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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q/A (Amendment No. 2)



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended:    December 31, 2004



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number: 1-9481



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ARCHON CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Nevada                                                         |  | 88-0304348                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)



3993 Howard Hughes
Parkway, Suite 630, Las Vegas, Nevada 89109

(Address of principal executive office and zip code)



(702) 732-9120

(Registrants telephone number, including area code)





(Former name, former address and former fiscal year, if changed since last
report)



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



Indicate by a check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    YES ̈NO  x



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:



Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    YES ̈NO ̈



APPLICABLE ONLY TO CORPORATE ISSUERS:



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



6,227,631 as of February 18, 2005



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Explanatory Note. Archon Corporation (the Company) is filing this Amendment No.
2 on Form 10-Q/A for the quarterly period ended December 31, 2004, which was originally filed on February 22, 2005 and amended by Amendment No. 1 on Form 10-Q/A on March 30, 2005, solely to correct an error in Amendment No. 1. The Company
inadvertently inserted an incorrect figure in the Companys Condensed Consolidated Balance Sheets in Item I of Part I. Specifically, the Current portion of debt for September 30, 2004 should have been $13,475,761 and not $13,525,761
as reported in Amendment No. 1.



This Amendment No. 2 also
includes the items of the Quarterly Report on Form 10-Q, as amended by Amendment No. 1, that are not being amended. Except as noted above and as previously described in Amendment No. 1, this Amendment No. 2 on Form 10-Q/A does not provide an update
or discussion of any developments regarding the Company after the date of the original filing of the Quarterly Report on Form 10-Q.



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ARCHON CORPORATION



INDEX



|        |  |                                                                                       |  |                                                                                                       |  |     
|------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                       |  |                                                                                                       |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                      
|        |  |                                                                                      
|Item 1  |  | Unaudited Condensed Consolidated Financial Statements:                                |  |                                                                                                      
|        |  |                                                                                       | 
|        |  |                                                                                       |  | Condensed Consolidated Balance Sheets as of December 31, 2004 and September 30, 2004                  |  | 1   
|        |  |                                                                                       | 
|        |  |                                                                                       |  | Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2004 and 2003 |  | 3   
|        |  |                                                                                       | 
|        |  |                                                                                       |  | Condensed Consolidated Statement of Stockholders Equity for the Three Months Ended December 31, 2004 |  | 4   
|        |  |                                                                                       | 
|        |  |                                                                                       |  | Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2004 and 2003 |  | 5   
|        |  |                                                                                       | 
|        |  |                                                                                       |  | Notes to Unaudited Condensed Consolidated Financial Statements                                        |  | 6   
|        |  |                                                                                      
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13                                                                                                   
|        |  |                                                                                      
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19                                                                                                   
|        |  |                                                                                      
|Item 4  |  | Controls and Procedures                                                               |  | 20                                                                                                   
|        |  |                                                                                      
|PART II |  | OTHER INFORMATION                                                                     |  |                                                                                                      
|        |  |                                                                                      
|Item 1  |  | Legal Proceedings                                                                     |  | 21                                                                                                   
|        |  |                                                                                      
|Item 2  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      |  | 21                                                                                                   
|        |  |                                                                                      
|Item 3  |  | Defaults Upon Senior Securities                                                       |  | 21                                                                                                   
|        |  |                                                                                      
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                   |  | 22                                                                                                   
|        |  |                                                                                      
|Item 5  |  | Other Information                                                                     |  | 22                                                                                                   
|        |  |                                                                                      
|Item 6  |  | Exhibits and Reports on Form 8-K                                                      |  | 22                                                                                                   



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PART I  FINANCIAL INFORMATION



