimates of fair value; thus, the estimates provided herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The carrying amounts of cash and cash equivalents, account receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these instruments. Additionally, the carrying value of our long-term debt approximates fair value due to the variable nature of applicable interest rates and relative short-term maturity.

Concentrations of Credit Risk and Credit Losses

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of bank deposits and trade receivables.

The Company accounts for credit losses in accordance with ASU 2016-13 using a forward-looking expected loss model.

The Company maintains its surplus cash in bank accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

The Company extends short-term credit to its gaming customers. Such credit is non-interest bearing and is due on demand. In addition, the Company also has receivables due from hotel guests and convention groups and events, which are primarily secured with a credit card. An allowance for doubtful accounts is determined to reduce the Company’s receivables to their carrying value, which approximates fair value. The allowance is estimated based on historical collection experience, specific review of individual customer accounts, current economic and business conditions and management’s expectations of future economic and business conditions. The allowance is applied even when the risk of credit loss is remote. When a situation warrants, the Company may create a specific identification reserve for a high collection risk receivables. The Company writes off its uncollectible receivables once all efforts have been made to collect such receivables. Recoveries of accounts previously written off are recorded when received. Concentrations of credit risk with respect to gaming and non-gaming receivables are limited due to the large number of customers comprising the Company’s customer base. Historically, the Company has not incurred any significant credit-related losses.

As of the end of each of the years ending December 31, 2025, and 2024, the Company has recorded a reserve of $0.1 million and $0.2 million, respectively, for gaming and non-gaming receivables.

The Company believes it is not exposed to any significant credit risk on cash and accounts receivable.

Impact of Recently Issued Accounting Standards

In December 2025, the FASB issued ASU 2025-11,Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.

In September 2025, the FASB issued ASU 2025-06,Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) the new guidance amends the existing standard to remove references to various stages of a software development project to better align with current software development methods such as agile programming. The types of costs required to be capitalized has not significantly changed. In addition, the new standard requires the capitalization of costs when (1) management has authorized and committed to funding the project and (2) it is probable that the project will be completed and the software will be used to perform its intended function. The ASU is effective for annual reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets which provides (1) all entities with a practical expedient and (2) entities other than public business entities with an accounting policy election when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. The practical expedient allows an entity to assume that, when estimating expected credit losses, current conditions as of the balance sheet date remain unchanged for the remaining life of the asset. The accounting policy election permits nonpublic entities that elect the practical expedient to also consider collection activity occurring after the balance sheet date when estimating expected credit losses. The standard is effective for fiscal years beginning after December 15, 2025, and for interim periods within those annual reporting periods. Early adoption is permitted. The Company will adopt the ASU for its fiscal year beginning January 1, 2026, it is not expected to have a material impact on the financial condition, results of operations, or cash flows.

In December 2023, the FASB issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires business entities to expand their annual disclosures of the effective rate reconciliation and income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. The adoption of this ASU only impacted our disclosures. See Note 7. Taxes.

In November 2024, the FASB issued ASUNo. 2024-03,*Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,which requires business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027.*Entities are permitted to apply either the prospective or retrospective transition methods. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under review and study by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, we have not yet determined the effect, if any, the implementation of any such proposed or revised standards would have on the Company’s Consolidated Financial Statements.

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following (in thousands):

The Company calculates credit loss reserves to the accounts receivable balance by applying a percentage, estimated by management based on historical aging experience, current economic conditions and management’s expectations of future economic conditions. The Company recorded bad debt expense of $184 thousand, $234 thousand and $194 thousand in 2025, 2024 and 2023, respectively.

NOTE 3. GOODWILL AND INTANGIBLE ASSETS

Goodwill was $25.1 million at December 31, 2025 and 2024. The Company’s goodwill is related to the acquisition of the Monarch Black Hawk in 2012. There are no accumulated impairment losses or any other adjustments to the goodwill as defined in ASC 350-20-50-1.

