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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2004

OR

For the transition period from:

Commission file number: 0-14050

THE SANDS REGENT

(Exact name of registrant as specified in its charter)

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

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.10 par value

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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

The aggregate market value of the Registrant’s $.10 par value Common Stock held by non-affiliates of the Registrant on December 31, 2003 was $21,417,966. The aggregate market value is computed with reference to the closing price per share on that date.

Registrant’s Common Stock outstanding at September 24, 2004 was 5,646,555 shares.

Portions of Registrant’s definitive Proxy Statement for its November 1, 2004 Annual Meeting of Shareholders are incorporated into Part III of this report as set forth herein.

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THE SANDS REGENT

INDEX TO FORM 10-K

FOR THE YEAR ENDED JUNE 30, 2004

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PART I

General

The Sands Regent and subsidiaries (the “Company”, “we” and “our”) operate casinos and tourist-based facilities through our wholly-owned subsidiaries: Zante, Inc., which owns and operates the Sands Regency Casino Hotel (“Sands”) in downtown Reno, Nevada; Last Chance, Inc., which operates the Gold Ranch Casino and RV Resort (“Gold Ranch”) in Verdi, Nevada; and Plantation Investments, Inc., which owns and operates Rail City Casino (“Rail City”) in Sparks, Nevada. The Company was incorporated in Nevada in 1965.

The Sands has approximately 29,000 square feet of gaming space and a full selection of gaming alternatives, including 600 slot machines, 19 table games, keno, bingo, and a sportsbook operated by Leroy’s Sportsbooks. Additionally, the Sands resort complex has 832 hotel rooms, including 29 suites, a health spa, and a large outdoor swimming pool. Dining options at the Sands include Tony Roma’s, Famous for Rib’s, restaurant; Cabana Café, a coffee house/deli-style restaurant; and Antonia’s, Very Italian Buffet. The property also has a Mels the Original, diner style restaurant, and an Arby’s restaurant, both which are franchises operated by third parties. The facility also includes an entertainment cabaret, three cocktail lounges, a comedy club and approximately 12,000 square feet of convention and meeting space. Third parties lease space from the Sands and operate a car rental business, a bicycle and ski rental shop, a beauty shop, and a video arcade. The Sands resort complex contains multiple parking areas, including a parking garage, with a total combined capacity for approximately 1,100 vehicles. The Sands offers large, attractive hotel rooms at reasonable prices to travel groups, air wholesalers, and motor coaches primarily from Western Canada, the Pacific Northwest and Northern California. Due to the city-sponsored ReTRAC project (Reno Transportation Railroad Access Corridor), the Sands has temporarily lost utility in varying degrees of up to 30% of its parking (see “Risks Related to our Business” in the Management Discussion and Analysis section of this report).

Gold Ranch offers approximately 252 slot machines in an 8,000 square foot casino, two restaurants, two bars, a 105-space RV park, a California lottery station, an ARCO gas station, a convenience store, and a Jack-in-the-Box restaurant, which is leased to a third party. Gold Ranch’s guests include both tourists and local residents with local residents generating approximately 60% of the property’s casino patronage. Gold Ranch attempts to attract local residents through mid-week promotions geared toward enhancing local play mainly through lottery, casino, and restaurant programs. Tourist programs emphasize the RV park, casino and restaurant cross-promotions. Gold Ranch tries to attract as much traffic as possible off Interstate 80, the major Nevada/California thoroughfare.

On May 1, 2004, the Company acquired Rail City in Sparks, Nevada. Rail City has approximately 16,600 square feet of gaming space housing 634 slots, 6 table games, keno, a sportsbook operated by Cal Neva, a 24-hour family-style restaurant and a bar. Substantially all of Rail City’s customer base comes from northern Nevada and a majority of its customers reside in close proximity to the casino.

The Company’s operations are conducted 24 hours per day, every day of the year. The primary source of revenue and income to the Company is its gaming activities, although the hotel, RV park, bars, shops, restaurants, convenience store, gas station and other services are important in supplementing its gaming activities revenue. The Company’s overall operating and marketing philosophy emphasizes in-house and citywide special events, generous promotions, highly competitive pricing, and liberal gaming odds. A great deal of emphasis is placed on marketing to local patrons, especially at Rail City, however, the majority of the total revenue of the Company’s downtown Reno property is attributable to tourism. The Company offers, on a very limited basis, complimentary hotel accommodations to select customers, no third party group arrangements known as “junkets” are conducted, and in general, the Company does not extend credit to its gaming clientele.

Marketing

SANDS REGENCY.    At the Sands we have continued to successfully address the challenges presented by the proliferation of casino gambling in our key feeder markets, and the inability of the Reno market as a whole to

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effectively market itself as a destination for travelers. This has been accomplished through aggressive marketing plans that play to the strengths that we have developed over the past several years – those being the locals market, out-of-market visitors seeking value for their entertainment dollar, and special interest groups.

We have continued to successfully grow our locals market share at the Sands by offering compelling promotions, player’s club benefits that are competitive with any club in the market, and special events geared specifically for this group. In addition, we have added new events and promotions to our existing schedule, which has helped us increase out of market visitation by creating new reasons to visit the Sands.

Our advertising strategy in the local market has also evolved over the past year, and we have begun to focus more effort on direct mail programs that target locals who are not currently customers of the Sands. The strategy behind this approach is to focus on zip codes where our most loyal customers reside. This allows us to create a more targeted strategy while using a medium (direct mail and database marketing) in which the results are more measurable than traditional mediums like television, radio, and newspaper advertising.

At the Sands we continue to appeal to the budget conscious traveler by offering large, remodeled hotel rooms at reasonable prices. We feel our hotel rooms are superior to other value-oriented properties, and have been further improved over the past year, as we have added new furnishings to them. Furthermore, our food outlets (Tony Roma’s, Mel’s Diner) offer large portions at competitive prices. Our gaming product also meets and often exceeds the expectations of this market segment. We offer a large variety of games with some of the best odds in the Reno market. We are also one of only three casinos in the market to offer bingo.

Special interest groups such as bowlers, cribbage players, shuffleboard players, and pool players continue to be a staple for the Sands. A complete schedule of tournaments throughout the year allows us to cater to each of these groups.