Item 1. Unaudited Condensed Consolidated Financial Statements



Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                    |  |                             |             |                              |   |            
|----------------------------------- |  | --------------------------- | ----------- | ---------------------------- | - | -----------
|                                    |  | December 31,2004 (Restated) |             | September 30,2004 (Restated)
|ASSETS                              |  |                             |             |                              |   |            
|                                    |  |                            
|Current assets:                     |  |                             |             |                              |   |            
|Cash and cash equivalents           |  | $                           | 2,595,360   |                              | $ | 3,442,418  
|Investment in marketable securities |  |                             | 7,118,722   |                              |   | 5,398,441  
|Accounts receivable, net            |  |                             | 139,936     |                              |   | 3,286,668  
|Inventories                         |  |                             | 274,736     |                              |   | 294,162    
|Prepaid expenses and other          |  |                             | 984,148     |                              |   | 805,578    
|                                    |  |                             |             |                              |   |            
|Total current assets                |  |                             | 11,112,902  |                              |   | 13,227,267 
|                                    |  |                            
|Land held for development           |  |                             | 21,504,400  |                              |   | 21,504,400 
|                                    |  |                            
|Property held for investment, net   |  |                             | 132,915,429 |                              |   | 133,708,401
|                                    |  |                            
|Property and equipment, net         |  |                             | 30,457,657  |                              |   | 31,162,313 
|                                    |  |                            
|Other assets                        |  |                             | 7,452,403   |                              |   | 7,329,354  
|                                    |  |                             |             |                              |   |            
|Total assets                        |  | $                           | 203,442,791 |                              | $ | 206,931,735
|                                    |  |                             |             |                              |   |            



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



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##### Table of Contents

Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (continued)



|                                           |  |                              |             |                               |   |            
|------------------------------------------ |  | ---------------------------- | ----------- | ----------------------------- | - | -----------
|                                           |  | December 31, 2004 (Restated) |             | September 30, 2004 (Restated)
|LIABILITIES and STOCKHOLDERS EQUITY       |  |                              |             |                               |   |            
|                                           |  |                             
|Current liabilities:                       |  |                              |             |                               |   |            
|Accounts payable                           |  | $                            | 2,676,170   |                               | $ | 2,138,077  
|Interest payable                           |  |                              | 273,060     |                               |   | 1,939,750  
|Accrued and other liabilities              |  |                              | 3,619,013   |                               |   | 3,220,391  
|Current portion of debt                    |  |                              | 14,116,436  |                               |   | 13,475,761 
|Current portion of non-recourse debt       |  |                              | 27,425,346  |                               |   | 30,057,775 
|                                           |  |                              |             |                               |   |            
|Total current liabilities                  |  |                              | 48,110,025  |                               |   | 50,831,754 
|                                           |  |                             
|Debt  less current portion                |  |                              | 927,493     |                               |   | 1,127,915  
|                                           |  |                             
|Non-recourse debt  less current portion   |  |                              | 80,474,561  |                               |   | 80,929,404 
|                                           |  |                             
|Deferred income taxes                      |  |                              | 29,243,868  |                               |   | 29,748,077 
|                                           |  |                             
|Other liabilities                          |  |                              | 23,232,000  |                               |   | 21,902,820 
|                                           |  |                             
|Stockholders equity                       |  |                              | 21,454,844  |                               |   | 22,391,765 
|                                           |  |                              |             |                               |   |            
|Total liabilities and stockholders equity |  | $                            | 203,442,791 |                               | $ | 206,931,735
|                                           |  |                              |             |                               |   |            