The Company’s finite-lived intangible assets at December 31, 2025 consist of assets related to a cloud computing arrangement related to a hotel management system that is being amortized over 5 years and other software contracts covering more thanone year.

Estimated amortization expenses for the 5 years ending December 31, 2030 are as follows (in thousands):

The Company periodically evaluates the remaining useful lives of its finite-lived intangible assets to determine whether events and circumstances warrant a revision to the remaining period of amortization.

NOTE 4. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

NOTE 5. ACCOUNTING FOR LEASES

In conformity with ASU No. 2016-02, “Leases (Topic 842), (“ASC 842”)” leases with durations greater than twelve months are recognized on the balance sheet.

For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of the lease payments over the lease term. Certain of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into its determination of lease payments when appropriate. As permitted by ASC 842, the Company elected not to separate non-lease components from their related lease components.

As of December 31, 2025, the Company’s right of use assets consisted of the Parking Lot Lease, the Driveway Lease (both as defined and discussed in Note 12. Related Party Transactions), as well as certain billboard leases.

The table below presents information related to the lease costs for operating leases during 2025, 2024 and 2023 (in thousands):

When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of its leases do not provide a readily determinable implicit rate. Therefore, the Company must estimate its incremental borrowing rate to discount the lease payments based on information available at lease commencement. Upon adoption of the new lease standard, incremental borrowing rates used for existing leases were established using the rates in effect as of the lease inception or modification date. The weighted-average incremental borrowing rate of the leases presented in the lease liability as of December 31, 2025 and 2024 was 4.35% and 4.34%, respectively.

The weighted-average remaining lease term of the leases presented in the lease liability as of December 31, 2025 and 2024 was 15.7 years and 16.5 years, respectively.

Following is the undiscounted cash flow for the next five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet (in thousands):

Cash paid related to the operating leases presented in the lease liability for the twelve months ended December 31, 2025, 2024 and 2023 were $1.6 million, $1.5 million and $1.5 million, respectively.

In addition, we lease gaming equipment and paid $3.4 million, $2.9 million and $2.7 million in the years ended December 31, 2025, 2024 and 2023, respectively. The lease cost is included in the casino operating expenses.

NOTE 6. LONG-TERM DEBT

On December 31, 2024, the Company entered into the Sixth Amended and Restated Credit Agreement (the “Amended Credit Facility”) with Wells Fargo Bank, N.A., as administrative agent. The Amended Credit Facility amends and restates the Company’s$100.0 million credit facility, dated as of February 1, 2023 (the “Prior Facility”).

The Amended Credit Facility extends the maturity date to January 1, 2028 and removes the lien on real property under the Prior Facility. Additionally, the interest rate under the Amended Credit Facility is either SOFR (the Secured Overnight Financing Rate) plus a margin of 1.25% or the Base Rate (as defined in the Amended Credit Facility) plus a margin of 0.25%. The Commitment Fee Percentage (as defined in the Amended Credit Facility) was revised to be 0.25% per annum.

In addition to other customary covenants for a facility of this nature, as of December 31, 2025, the Company is required to maintain a Total Leverage Ratio (as defined in the Amended Credit Facility) of no more than 1.5:1.0 and Fixed Charge Coverage Ratio (as defined in the Amended Credit Facility) of at least 1.1:1.0. As of December 31, 2025, the Company’s Total Leverage Ratio and Fixed Charge Coverage Ratio associated with the credit facility was 0.0:1.0 and 149.7:1.0.

On February 24, 2025, Wells Fargo Bank agreed to waive its right to declaring an event of default under the Amended Credit Facility arising out of the Judgment (as defined in NOTE 11. COMITMENT AND CONTINGENCIES), so long as we strictly comply with each and every other provision of the Credit Facility. We believe that we are in full compliance.

As of December 31, 2025, the Company hadno outstanding principal balance under the Amended Credit Facility, a $0.6 million standby letter of credit and $99.4 million remained available for borrowing.