GOLD RANCH.    At Gold Ranch the key to success is our ability to continue to capture market share from two distinct customer segments – locals and tourists traveling on Interstate 80 between Reno and the Bay Area. In the coming year we will focus our marketing efforts on these two groups while applying the knowledge we have gained through our experiences since acquiring Gold Ranch. In addition, current plans are to install a slot tracking system, player’s club, and cashless “ticket-in ticket-out” slot technology in Spring 2005 to more effectively compete with other casinos in the Reno market. These additions are significant and will allow us to effectively capture more business from these customer segments by executing a marketing plan that will include the following components:

We will use promotions and special events to generate mid-week local business. These promotions, in conjunction with the direct mail programs mentioned earlier, will continue to be a key component to our marketing efforts. We have established a series of successful special events at Gold Ranch since the purchase, and will augment these events with more promotional activities in the coming year. The key is to continue to build the database so that we are able to reach significantly more potential customers in our key locals market (Truckee, Verdi, and Northwest Reno). This will continue to be a challenge for us at Gold Ranch until a player’s club is established, making it easier to drive visitation and qualify the gaming worth of these visitors.

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RAIL CITY CASINO.    At Rail City Casino strength of marketing and brand identity have been the major focus of our advertising campaigns, as well as, putting the FUN back into gaming. Customer loyalty and retention has also been an area of major focus; subsequent to the events of September 11, 2001 and, with the increasing presence of gaming in California, many of the hotel casinos in the area are now heavily campaigning for local customers. Sensing the trend, Rail City Casino significantly increased our promotions and customer loyalty programs. We will continue to strive to be “Your friendly neighborhood casino”. This is accomplished through the following programs:

Rail City will continue to show its appreciation for its customers through birthday comps and personal attention by the City Express Ambassadors. The Ambassadors continue to provide a family-type atmosphere for our guests. They know many of our customers by name and even their card numbers! They provide personalized service and attention to each guest.

Rail City promotions will continue to focus on rewarding our loyal player’s club members, as well as those players who prefer to remain untracked.

Rail City Casino will continue to utilize television, newspaper, radio and print to attract new customers. We have added a new television and radio advertising aimed at the Spanish-speaking population. Additionally, we utilize casino signage to inform our guests about current promotions.

Competition

Competition among casinos in the Reno market is intense. The expansion of Native American gaming in northern California, the Pacific Northwest, and British Columbia has had and will continue to have impact on total gaming revenues of the greater Reno area. Over the last three years, existing Native American casinos in northern California have undergone significant expansions. In addition, Station Casino’s Thunder Valley opened in June of 2003, just off I-80, the main link between Reno and northern California. More Native American casinos are planned in northern California and many are partnering with existing gaming companies that have greater financial resources than the Company to promote their facilities.

With our purchase of Rail City in May 2004, we have tried to lessen our dependence on tourism. Now over 70% of its company-wide gaming revenues are from local patrons. However, many of the 17 major casinos and hotel/casinos in the Reno area are attempting to compete for the local customer due primarily to the decrease in tourism caused by Native American casinos. Many of our direct competitors in the Reno market have greater financial and other resources than we do.

Employees

At June 30, 2004, the Company employed 711 people at the Sands, including 83 salaried employees and 628 hourly employees; 113 people at Gold Ranch, including 13 salaried employees and 100 hourly employees; and 329 people at Rail City, including 45 salaried and 284 hourly employees. None of the Company’s employees is represented by a union. The Company has not experienced any work stoppages or other significant labor problems and management considers its labor relations to be good.

Regulation and Licensing—Nevada Gaming

The ownership and operation of casino gaming facilities in Nevada are subject to (i) The Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, “Nevada Act”); and (ii) various local regulation. The Company’s gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission (“Nevada Commission”), the Nevada State Gaming Control Board (“Nevada Board”) and the City of Reno, for the Sands, Washoe County, for Gold Ranch, and the City of Sparks for Rail City (together, the “Nevada Gaming Authorities”).

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The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things:

Change in such laws, regulations and procedures could have an adverse effect on the Company’s gaming operations.

The Sands Regent subsidiaries Zante, Inc., Last Chance, Inc. and Plantation Investments, Inc. are required to be licensed by the Nevada Gaming Authorities. The gaming licenses require a periodic payment of fees and taxes and are not transferable. The Company is registered by the Nevada Commission as a publicly traded corporation (“Registered Corporation”) and as such, it is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information, which the Nevada Commission may require. No person may become a major stockholder of, or receive any percentage of profits from the Company without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company has obtained from the Nevada Gaming Authorities the various registrations, approvals, permits and licenses required in order to engage in gaming activities in Nevada.

The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company or its subsidiaries, in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the Company or its subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause, which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position.

If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company or its subsidiaries, the Company would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company and its subsidiaries to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

The Company and its subsidiaries are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions must be reported to, or approved by, the Nevada Commission.

If it were determined that the Nevada Act was violated by the Company or its subsidiaries, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In addition, the Company, its subsidiaries, and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the direction of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate the Company’s gaming properties and, under

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certain circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the Company’s gaming properties) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company’s gaming operations.

Any beneficial holder of the Company’s voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company’s voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The Nevada Act requires any person who acquires more than 5% of the Company’s voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of the Company’s voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an “institutional investor,” as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the Company’s voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of the directors of the Company, any change in the Company’s corporate charter, bylaws, management, policies or operations of the Company, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Company’s voting securities for investment purposes only. Activities, which are not deemed to be inconsistent with holding voting securities for investment purposes include:

If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock of the Company beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company or its subsidiaries if the Company

The Nevada Commission may, in its discretion, require the holder of any debt security of the Company to file applications, be investigated and be found suitable to own the debt security of the Company. If the Nevada

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Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Company can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it:

The Company is required to maintain a current stock ledger in Nevada, which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require the Company’s stock certificates to bear a legend indicating that the securities are subject to the Nevada Act. The Company’s stock certificates do bear such a legend.

The Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or the proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities. Any representation to the contrary is unlawful.

Changes in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of the Company must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of the Company. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada gaming licensees, and registered gaming corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy to:

Approvals are, in certain circumstances, required from the Nevada Commission before the Company can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Company’s Board of Directors in response to a tender offer made directly to the Company’s shareholders for the purposes of acquiring control of the Company.

License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the Nevada licensee’s respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either a percentage of the gross revenues received or the number of games or gaming devices operated.

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A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or beverages. Nevada licensees that hold a license as an operator of a slot route, or a manufacturer’s or distributor’s license, also pay certain fees and taxes to the State of Nevada.

Any person who is licensed, required to be licensed, required to be registered, or is under common control with such persons (collectively, “Licensees”), and who has become involved in a gaming venture outside of Nevada is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

Regulation and Licensing—California Lottery

The Company, through Last Chance, operates a California Lottery outlet at the Gold Ranch facility. As such, the Company is subject to certain regulatory and licensing requirements of the California State Lottery Commission (“CSLC”).