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





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##### Table of Contents

Archon Corporation and Subsidiaries

Condensed Consolidated Statements of Operations



|                                                        |  |                                 |            |   |                 |   |            |  
|------------------------------------------------------- |  | ------------------------------- | ---------- | - | --------------- | - | ---------- | -
|                                                        |  | Three Months Ended December 31, |           
|                                                        |  | 2004                            |            |   | 2003 (Restated) |  
|Revenues:                                               |  |                                 |            |   |                 |   |            |  
|Casino                                                  |  | $                               | 5,771,828  |   |                 | $ | 7,396,205  |  
|Hotel                                                   |  |                                 | 530,132    |   |                 |   | 644,206    |  
|Food and beverage                                       |  |                                 | 1,668,255  |   |                 |   | 2,150,155  |  
|Investment properties                                   |  |                                 | 3,100,562  |   |                 |   | 3,100,562  |  
|Other                                                   |  |                                 | 550,948    |   |                 |   | 480,569    |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Gross revenues                                          |  |                                 | 11,621,725 |   |                 |   | 13,771,697 |  
|Less casino promotional allowances                      |  |                                 | (1,446,361 | ) |                 |   | (2,088,254 | )
|                                                        |  |                                 |            |   |                 |   |            |  
|Net operating revenues                                  |  |                                 | 10,175,364 |   |                 |   | 11,683,443 |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Operating expenses:                                     |  |                                 |            |   |                 |   |            |  
|Casino                                                  |  |                                 | 3,299,577  |   |                 |   | 4,211,083  |  
|Hotel                                                   |  |                                 | 205,077    |   |                 |   | 144,231    |  
|Food and beverage                                       |  |                                 | 1,029,214  |   |                 |   | 942,071    |  
|Other                                                   |  |                                 | 251,132    |   |                 |   | 280,707    |  
|Selling, general and administrative                     |  |                                 | 962,360    |   |                 |   | 1,190,915  |  
|Corporate expenses                                      |  |                                 | 1,129,367  |   |                 |   | 751,515    |  
|Utilities and property expenses                         |  |                                 | 1,180,592  |   |                 |   | 1,323,303  |  
|Depreciation and amortization                           |  |                                 | 1,503,923  |   |                 |   | 1,558,792  |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Total operating expenses                                |  |                                 | 9,561,242  |   |                 |   | 10,402,617 |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Operating income                                        |  |                                 | 614,122    |   |                 |   | 1,280,826  |  
|Loss on disposal of assets                              |  |                                 | (248,419   | ) |                 |   | 0          |  
|Interest expense                                        |  |                                 | (2,904,419 | ) |                 |   | (3,834,682 | )
|Interest and other income                               |  |                                 | 184,039    |   |                 |   | 261,973    |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Loss before income tax benefit                          |  |                                 | (2,354,677 | ) |                 |   | (2,291,883 | )
|Federal income tax benefit                              |  |                                 | 824,137    |   |                 |   | 779,240    |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Net loss                                                |  |                                 | (1,530,540 | ) |                 |   | (1,512,643 | )
|Dividends accrued on preferred shares                   |  |                                 | (386,925   | ) |                 |   | (394,144   | )
|                                                        |  |                                 |            |   |                 |   |            |  
|Net loss applicable to common shares                    |  | $                               | (1,917,465 | ) |                 | $ | (1,906,787 | )
|                                                        |  |                                 |            |   |                 |   |            |  
|Average common shares outstanding                       |  |                                 | 6,221,431  |   |                 |   | 6,221,431  |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Average common and common equivalent shares outstanding |  |                                 | 6,221,431  |   |                 |   | 6,221,431  |  
|                                                        |  |                                 |            |   |                 |   |            |  
|Loss per common share:                                  |  |                                 |            |   |                 |   |            |  
|Basic and diluted                                       |  | $                               | (0.31      | ) |                 | $ | (0.31      | )
|                                                        |  |                                 |            |   |                 |   |            |  



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



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Archon Corporation and Subsidiaries

Condensed Consolidated Statement of Stockholders Equity

For the Three Months Ended December 31, 2004



|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | -------------- | - | --------- | ------------------------ |  | - | ------------------ | - |  | ----------------------------------- | ----------- | ------------- |  | - | --------- |  | - | ------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | PreferredStock |   |           | AdditionalPaid-InCapital |  |   | AccumulatedDeficit |   |  | AccumulatedOtherComprehensiveIncome |             | TreasuryStock |  |   | Total     | 
|Balances, October 1, 2004                |  | $           | 62,214 |                | $ | 9,673,553 |                          |  | $ | 54,582,364         |   |  | $                                   | (42,830,615 | )             |  | $ | 992,023   |  | $ | (87,774 | ) |  | $ | 22,391,765 |  
|Net loss                                 |  |             |        |                |   |           |                          |  |   |                    |   |  |                                     | (1,530,540  | )             |  |   |           |  |   |         |   |  |   | (1,530,540 | )
|Preferred stock purchased                |  |             |        |                |   | (432      | )                        |  |   | (102               | ) |  |                                     |             |               |  |   |           |  |   |         |   |  |   | (534       | )
|Unrealized gain on marketable securities |  |             |        |                |   |           |                          |  |   |                    |   |  |                                     |             |               |  |   | 594,153   |  |   |         |   |  |   | 594,153    |  
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  
|Balances, December 31, 2004              |  | $           | 62,214 |                | $ | 9,673,121 |                          |  | $ | 54,582,262         |   |  | $                                   | (44,361,155 | )             |  | $ | 1,586,176 |  | $ | (87,774 | ) |  | $ | 21,454,844 |  
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  