NOTE 7. INCOME TAXES

In December 2023, the Financial Accounting Standards Board issued updated accounting guidance, ASU 2023-09, on disclosure for income taxes which the Company adopted prospectively as of January 1, 2025. Foreign pretax income, income tax expense, and income taxes paid were immaterial for all periods presented. As a result, foreign amounts have not been separately disaggregated. All pretax income was related to domestic, continuing operations for all periods presented.

The Company’s income tax provision (benefit) consists of the following (in thousands):

In conformity with the ASC Topic 718, Compensation-Stock Compensation: Improvements to Employee Share-based Payment Accounting (ASU 2016-09), all excess tax benefits and deficiencies are recognized as income tax expense (income tax benefit) in the Company’s Consolidated Statement of Income. This may result in increased volatility in the Company’s effective tax rate.

The Company adopted ASU 2023-09 for the year ended December 31, 2025 and applied the new disclosure requirements prospectively to the current annual period.

The income tax provision differs from that computed at the federal statutory rate. A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate for the year ended December 31, 2025 was as follows (in thousands, except percentages):

A reconciliation of the federal income tax statutory rate and the Company’s effective tax rate was as follows:

The effective tax rate varies year-over-year primarily based on the amount of the excess tax benefit on stock compensation. In 2025, 2024 and 2023, the Company recorded against the tax expense $2.2 million, $1.3 million and $0.4 million tax benefit for employee stock-based compensation, respectively.

In 2025, the effective tax rate is greater than the federal statutory tax rate of 21% primarily as a result of state tax and permanent items of $2.1 million and $1.3 million, respectively, offset by the excess tax benefits on stock compensation of $2.2 million. In 2024, the effective tax rate is greater than the federal statutory tax rate of 21% primarily as a result of state tax of $1.6 million, offset by the excess tax benefits on stock compensation of $1.3 million. In 2023, the effective tax rate is greater than the federal statutory tax rate of 21% primarily as a result of state tax and permanent items of $2.1 million and $2.0 million, respectively.

The components of the deferred income tax assets and liabilities at December 31, 2025 and 2024, as presented in the consolidated balance sheets, are as follows (in thousands):

As of December 31, 2025, the Company has state net operating loss (“NOL”) carryforwards of $8.4 million. The Company has utilized all federal NOL carryforwards. The state NOL carryforwards expire in 2030 through 2040.

The state NOL of $8.4 million, acquired as part of the Monarch Black Hawk acquisition, is subject to Internal Revenue Code change of ownership limitations. Accordingly, future utilization of the carryforwards is subject to an annual base limitation of $1.25 million that can be applied against future taxable income.

The Company acquired NOLs of Monarch Black Hawk generated in tax years 2000 through 2012. The statute of limitation for assessment for these NOL years is determined by reference to the year the NOL is used to reduce taxable income. Consequently, the separate returns that included Monarch Black Hawk for 2008 through 2012 remain subject to examination by taxing authorities. The Company’s income tax returns from 2022 forward are subject to examination by the taxing authorities.

ASC 740 require that tax positions be assessed for recognition using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions (UTP) must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts. The Company’s policy regarding interest and penalties associated with uncertain tax positions is to classify such amounts as income tax expense.

As of December 31, 2025, we recognized an uncertain tax position, inclusive of accrued interest, of$739 thousand and is included in other long-term liabilities. The total amount of the unrecognized tax benefits that, if recognized, would affect the effective tax rate is$10 thousand. The uncertain tax position results from depreciation taken on property and equipment relating to the ongoing litigation with PCL Construction Services, Inc.

No uncertain tax positions were recorded as of December 31, 2024 and 2023.

The following table summarizes the activity related to our uncertain tax position:

On July 4, 2025, H.R. 1, commonly known as the One Big, Beautiful Bill Act (the “OBBBA”), was enacted. The OBBBA contains significant changes to corporate taxation, including accelerated deductions for capital spending, expensing of research and development costs and increased deductibility of interest expense. The enactment of the OBBBA did not materially impact our 2025 financial statements.