Given the on-line nature of the California Lottery operating system, the licensing requirements, while prudent, are less rigorous than the Nevada Gaming Commission. CSLC may terminate the Company’s lottery contract upon thirty days’ written notice, or less if deemed appropriate, in CSLC’s sole discretion. Reasons for termination include, but are not limited to, failure to follow CSLC policy, failure to meet financial obligations owed to CSLC, failure to meet CSLC’s established sales requirements, failure to maintain CSLC’s equipment and property in a condition acceptable to CSLC, a change in CSLC’s operation and/or administration of the lottery, and the lottery retailer engages or engaged in or permits or permitted conduct on or off business premises, which may or does affect, undermine or unfavorably reflect upon the security, integrity, honesty and/or fairness of the operation and/or administration of CSLS and/or any lottery game.

Regulation and Licensing—Alcoholic Beverages

The sale of alcoholic beverages by the Company is subject to supervision, control and regulation by the City of Reno (Zante), the City of Sparks (Plantation) and Washoe County (Last Chance), which issues licenses deemed to be nontransferable, revocable privileges, and which has full power to limit, condition, suspend or revoke such licenses. The Company is presently licensed to sell alcoholic beverages at all of its properties. Any adverse regulatory act with respect to this license could have an adverse effect upon the operations of the Company.

Other Information

We file with the Securities and Exchange Commission (SEC) our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports, proxy statements and registration statements. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants, including us, that file electronically. We also maintain a website located at http://www.sandsregency.com, and electronic copies of our periodic and current reports are available, free of charge, under the “Investor Relations” link on our website as soon as practicable after such material is filed with, or furnished to, the SEC. Additionally the Company maintains a Code of Conduct, and a copy is available by written request submitted to:

THE SANDS REGENT

CORPORATE OFFICES

345 NORTH ARLINGTON AVENUE

RENO, NEVADA 89501

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The Company owns and operates the casino and hotel towers at the Sands on an approximately 6.3 acre site in downtown Reno. The casino/hotel site also includes a large outdoor swimming pool, pool house, and other buildings and facilities. Garage and surface parking are provided at the casino/hotel site and an approximately 2.7 acre site located adjacent to the casino/hotel site. Management considers the Sands facility to be in good condition and well maintained. Approximately 30% of the Sands’ parking facilities has lost some utility due to the ReTRAC project (Reno train trench excavation), which is currently underway. For a more complete description of the ReTRAC project and its potential effect on the Sands, refer to “Risks Related to our Business” in the Management Discussion and Analysis section of this report.

The Company also owns the business assets and leases the real property at Gold Ranch. The real property lease has a twenty-year term with four five-year extension options ending in 2042. The Company possesses the option to purchase the Gold Ranch real property at an agreed upon base price with inflation adjustments based upon the Consumer Price Index. Gold Ranch is located on Interstate 80 in Verdi, Nevada, twelve miles west of Reno. Management considers the Gold Ranch facility to be in good condition and well maintained.

On May 1, 2004, the Company acquired Rail City Casino in Sparks, Nevada. The Company owns the building and 3 of the 4 parcels of the 6.7 acre site. The parcel not owned by Rail City is owned by the State of Nevada. This 2.6 acre parcel is subject to a ground lease and is currently used for surface parking. The ground lease has terms determined to be below market (see Note 3- Intangible Assets). Management considers the Rail City facility to be in good condition and well maintained.

In addition, the Company owns several smaller properties in Reno consisting of a combined area of approximately .7 acres and operates a slot route, which places 89 gaming devices in 15 locations in the greater Reno area.

The Company has incurred legal and settlement costs aggregating $547,000 in connection with the settlement of a personal injury claim against The Sands Regency. The Company reached a settlement through mediation in July 2003 in the case of Debra Grant vs. Zante, Inc. dba The Sands Regency Casino and Hotel, case no. CV 02-02074, in the Second Judicial District Court of the State of Nevada, in and for the County of Washoe. The case was dismissed on August 18, 2003.

Although this claim, subject to a contracted deductible, was insured, the insurance carrier is insolvent and not expected to make any payment to the Company. A loss from this event was realized in the quarter ended June 30, 2003. The Company is seeking recovery of its loss from the Company’s insurance broker. The Company believes that it has meritorious claims for relief.

The Company is a party to various other legal actions, proceedings and pending claims arising in the normal course of its business. Management does not expect the outcome of these claims or suits to have a material adverse effect on the Company’s financial position or results of future operations. However, any proceeding or litigation has an element of uncertainty, and the ultimate outcomes may differ from management’s expectations.

The Company did not submit any matters to a vote of security holders in the fourth quarter of fiscal 2004.

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PART II

Our common stock is listed on the NASDAQ Small Cap Market and traded under the symbol “SNDS”. The following table sets forth the quarterly high and low closing share price information for the periods indicated:

As of September 24, 2004, the Company had approximately 220 shareholders of record and in excess of 400 beneficial shareholders.

The declaration and payment of dividends in the future, if any, will be determined by our Board of Directors in light of the conditions then existing, including the Company’s earnings, financial condition, capital requirements and other factors. During the last two fiscal years, we have not paid cash dividends and we intend to continue to retain earnings for use in our business. Our agreement with our lenders allows for the payment of cash dividends, however there are certain restrictions.

The following table presents information regarding outstanding options and shares reserved for issuance under existing equity compensation plans at June 30, 2004:

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Results of Operations and Basis of Presentation

The Sands Regent and its subsidiaries (the “Company”, “we”, ”our”, or “us”) operate 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 Rail City Casino (“Rail City”) in Sparks, Nevada. The Sands has 832 hotel rooms and 5 restaurants, including Tony Roma’s Famous for Ribs, Mel’s the Original diner, and Arby’s. It has a full selection of gaming options, including 600 slot machines, 19 table games, keno, bingo, and a sportsbook operated by Leroy’s Race and Sportsbooks. Additionally, the Sands has a Just for Laughs’ comedy club, a cabaret lounge, and a health spa.

On June 1, 2002, the Company acquired Gold Ranch. Gold Ranch’s gaming options include 252 slot machines, a California lottery station on Gold Ranch’s property which straddles the Nevada/California border, and a Leroy’s

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sportsbook. Additionally, Gold Ranch has a 105 space RV park, 2 restaurants (a 24-hour family style restaurant and a Jack-in-the-Box), and an ARCO gas station and convenience store.