NOTE 8. BENEFIT PLANS

Effective November 1, 1995, the Company adopted a savings plan, which qualifies under Section 401(k) of the Internal Revenue Code. Under the plan, participating employees may defer up to 100% of their pre-tax compensation, but not more than the statutory limits. The Company’s matching contributions were approximately $1,035 thousand, $857 thousand, and $860 thousand for years ended December 31, 2025, 2024 and 2023, respectively.

NOTE 9. STOCK-BASED COMPENSATION

On May 21, 2014, we adopted the 2014 Equity Incentive Plan (as amended, the “2014 Plan”). The purposes of the 2014 Plan are to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of the Company’s business. In 2024, Monarch stockholders extended the 2014 Plan for additional 10 years. The 2014 Plan, as amended (the “2014 Plan”), is an “omnibus plan” under which stock options, stock appreciation rights, performance awards, dividend equivalents, restricted stock, and restricted stock units can be awarded to employees, directors and consultants of the Company.

The maximum aggregate number of shares which may be issued pursuant to all awards under the 2014 Plan, the Amendment No. 1, Amendment No. 2 and Amendment No. 3 to the 2014 Plan is 4,400,000 shares plus the shares available for grant or subject to outstanding awards under the predecessor plans. The share reserve as of December 31, 2025 is 1,036,747. By its terms, the 2014 Plan will expire in May 2034 after which no options may be granted unless the 2014 Plan is amended or replaced.

Pursuant to the terms of the 2014 Plan, either the Board of Directors or a committee designated by the Board of Directors is authorized to administer the plan. The administrator has the authority, in its discretion, to select employees, consultants and directors to whom awards under the 2014 Plan may be granted from time to time, to determine whether and to what extent awards are granted, to determine the number of shares or the amount of other consideration to be covered by each award (subject to certain limitations), to approve award agreements for use under the 2014 Plan, to determine the terms and conditions of any award (including the vesting schedule applicable to the award), to amend the terms of any outstanding award granted under the 2014 Plan (subject to certain limitations), to construe and interpret the terms of the 2014 Plan and awards granted, and to take such other action not inconsistent with the terms of the 2014 Plan as the administrator deems appropriate.

A summary of the stock option activity as of and for the year ended December 31, 2025 is presented below:

A summary of the status of the Company’s nonvested stock option shares as of, and for the year ended, December 31, 2025 is presented below:

Expense Measurement and Recognition

The Company recognizes stock-based compensation expense for all current stock option award grants and for the unvested portion of previous stock option award grants based on grant date fair values. Unrecognized costs related to all stock option awards outstanding at December 31, 2025 totaled approximately $21.9 million and is expected to be recognized over a weighted average period of 2.7 years.

The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to stock option exercises and forfeitures.

The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Option valuation assumptions for options granted during each year were as follows (dollars in thousands, except weighted average grant date fair value per share):

The risk-free interest rate is based on the U.S. Treasury security rate in effect as of the date of grant. The expected lives of options and expected volatility are based on Company’s historical data.

Reported stock-based compensation expense was classified as follows (in thousands) and it is included in the Respective operating expenses in the Consolidated Statement of Income:

NOTE 10. STOCK REPURCHASE PLAN

On October 22, 2014, the Board of Directors of Monarch authorized a stock repurchase plan (the “Repurchase Plan”). Under the Repurchase Plan, the Board of Directors authorized a program to repurchase up to 3,000,000 shares of the Company’s common stock in the open market or in privately negotiated transactions from time to time, in compliance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended, subject to market conditions, applicable legal requirements and other factors. The Repurchase Plan does not obligate the Company to acquire any particular amount of common stock and the plan may be suspended at any time at the Company’s discretion, and it will continue until exhausted. The actual timing, number and value of shares repurchased under the repurchase program will be determined by management at its discretion and will depend on a number of factors, including the market price of the Company’s stock, general market economic conditions and applicable legal requirements.