On May 1, 2004, the Company acquired Rail City in Sparks, Nevada. Rail City has approximately 16,600 square feet of gaming space housing 634 slots, 6 table games, keno, a Cal Neva sportsbook, a 24-hour family-style restaurant and a bar.

Consolidated financial results for the year ended June 30, 2002 include one month of operations for Gold Ranch, and each of fiscal 2003 and 2004 include a full year of Gold Ranch operations. Consolidated financial results for the year ended June 30, 2004 include two months of operations for Rail City.

Reclassifications have been made to the fiscal 2003 and 2002 consolidated financial statements to conform to the 2004 presentation.

Significant Accounting Policies and Estimates

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Certain of our 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 we 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 our estimates. Policies and estimates identified below are considered to be the most significant.

Long-lived assets

Property and equipment are stated at cost less accumulated depreciation. Judgments are made in determining if or when assets have been impaired and the estimated useful lives of assets. The accuracy of these estimates affects the depreciation expense recognized in our results of operations. The carrying values of our long-lived assets are reviewed when events or changes in circumstance indicate that the carrying amount of an asset may not be recoverable. Management assesses the possibility of an asset impairment by using estimates of future cash flows based on current operating results, trends, prospects, demand, competition, and other economic factors. In the year ended June 30, 2004, the Company accelerated the depreciation associated with the fuel pumps at Gold Ranch (see Note 13).

Goodwill and other intangible assets

The provisions of SFAS No. 142 require us to review goodwill and other intangibles annually for impairment. We completed our annual review and determined that there is no impairment of assets at June 30, 2004. The annual evaluation requires a detailed review of current operating results, as well as analytical projections and cash flow forecasts.

Allowance for doubtful accounts

We allow for an estimated amount of receivables that may not be collected. We estimate our allowance using a specific formula applied to aged receivables. Historical experience is considered, as are customer relationships. Receivables or note receivables, which are outside the normal course of business are addressed on an individual basis. Refer to Note 4.

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Self-insurance accrued liability

The Company is self-insured for various levels of general liability, workers’ compensation, and employee medical insurance. Insurance claims and reserves include estimated settlements for known claims, as well as accrued estimates of incurred but not reported claims. In estimating these costs, we make judgments based on historical claims experience, accident frequency, severity, and the experience of industry agents, administrators, and others, as appropriate.

Litigation accrued liability

We assess our exposure to loss contingencies including legal matters and provide for an exposure if the potential loss is judged to be probable and estimable. If the actual loss from a contingency differs from management’s estimate, operating results could be impacted. We carry general liability insurance with umbrella coverage and other insurance, subject to an applicable deductible, to protect it against large losses.

Customer reward program liability

The Company has in place a rewards system based on customer gaming play. Rewards are redeemable for complimentary hotel rooms, food, beverage, merchandise, and in many cases cash. A significant amount of rewards earned by customers expire without redemption. We estimate the percentage of rewards earned that will eventually be redeemed based on experience and various special circumstances.

Results of Operations—Comparison of fiscal 2004 to fiscal 2003

CONSOLIDATED RESULTS.    For the year ended June 30, 2004, the Company’s net operating revenues increased from $55.7 million to $62.3 million, or 12.0%, from the year ended June 30, 2003. Without the two month results of Rail City, which was acquired May 1, 2004, net revenues would have increased from $55.7 million in fiscal 2003 to $58.2 million, or 4.5%, in fiscal 2004. The Sands’ net operating revenues were $34.4 million for fiscal 2004, compared to $33.5 million in fiscal 2003, a 2.7% increase. The Sands benefited from an usually strong winter and early spring, which is typically a very slow season. Gold Ranch had net operating revenues of $23.8 million in fiscal 2004, compared to $22.2 million in fiscal 2003, a 7.2% increase. This increase resulted from higher gasoline prices at the high volume fuel and convenience store. Rail City’s net revenues were $4.1 million for two months of operations.

Our consolidated income from operations was $4.9 million for the year ended June 30, 2004, compared to $4.3 million for the year ended June 30, 2003. Income from operations for the Sands was just under $2.8 million in fiscal 2004 as compared to over $2.8 million in fiscal 2003. The Sands had a net operating revenue increase, but slightly lower income from operations due mainly to increased marketing expense designed to counter the effects of the ReTRAC project and the new Thunder Valley Casino in nearby Rocklin, California (see “Risks Related to our Business” later in this discussion). Gold Ranch’s income from operations decreased to $1.5 million in fiscal 2004, compared to $1.8 million in fiscal 2003, lower primarily due to a $195,000 charge for impairment of its gasoline pumps. Rail City had income from operations of $1.0 million in its first two months of operations under the Company. Finally, corporate costs of the parent company amounted to $439,000, larger than the $324,000 operating expenses of the prior year, due to an allocation of corporate salaries and bonus expense precipitated by the purchase of Rail City.

Consolidated net income was $6.9 million, or $1.32 per share ($1.24 diluted) for the year ended June 30, 2004 compared to $1.9 million, or $.38 per share ($.36 diluted) for the year ended June 30, 2003. The large improvement in fiscal 2004 net income was due primarily to two events. First, the Company received payments of $4.4 million on a previously fully-reserved note receivable the Company possessed in connection with its December 1998 sale of the Copa Casino (see “Gain on previously reserved note receivable” in this discussion), and secondly, Rail City contributed $442,000 to net income in its first two months of operations. Without these two events, the Company would have had net income of $2.0 million, or $.38 per share ($.36 diluted) as compared to the $1.9 million, or $.38 per share ($.36 diluted), net income of fiscal 2003.

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Year-over-year comparisons are affected by large non-operating gains from the collection of a note receivable that was previously reserved. The following is consolidated pro forma net income information that is presented as if i) neither year realized these non-operating gains and ii) Rail City was acquired July 1, 2002, as presented in Note 1(a).

SANDS REGENCY HOTEL AND CASINO.    The Sands’ net revenues increased $936,000, from $33.5 million for fiscal 2003 to $34.4 million in fiscal 2004, as the downtown Reno property benefited from the men’s American Bowlers Congress triennial tournament, which was a month longer and drew larger numbers to the Reno area than last year’s Women’s Invitational Bowlers Congress triennial tournament. Further, former patrons of the closed Sundowner Casino, situated adjacent to the Sands, provided the Sands with incremental guest counts. Factors moderating the downtown Reno property’s revenues included the intermittent street disruptions caused by ongoing work on the downtown railroad trench (ReTRAC project), high fuel prices, and increased competition from Native American casinos, especially from the nearby Thunder Valley Casino in Rocklin, California, which opened in May 2003.

Gaming revenues for the Sands increased from $21.5 million in fiscal 2003 to $22.3 million in fiscal 2004. Gaming revenues for fiscal 2004 tracked lower to the prior year through approximately November 2003, primarily attributable to a soft fiscal first quarter, which was weakened by: i) street closures from the ReTRAC project and ii) less patronage from by the northern California feeder market who gave trial to the newly opened Thunder Valley Casino. In the March 2004 quarter, which was unusually strong in what is typically a seasonally slow period, the gaming revenues turned higher on the year-over-year comparison and remained higher, finishing higher than the prior year by $832,000, or 3.9%. The increase in gaming revenues was partially offset by lost revenues from our keno operations, which was outsourced to a third party on May 17, 2004, and now realizes only a small percentage of total keno revenues, but also experiences reduced costs.

Lodging revenues for the Sands increased for the year ended June 30, 2004, to $9.0 million from $8.5 million for fiscal 2003. The Sands’ average room rate was $33.90 for fiscal 2004 versus $33.22 for fiscal 2003, which contributed approximately $176,000 to the increase in lodging revenues. However, the primary reason for the lodging revenue increase was an additional 10,225, or 4.0%, more rooms sold in the 2004 fiscal year than in fiscal 2003. The Sands benefited from less rooms available in the market, as two downtown hotels, the Comstock and the Sundowner, were closed most of the year, both currently being remodeled into condominiums.

Despite an increase in net revenues at the Sands, income from operations decreased $64,000, or 2.2%, from fiscal 2003 to fiscal 2004, due to a variety of factors, including increased marketing costs to combat the negative effects of both the ReTRAC project and the new competition from California casinos. Further, the wholesale prices for meat used in the restaurants was markedly higher, the 2003 Nevada legislature enacted new taxes which increased operating costs over $90,000, and finally, depreciation costs were higher due to the first full year of amortization of two large projects completed in fiscal 2003: i) the hotel guest rooms remodel and ii) the slot machine player tracking system upgrade.

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The following table highlights our various sources of revenues and expenses as compared to prior years for the Sands (dollars in thousands)

GOLD RANCH CASINO AND RV RESORT.    For the year ended June 30, 2004, Gold Ranch had net revenues of $23.8 million, compared to $22.2 million for the year ended June 30, 2003. This increase was attributable primarily to gasoline revenue and in particular an increase in the price of gasoline. The average retail price of a gallon of gasoline was $1.58 for fiscal 2003 compared to $1.85 for fiscal 2004. Gasoline gallons sold declined by 213,000, or 2.7%, due in part to slightly less traffic on Interstate 80 during the fiscal year. Additionally, during the last half of the 2004 fiscal year, Gold Ranch experienced some competitive gasoline pricing on the I-80 corridor in California. At times, Gold Ranch wasn’t able to sell gasoline as cheaply as its California competitors and maintain its margins.

Gaming revenue for Gold Ranch is comprised of slot machine revenue and, to a lesser degree, revenue from a California lottery ticket station. Gaming revenue increased from $5.7 million for the year ended June 30, 2003 to $5.8 million for the year ended June 30, 2004. Management believes the substantially flat results were due, in part, to the decrease in the number of customers drawn by inexpensive gasoline and to competition from casinos in Northern California. Further, gaming revenues were negatively impacted by a lower than theoretical hold percentage on its slot machines. Hold percentage is the percentage the house “wins”, which is compared to total dollars played. Management believes the excessively low-hold problem of its slot machines was due to an isolated incident and has taken corrective action.

Gold Ranch’s income from operations for the year ended June 30, 2004 declined from the year ended June 30, 2003 by $229,000, or 12.9%. The primary reason for the decline was a non-cash charge of $195,000 taken on its gasoline pumps. Further, management believes that the intermittently malfunctioning pumps may have contributed to the gallons sold shortfall. Other items contributing to Gold Ranch’s decrease in income from operations include higher meat prices in its restaurant, new taxes enacted by the 2003 Nevada legislature, which among other things, increased the Nevada tax on cigarettes and negatively impacted convenience store volume and gross margins.

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

RAIL CITY CASINO.    The Company acquired Rail City in May 2004. For the two months ended June 30, 2004, Rail City had $3.7 million of gaming revenues during the spring/summer season, which in contrast to the Company’s other properties, is historically a slightly softer season than the winter months. Rail City’s other material revenue center is food and beverage, which is comprised of one high volume restaurant and bar. Food and beverage revenues were $879,000 for the 2 months.

Rail City had income from operations of $1 million for the two months ended June 30, 2004 and an operating expense margin of 75.4%. The following table highlights Rail City’s sources of revenues and expenses for the:

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CORPORATE COSTS.    Corporate costs of the parent company, including public company reporting and related legal and accounting fees, were $439,000 in the year ended June 30, 2004, compared to $324,000 in the year ended June 30, 2003. The $115,000 increase was due to some senior management bonuses at the parent company. For the fiscal year ended June 30, 2004, the total amount of management bonuses absorbed by the parent company was approximately $140,000, as compared to no bonuses allocated to the parent company in the prior year. Additionally, director fees increased in 2004 by $56,000 over the prior year. Conversely, the Company actively sought to decrease some of the costs associated with being a public company, which have increased in recent years, and year-over-year cost reductions were experienced in annual report production costs, directors and officers insurance, and in corporate-related legal fees, which, in total, decreased $71,000 and partially offset the cost increases.

INTEREST EXPENSE.    Interest expense was almost $1.2 million for the year ended June 30, 2004, compared to slightly more than $1.2 million in the year ended June 30, 2003. The decrease resulted despite our acceleration of the expensing of loan fees from our previous bank debt, which was refinanced in May 2004. We realized the amortization of loan fees in our interest expense and those fees were $231,000 greater in 2004 than the prior year. Throughout fiscal 2004, the Company continued its policy to pay down its long-term line of credit with any available cash. This was accelerated by a $4.4 million settlement we received on a note receivable we held in connection with the December 1998 sale of the Copa Casino. On May 1, 2004, we increased our bank debt from $2.4 million to approximately $42.9 million to fund the Rail City acquisition. (see “Capital Resources and Liquidity” in this section for a more detailed explanation).

LOSS ON ABANDONMENT OF NEW PROJECTS.    In the year ended June 30, 2004, the Company took a $46,000 write-off of costs we had incurred on an opportunity we are still pursuing, which involves expanding the number of slot machines we have in one of our slot route locations from the current 8 machines to 150. The Company maintains the required non-restricted state license to turn this operation into a casino; however, in January 2004, the Reno City Council denied the Company’s request to expand, resulting in the loss. We believe the action taken by the council was arbitrary and we have taken taken legal action. In the year ended June 30, 2003, we abandoned our plans to build a casino in Minden, Nevada, resulting in a loss of $59,000.