In the fourth quarter of 2025, under its existing Repurchase Plan, the Company purchased 445,715 shares of its common stock on the open market for an aggregate purchase cost of $41.0 million. During 2025, under the Repurchase Plan, the Company purchased a total of 797,279 shares of its common stock on the open market for an aggregate purchase cost of $72.2 million. As of December 31, 2025, we have authorization to purchase up to 1,152,761 shares under the Repurchase Plan.

NOTE 11. COMITMENT AND CONTINGENCIES

On August 30, 2019, PCL Construction Services, Inc. (“PCL”) filed a complaint in District Court, City and County of Denver, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk (the “Project”). The case is captionedPCL Construction Services, Inc. v. Monarch Growth Inc., et al., Case No. 2019CV33368 (the “First Denver Lawsuit”). On December 5, 2019, the Company filed its answer and counterclaim, which alleges, among other items, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties, made fraudulent or negligent misrepresentations on which the Company and its Colorado subsidiaries relied, and included claims for monetary damages as well as equitable and declaratory relief.

On March 26, 2021, PCL filed a mechanics’ lien foreclosure action in the District Court, County of Gilpin, Colorado, against the Company and its Colorado subsidiaries, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned PCL Construction Services, Inc., v. Monarch Growth Inc., et al., Case No. 2021CV30006 (the “Gilpin Lawsuit”). The complaint essentially mirrors the claims and allegations made by PCL in the First Denver Lawsuit. The Gilpin Lawsuit includes an additional claim, however, for foreclosure of PCL’s purported mechanics’ lien against the property on which the Monarch Casino Resort Spa Black Hawk is situated (the “Property”). PCL also joined additional parties who may claim a purported lien against the Property, as defendants. Many of the Company’s co-defendants have filed cross claims against Monarch for foreclosure of mechanics’ liens and related claims, including unjust enrichment.

Monarch filed its answer and counterclaims to PCL’s second amended complaint in the Gilpin Lawsuit on July 15, 2021, but a trial of the matter has not been set. The case remains stayed, however, pending the outcome of the First Denver Lawsuit, Case No. 2019CV33368. We are currently unable to determine the probability of the outcome or reasonably estimate the loss or gain, if any.

On February 9, 2023, Monarch Growth, Inc., Monarch Casino & Resort, Inc. and Monarch Black Hawk, Inc. filed a complaint in District Court, City and County of Denver, Colorado, against PCL, in connection with the Company’s now completed expansion of the Monarch Casino Resort Spa Black Hawk. The case is captioned Monarch Growth Inc., et al., v. PCL Construction Services, Inc., Case No. 2023CV30458 (the “Second Denver Lawsuit”). The complaint alleges, among other things, that PCL breached the construction contract, duties of good faith and fair dealing, and implied and express warranties based on defective and/or nonconforming construction work at the project, and includes claims for monetary damages as well as equitable and declaratory relief.

On February 14, 2025, the Court issued its Findings of Fact, Conclusions of Law and Order of Judgment in the First Denver Lawsuit. The Court awarded damages in favor of PCL of $74,772,551 for its claims of breach of contract, breach of implied warranty, and breach of the duty of good faith and fair dealing and $144,894 to the Company for its negligence and gross negligence counterclaims against PCL. The Court entered a single judgment in the amount of the net difference between the cross-judgment and awarded PCL a principal judgment amount of $74,627,657 (the “Judgment”).

On February 28, 2025, PCL filed a Motion to Amend the Judgment to Add Prejudgment Interest, which the Court denied on May 23, 2025. On March 14, 2025, PCL filed a Bill of Costs and Motion for Attorneys’ Fees. Monarch has filed an opposition, challenging PCL’s entitlement to such fees and costs, as well as the computation and amount of the fees and costs PCL seeks. The Court heard oral arguments on PCL’s entitlement to fees and costs on December 12, 2025. On February 4, 2026, the Court issued an Order denying PCL’s Motion for Attorneys’ Fees and Bill of Costs in their entirety.