GAIN ON PREVIOUSLY RESERVED NOTE RECEIVABLE.    On November 13, 2003, we reached an agreement with Gulfside Casino Partnership (d/b/a the Copa Casino in Gulfport, Mississippi), regarding a final settlement of amounts owed to the Company pursuant to a non-interest bearing promissory note issued to the Company in connection with its December 1998 sale of its interest in the Copa Casino. The terms of the note required a monthly payment to the Company in an amount equal to the greater of $15,000 or 2% of the Copa Casino’s gross gaming revenues (4% beginning July 2004) until the note is paid in full. At the time of the settlement, the unpaid balance of the note was $5.0 million. On November 28, 2003, the Company received an approximately $4.0 million cash payment as final settlement under the note. The Company had not previously recognized a gain on the settlement amount due primarily to the Company’s uncertainty of the Copa’s current management’s ability to obtain long-term financing, as well as competitive, legal, financial, environmental and various other risks facing the casino. As a result, in December 2003, the Company recognized a gain for the full settlement amount of $4.0 million plus debt service payments of $387,000 made during the period.

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FEDERAL INCOME TAX-EFFECTIVE RATE. The Company’s effective tax rate of 14.3% varies significantly from the statutory rate due to circumstances involving the Company’s 1998 sale of the Copa Casino. At the time of the Copa Casino’s sale, the Company’s tax basis in the Copa Casino was $7.3 million and its financial basis was $2.7 million. The sales price included a note for $8.0 million and $500,000 in cash. The $8.5 million proceeds from the sale was recognized for tax purposes and a $1.2 million tax gain was recorded. No gain was recognized for financial statement purposes. A deferred tax asset was recognized for $1.9 million with a related valuation allowance of $1.5 million. The valuation allowance was recorded due to the uncertainty of receiving any future payments in relation to the sale. In fiscal 2003, payments were received, which reduced the net deferred tax asset to $270,000. In fiscal 2004, a payment of $4.0 was received in a negotiated settlement of the note. In addition, the remaining $1.0 million due was written off as bad debt for tax purposes, as this was previously recorded as part of the tax gain in 1998. Accordingly, the valuation allowance was reversed, the deferred tax asset was utilized, and the overall tax rate was reduced as a result of this transaction.

Comparison of fiscal 2003 to 2002

CONSOLIDATED RESULTS.    For the year ended June 30, 2003, the Company’s net operating revenues increased from $34.1 million to $55.7 million, or 63.3%, from the year ended June 30, 2002. Consolidated income from operations increased from $1.3 million in the previous year to $4.3 million in the current year ended June 30, 2003. The Company generated a consolidated net income of $1.9 million, or 38 cents per share (36 cents diluted), for the year ended June 30, 2003, as compared to a consolidated net loss of ($189,000), or ($.04) per share, for the year ended June 30, 2002. There were four primary reasons for the increase in revenues and consolidated net income of the Company during the current fiscal year: 1) the acquisition and consolidation of Gold Ranch operations into the Company as of June 1, 2002; 2) the return of a major bowling event to Downtown Reno after its regularly scheduled one year hiatus; 3) the reopening of the Reno-Sparks convention center after undergoing a significant expansion and remodel; and 4) the steady return of wholesale airline tour operations post the September 11, 2001 terrorist attack.

SANDS REGENCY HOTEL AND CASINO.    For the year ended June 30, 2003, the Sands had net revenues of $33.5 million, compared to $32.4 million for the year ended June 30, 2002, an increase of 3.4%. Gaming revenues of the Sands property accounted for the majority of the net revenue increase, increasing $988,000, from $20.5 million in fiscal 2002 to $21.5 million in fiscal 2003. Consistent with the gaming industry in general, most of the revenue growth realized was in slot machine revenue, which increased 6.0%, from $15.1 million in the year ended June 30, 2002, to $16.0 million in the year ended June 30, 2003. The Sands sold approximately 11,000 more hotel rooms in fiscal 2003 year as compared to the previous year, an increase of 4.7%, which generated additional guest counts, a large factor in the gaming revenue increase. The average daily hotel rate increased from $31.73 in the year ended June 30, 2002, to $33.15 in the year ended June 30, 2003, as the Sands, and Reno in general, benefited from increased demand associated with the four month long Women’s International Bowling Congress, and a strong summer of 2002 (first quarter of fiscal 2003), as Reno tourism rebounded from the effects of the September 11 terrorist attack.

Income from operations increased from $1.3 million in the year ended June 30, 2002 to $2.8 million in the year ended June 30, 2003. Operating margins increased substantially in gaming departments; gaming revenues increased $988,000, or 4.8%, while gaming operating expenses decreased $159,000, or 1.6%, year-to-year. Gaming operating expense margins at the Sands improved from 48.2% to 45.2%. Cost savings programs instituted in the current year resulted in a lower cost of complimentary rooms, food, beverage, and merchandise given to casino customers. Additionally, new slot machine related technology purchased in December 2002 has proven to be less labor intensive and has allowed for a reduction in labor hours in the slot department.

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The following table highlights our various sources of revenues and expenses as compared to prior years for the Sands (dollars in thousands)

GOLD RANCH CASINO AND RV RESORT.    The Company acquired Gold Ranch in June 2002, as such, it is difficult to draw meaningful conclusions from prior year comparisons for revenues, expenses, and operating margins. Further, one month’s revenues can not be annualized to help draw comparisons because of seasonality factors. In general, good weather means more travelers on Interstate 80 and higher revenues for the Gold Ranch. However, Gold Ranch and Reno area promotions and special events, the timing of holiday weekends, the size of the California lottery jackpot, and the price of gasoline can all significantly impact Gold Ranch customer counts. Total net revenues for Gold Ranch were $22.2 million for the year ended June 30, 2003, as compared with net revenues of $1.7 million in the one month of operation in the year ended June 30, 2002. The highest revenue component at the Gold Ranch Property is the high volume ARCO gas station and convenience store. The gas station and convenience store contributed $14.8 million to Gold Ranch’s net revenue for the year ended June 30, 2003, as compared to $1.1 million for the one month ended June 30, 2002. A change in the price of gasoline can greatly influence total revenues but have a minimal impact on profitability.

The next highest net revenue component, slot machines, accounted for $5.4 million of the total net revenues in the year ended June 30, 2003, as compared to $446,000 in the one month ended June 30, 2002. Beginning with the quarter ended September 30, 2002, the Company’s first full quarter of operation, slot machine volume, as measured by cash and coin dropped in slot machines was $28.5, $26.0, $24.6, and $25.6 million, sequentially by quarter, which approximates anticipated seasonality at the Verdi, Nevada property.

Operating costs for Gold Ranch for the year ended June 30, 2003, were $20.4 million, compared to $1.5 million for the one month ended June 30, 2002. Income from operations for the 2003 fiscal year was $1.8 million, which compares to the income from operations of $202,000 for the one month ended June 30, 2002.

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The following table highlights our various sources of revenues and expenses as compared to the prior year for Gold Ranch (dollars in thousands)

CORPORATE COSTS.    Corporate costs, including public company reporting and related legal and accounting fees, were $324,000 in the year ended June 30, 2003. This was higher than the $227,000 of corporate costs in the year ended June 30, 2002, primarily due to incremental costs associated with the acquisition of Gold Ranch and to additional costs associated with new public company disclosure requirements.

INTEREST INCOME AND EXPENSE.    Effective June 1, 2002, the Company’s principal long-term debt instrument was in the form of a revolving line of credit. Rather than draw interest income on its excess operating cash, the Company found it beneficial to reduce interest expense in fiscal 2003 by making voluntary principal payments to its line of credit. As a result, interest income decreased from $178,000 in fiscal 2002 to $8,000 in fiscal 2003. However, interest expense decreased from $1.6 million in the year ended June 30, 2002, to $1.2 million in the year ended June 30, 2002, despite the Company carrying a higher average debt load during fiscal 2003. The Company carried an average debt load of approximately $10.7 million in fiscal 2002. The balance of long term debt at the beginning of fiscal 2003 was $19.9 million, throughout the fiscal year the Company made principal payments of $6.5 million, and by June 30, 2003, the Company’s long-term debt balance was $13.4 million. The effective interest rate of the Company’s long-term debt prior to the June 1, 2002 Gold Ranch acquisition was 10.8%, and throughout fiscal 2003, it was approximately 7.2%.

INSURANCE SETTLEMENT/LAWSUIT.    In the year ended June 30, 2003, the Company incurred legal and settlement costs aggregating $547,000 in connection with the settlement of a personal injury claim. The Company from time-to-time incurs legal costs and settlements charges in its normal course of business; however the Company maintains general liability insurance to protect itself from costs exceeding the contracted deductible. This claim was insured, but the insurance carrier, Legion Indemnity, is insolvent and not expected to make any payment to the

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Company. The Company is seeking recovery of its loss from the Company’s insurance broker. Any recovery will be realized and recorded when received. Other potential liabilities emanating from the same two year period the Company was insured by Legion Indemnity have been identified and the Company feels have been sufficiently reserved for. The statute of limitations has expired for additional claims arising out of this period.

LOSS ON DISPOSITION OF ASSETS/PROJECT ABANDONMENTS.    The Company had losses on disposition of assets of $140,000 in the year ended June 30, 2003, compared with losses of $182,000 in the year ended June 30, 2002. In fiscal 2002 the Company’s losses on disposition of assets were due to the completion of the hotel room remodel project. During the year ended June 30, 2003, losses primarily stemmed from the disposition of slot machines and related hardware and software, and the write-down of a prospective new venture in Minden, Nevada, a project no longer actively being pursued.

GAIN ON PREVIOUSLY RESERVED NOTE RECEIVABLE.    During the year ended June 30, 2003, the Company received $737,000 in payments pursuant to a non-interest bearing promissory note issued to the Company in connection with its December 1998 sale of its interest in the Copa Casino. The Company recognized a gain for $413,000 of the payment amount because it had not previously done so, due to the Company’s uncertainty of the Copa’s current management’s ability to obtain long-term financing, as well as competitive, legal, financial, environmental and various other risks facing the casino. Subsequently, in the year ended June 30, 2004, the Company realized an additional gain for $4.4 million and the note has been settled in full (see Note 4).

Seasonality

As is true for most casinos in the Reno area, especially for casinos with lodging, tourism declines rather substantially in the winter. Due to lower room rates and a lower level of gaming play per occupied room, operating margins and, to a lesser extent, revenues are lower during our second and third fiscal quarters. To attempt to counter this seasonality, the Company has aggressively pursued local patrons for the last several years. In May 2004, the Company acquired Rail City, a locals’ casino, which historically experiences above average demand during the winter months. Despite this acquisition, management anticipates that the trend of experiencing lower operating margins and revenues in the second and third quarters of each fiscal year may diminish somewhat, but will continue.

Capital Resources and Liquidity

The Company’s cash and cash equivalents increased from $4.0 million at June 30, 2003 to $5.4 million at June 30, 2004. The increase results from the cash requirements necessary to operate a new casino. The Company keeps operating cash only on hand; excess cash is used to pay down its line of credit. We had negative working capital of $1.5 million as of June 30, 2004, compared to working capital of $1.6 million as of June 30, 2003. This resulted from our aggressive pay down policy on our line of credit. At June 30, 2004, the Company had $6.8 million of credit lines available.

Cash flow from operations provided $9.2 million during the year ended June 30, 2004, compared to $6.7 million for the prior year. A substantial portion of the increase resulted from a $1.4 million change in the Company’s income tax position, which was a net receivable of $611,000 on June 30, 2003 and is a payable of $768,000 on June 30, 2004.

Investing activities accounted for a total of $33.7 million of net cash outflows for the year ended June 30, 2004, compared to net cash outflows of $6.4 million in the prior year. Net cash paid in the Rail City acquisition was $36.0 million. Additionally, we invested $2.3 million in annual capital expenditures, higher than the $1.7 million invested last year, but less than the $3.0 million expended in fiscal year ended June 30, 2002. Cash inflows of $4.4 million from the settlement of a note receivable, partially offset the cash used to acquire Rail City and used on capital expenditures.

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Financing activities provided $26.0 million of net cash inflows during the year ended June 30, 2004, compared to $6.4 million of net cash outflows in the prior year. The bank debt of $6.8 million at July 1, 2003, was repaid in full with the final $2.4 million refinanced in conjunction with the May 1, 2004 Rail City acquisition. Subordinated debt of $4.4 million, from the Company’s May 2002 acquisition of Gold Ranch Casino and RV Resort, was retired. This retirement was refinanced in March 2004 by a three-part debt and equity transaction with a private investor that consisted of (i) $2.4 million of equity raised by issuing 500,000 shares of common stock for $5.22 per share, (ii) a secured convertible note in the amount of $1.6 million, with a conversion price of $6.52, which is convertible into 246,012 shares of common stock, and (iii) a warrant to purchase up to 100,000 shares of our common stock, subject to certain limitations, at an exercise price of $7.82 per share. Additionally, the Company paid $1.0 million in costs to obtain the new bank and private investor debt financing.