On March 21, 2025, Monarch filed a Motion for a New Trial pursuant to C.R.C.P. 59(a)(1), which Judge Luxen denied on May 21, 2025. On March 21, 2025, Monarch also filed a Motion to Amend the Judgment under C.R.C.P. 59(a)(4) to (a) to include an additional $161,666 setoff for Monarch’s sanctions award, and (b) set a 6% per annum post-judgment interest rate on the on the revised $54,660,298 awarded to PCL and a 0% post-judgment interest rate on the $19,835,540 awarded to subcontractors as pass-through claims. On May 21, 2025, the Court partially granted and partially denied Monarch’s Motion to Amend the Judgment. Specifically, in his May 21, 2025 Order, Judge Luxen: (a) revised the total amount of damages due to PCL to $74,465,839 to correct certain mathematical errors in the Order and to offset PCL’s damages award by an additional $161,666 to account for the Court’s November 28, 2023 order entering sanctions against PCL, (b) set a 6% per annum post-judgment interest rate on the on the damages awarded to PCL, and (c) declined to amend its judgment to set a 0% post-judgment interest on the subcontractor pass-through claims.

On May 30, 2025, Monarch filed a Notice of Appeal with the Colorado Court of Appeals of the District Court’s February 14, 2025 Judgment and the District Court’s post-trial orders. On June 13, 2025, PCL filed a Notice of Cross Appeal of the District Court’s denial of PCL’s Motion for Prejudgment Interest. Monarch has posted a bond to stay enforcement of the Judgment pending such appeal.

On November 24, 2025, Monarch filed its Opening Appeal Brief. On January 29, 2026, PCL filed a combined Answer in Opposition to Monarch’s Opening Brief and Opening Cross-Appeal Brief (PCL’s “Opening-Answer”). Because PCL’s Opening-Answer exceeded the word limits permitted under the Court’s rules, PCL filed a motion for leave to file its Opening-Answer in excess of the word limit. On February 10, 2026, the Court of Appeals denied PCL’s Motion, ordered that PCL’s oversized Opening-Answer Brief be stricken, and ordered PCL to file an amended Opening-Answer that is within the word limit by February 24, 2026.

As of December 31, 2025, the Company has $77.3 million in liability related to the PCL litigation, which are presented in balance sheet as following: $47.0 million in Construction accounts payable and $30.3 million in Accounts payable.

The Company recognized $2.4 million, $0.8 million and $6.9 million in construction litigation expense relating to this lawsuit for the twelve months ended December 31, 2025, 2024 and 2023, respectively, which are included in Other operating items, net on the Consolidated Statements of Operations.

From time to time, we may be subject to other legal proceedings and claims in the ordinary course of business. Management believes that the amount of any reasonably possible or probable loss for such other known matters would not have a material adverse impact on our financial conditions, cash flows or results of operations; however, the outcome of these actions is inherently difficult to predict.

NOTE 12. RELATED PARTY TRANSACTIONS

The shopping center adjacent to the Atlantis is owned by BLI. John Farahi and Bob Farahi, Co-Chairmen of the Board of Directors and executive officers of the Company, and Ben Farahi each of whom has significant holdings in Monarch and each also beneficially owns limited partnership interests in BLI. Maxum LLC is the sole general partner of BLI, and Ben Farahi is the sole managing member of Maxum LLC. Neither John Farahi nor Bob Farahi has any management or operational control over BLI or the Shopping Center. Until May 2006, Ben Farahi held the positions of Co-Chairman of the Board of Directors, Secretary, Treasurer and Chief Financial Officer of the Company.