At June 30, 2004, 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 foreseeable future; 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 June 30, 2004.

Cautionary Note Regarding Forward-looking Statements

This annual report on Form 10-K 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 contains 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.

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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 as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission:

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.

Risks Relating to our Business

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.

Our business may be adversely impacted if the Reno economy declines.

We heavily market to and rely upon business from Reno area residents. In recent years, Reno has enjoyed robust business growth and has attracted a number of technology, product distribution and marketing companies. These businesses have created jobs and helped fuel residential development, including the Reno metropolitan area. Should there be negative changes in the business and job conditions in Reno, our locals business, which is a substantial part of our overall business, could be adversely impacted.

We may be unable to successfully integrate the operations of Rail City and/or experience significant charges to earnings as a result of the acquisition that may adversely affect our stock price and financial condition.

Acquisitions typically entail many risks and could result in difficulties in integrating the operations and personnel of acquired companies. If we are not able to successfully integrate Rail City, we may not obtain the advantages that the acquisition was intended to create, which may adversely affect our business, results of operations, financial condition and cash flows and the market price of our stock. In addition, in connection with acquisition, we could experience disruption in our business or employee base.

In addition, as a result of the Rail City acquisition 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 acquisition could adversely affect our results of operations for particular quarterly or annual periods.

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The gaming industry is highly competitive and increased competition could have a material adverse effect on our future operations.

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 continues to have an impact on casino revenues in Nevada in general, and some analysts have predicted the impact 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, 110 miles west of Reno in Rocklin, California. California’s well-documented budgetary problems have state officials in active negotiations to renegotiate certain compacts with Native

American tribes. Some Native American casino compacts have already been changed to allow for additional slot machines. Further, there are at least two initiatives on California’s November ballot, the passage of which, would serve to increase the number of slots in that state. 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 frequent our facilities. Adverse winter 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 attacks may seriously harm our business.

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.

If we lose our key personnel, our business could be materially adversely affected

We depend on the continued performance of our Chief Executive Officer and his management team. If we lose the services of our senior management personnel, and cannot replace such persons in a timely manner, our business could be materially adversely affected.

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Our business is subject to restrictions and limitations imposed by gaming regulatory authorities that could adversely affect us.

The ownership and operation of casino gaming facilities are subject to extensive state and local regulation. The State of Nevada and the applicable local authorities require various licenses, registrations, permits and approvals to be held by us. The Nevada Gaming Commission may, among other things, limit, condition, suspend, or revoke or decline to renew a license for any cause deemed reasonable by such licensing authority. If we violate gaming laws or regulations, substantial fines 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 on us of substantial fines or forfeiture of assets would have a material and adverse effect on our business, financial condition and results of operations.

If the State of Nevada or the City of Reno increases 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 or Sparks, or the County of Washoe were to increase gaming taxes and fees, our results of operations could be adversely affected.

Our operations continue to be negatively affected by the ongoing downtown Reno railroad trench project.

Work began in the Fall of 2003 on a project to build a trench through downtown Reno for the purpose of constructing a below grade rail transport corridor. Large-scale excavation is currently underway. Known as ReTRAC (Reno Transportation Railroad Access Corridor), the project is anticipated to be completed by late 2006. Currently, Union Pacific’s railroad tracks dissect downtown Reno, as well as the Sands’ parking facilities. ReTRAC has adversely affected the utility of nearly 300 of the Sands parking spaces to build an interim railroad track known as the ‘shoo-fly’. The Company has also been informed that a small number of parking spaces and Sands’ pedestrian overpass structure will be permanently lost.

The law requires that the Sands be given alternate parking or compensation for spaces and structures permanently or temporarily lost due to the project. In July 2003, the Sands received compensation amounting to approximately $582,000 for its contribution to the project. The Company is amortizing $428,000 of the proceeds over the anticipated length of the project (May 2003 through November 2006). Part of the proceeds, $154,000, represents land, specifically parking spaces, that were effectively sold to the City of Reno. The Company feels it was not adequately compensated for its contribution to the project and filed a lawsuit in January 2004. Negotiations are continuing for a replacement bridge and additional parking, and as of the date of this report, the Company is in active negotiations with ReTRAC, and reviewing its alternatives.

The effect of trench construction on downtown Reno’s business levels, and specifically the business levels of the Sands, is hard to quantify, as any potential downside due to customer inconvenience could be somewhat offset by opportunities, such as the effect this major construction project will have on the Reno area economy. In light of these uncertainties, the Company feels this project could still have an adverse material impact on the business levels of its downtown Reno property during the construction period.

Recently issued standards, rules and regulations of governing agencies and bodies could result in material increases 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

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financial results. Recently issued accounting standards affecting our financial results are described in Note 1 to our financial statements.

Our substantial indebtedness after the Rail City acquisition could adversely affect our operations and financial results.

On May 1, 2004, the Company acquired Rail City Casino in Sparks, Nevada. The major considerations given as to why Rail City was a good acquisition for the Company include, but not limited to:

The future success of the Company’s acquisition of Rail City will depend on a number of factors, including the successful integration of the operations of Rail City. The difficulties of combining the operations of Rail City with that of the Company include, among others:

In addition, even if the Company is able to integrate Rail City’s operations 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 within the anticipated time frame.

Our outstanding debt as of December 31, 2003 was approximately $6.9 million. After the Rail City acquisition, our debt increased to in excess of $44 million. As a result of this increase in debt, demands on our cash resources will increase. The increased levels of debt could, among other things:

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With the Credit Agreement executed in April 2004 in connection with the acquisition of Rail City, the Company has substantial variable interest rate debt in the amount of $41.3 million. Assuming the credit facilities are fully advanced, the Company is subject to substantial market interest rate risks. A one percent increase in interest rates would result in an increase in interest expense of approximately $413,000 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 Company does not use interest rate derivative instruments to manage exposure to interest rate changes.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of The Sands Regent:

We have audited the accompanying consolidated balance sheets of The Sands Regent and subsidiaries (the “Company”) as of June 30, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended June 30, 2004. Our audits also included the consolidated financial statement schedule listed as item 15 (a)(2). These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Sands Regent and subsidiaries as of June 30, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2004, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein.

Reno, Nevada

September 22, 2004

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THE SANDS REGENT

CONSOLIDATED BALANCE SHEETS