On August 28, 2015, Monarch, through its subsidiary Golden Road Motor Inn, Inc., entered into a 20-year lease agreement with BLI for a portion of the Shopping Center (the “Parking Lot Lease”). This lease gives the Atlantis the right to use a parcel, approximately 4.2 acres, adjacent to the Atlantis. The primary purpose of the Parking Lot Lease is to provide additional, convenient, Atlantis surface parking. The minimum annual rent under the Parking Lot Lease is $695 thousand commencing on November 17, 2015. The minimum annual rent is subject to a cost of living adjustment increase on each five-year anniversary. In addition, the Company is responsible for the payment of property taxes, utilities and maintenance expenses related to the leased property. The Company has anoption to renew the Parking Lot Lease for an additionalten-year term. If the Company elects not to exercise its renewal option, the Company will be obligated to pay BLI $1.6 million. In each of the years 2025 and 2024, the Company paid $748 thousand for rent and $27 thousand for operating expenses relating to this lease. In 2023, the Company paid $748 thousand for rent and $17 thousand for operating expenses relating to this lease. Theright of use asset andlease liability balances as of December 31, 2025, recognized in the Consolidated Balance Sheet, was $9.2 million.

In addition, the Atlantis shares a driveway with the Shopping Center and leases approximately 37,400 square feet from BLI (the “Driveway Lease”) for an initial lease term of 15 years, which commenced on September 30, 2004, at an original annual rent of $300 thousand plus common area expenses. The annual rent is subject to a cost of living adjustment increase on each five-year anniversary of the Driveway Lease. Effective August 28, 2015, in connection with the Company entering into the Parking Lot Lease, the Driveway Lease was amended to: (i) make the Company solely responsible for the operation and maintenance costs of the shared driveway (including the fountains thereon); (ii) eliminate the Company’s obligation to reimburse the Shopping Center for its proportionate share of common area expenses; and (iii) exercise thethree successive five-year renewal terms beyond the initial 15-year term in the existing Driveway Lease. At the end of the renewal terms, the Company has the option to purchase the leased driveway section of the Shopping Center. The annual rent for the years 2025, 2024 and 2023 was $496 thousand, $420 thousand and $404 thousand, respectively. In addition, the Company paid $46 thousand, $51 thousand and $51 thousand, respectively, for operating expenses related to this lease. Theright of use asset andlease liability balances as of December 31, 2025, recognized in the Consolidated Balance Sheet, was $2.7 million.

The Company occasionally leases billboard advertising, storage space and parking lot space from affiliates controlled by Farahi family stockholders and paid $511 thousand, $493 thousand and $505 thousand for the years ended December 31, 2025, 2024 and 2023, respectively, for such leases.

NOTE 13. DIVIDENDS

On February 7, 2023, the Company announced that the Company’s Board of Directors declared a one-time cash dividend (the “One-time Dividend”) of$5.00 per share of its outstanding common stock, par value$0.01 per share (“Common Stock”), to be paid to the stockholders of record of the Company on March 1, 2023 (the “Record Date”), payable on March 15, 2023 (the “Payment Date”).

In addition to the One-time Dividend, the Board of Directors approved the initiation of an Annual Dividend policy for the payment of an annual dividend in the amount of $1.20 per outstanding share of Common Stock, commencing in the second quarter of 2023. These dividends will be paid quarterly on the 15th day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date) to those stockholders of record on the 1st day of the third month of the applicable calendar quarter (or, if such date is not a trading day, then the first trading day immediately thereafter such date).

During 2023, the Company paid a one-time cash dividend of $5.00 per share of its outstanding common stock and three $0.30 cash dividends under the Annual Dividend policy, for a total of $5.90 per share of its outstanding common stock. For each of the year ended December 31, 2025 and December 31, 2024, the Company paid four $0.30 cash dividends under the Annual Dividend policy, for a total of $1.20 per share of its outstanding common stock.

On February 4, 2026, the Company announced a cash dividend of$0.30 per share of its outstanding common stock, payable on March 15, 2026, to stockholders of record on March 1, 2026. This cash dividend is part of the previously announced annual cash dividend of$1.20 per share payable in quarterly payments.

The Company’s declaration of each dividend amount shall be subject to the Board of Directors’ review of the then-current financial statements of the Company, available acquisition opportunities and other prudent uses of the Company’s cash resources. As such, the Board of Directors may suspend the dividend program at any time and no assurances can be given that a quarterly dividend will be paid.