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



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Archon Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows



|                                                    |  |                                 |            |   |      |   |             |  
|--------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                    |  | Three Months Ended December 31, |           
|                                                    |  | 2004                            |            |   | 2003 |  
|Cash flows from operating activities:               |  |                                 |            |   |      |   |             |  
|Cash and cash equivalents provided by operations    |  | $                               | 316,773    |   |      | $ | 448,833     |  
|Changes in assets and liabilities:                  |  |                                 |            |   |      |   |             |  
|Accounts receivable, net                            |  |                                 | 3,146,732  |   |      |   | 3,042,720   |  
|Inventories                                         |  |                                 | 19,426     |   |      |   | (50,934     | )
|Prepaid expenses and other                          |  |                                 | (178,569   | ) |      |   | (386,479    | )
|Deferred income taxes                               |  |                                 | (824,137   | ) |      |   | (591,250    | )
|Other assets                                        |  |                                 | (218,020   | ) |      |   | (605,942    | )
|Accounts payable                                    |  |                                 | 538,093    |   |      |   | 248,953     |  
|Interest payable                                    |  |                                 | (1,666,690 | ) |      |   | (2,036,462  | )
|Accrued and other liabilities                       |  |                                 | 1,727,802  |   |      |   | 1,285,941   |  
|                                                    |  |                                 |            |   |      |   |             |  
|Net cash provided by operating activities           |  |                                 | 2,861,410  |   |      |   | 1,355,380   |  
|                                                    |  |                                 |            |   |      |   |             |  
|Cash flows from investing activities:               |  |                                 |            |   |      |   |             |  
|Decrease in restricted cash                         |  |                                 | 0          |   |      |   | 13,898,971  |  
|Capital expenditures                                |  |                                 | (254,715   | ) |      |   | (468,340    | )
|Marketable securities purchased                     |  |                                 | (806,200   | ) |      |   | (49,237     | )
|Marketable securities sold                          |  |                                 | 0          |   |      |   | 2,861,458   |  
|                                                    |  |                                 |            |   |      |   |             |  
|Net cash (used in) provided by investing activities |  |                                 | (1,060,915 | ) |      |   | 16,242,852  |  
|                                                    |  |                                 |            |   |      |   |             |  
|Cash flows from financing activities:               |  |                                 |            |   |      |   |             |  
|Proceeds from debt                                  |  |                                 | 793,526    |   |      |   | 18,000,000  |  
|Paid on debt and obligation under lease             |  |                                 | (3,440,545 | ) |      |   | (39,013,191 | )
|Note receivable                                     |  |                                 | 0          |   |      |   | 2,500,000   |  
|Preferred stock acquired                            |  |                                 | (534       | ) |      |   | (56,893     | )
|                                                    |  |                                 |            |   |      |   |             |  
|Net cash used in financing activities               |  |                                 | (2,647,553 | ) |      |   | (18,570,084 | )
|                                                    |  |                                 |            |   |      |   |             |  
|Decrease in cash and cash equivalents               |  |                                 | (847,058   | ) |      |   | (971,852    | )
|Cash and cash equivalents, beginning of period      |  |                                 | 3,442,418  |   |      |   | 5,852,354   |  
|                                                    |  |                                 |            |   |      |   |             |  
|Cash and cash equivalents, end of period            |  | $                               | 2,595,360  |   |      | $ | 4,880,502   |  
|                                                    |  |                                 |            |   |      |   |             |  



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





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ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Basis of Presentation and General Information



Archon Corporation (the Company or Archon) is a
Nevada corporation. The Companys primary business operations are conducted through a wholly-owned subsidiary corporation, Pioneer Hotel Inc. (PHI), which operates the Pioneer Hotel & Gambling Hall (the Pioneer) in
Laughlin, Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the Strip) in Las Vegas, Nevada, and also owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland.



The condensed consolidated financial statements included herein have been
prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In
the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three-month periods are not necessarily indicative of
results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report on Form 10-K
for the year ended September 30, 2004.



Summary of
Significant Accounting Policies



Principles of
Consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of Archon and its wholly-owned subsidiaries. Amounts representing the Companys investment in less than majority-owned
companies in which a significant equity ownership interest is held are accounted for on the equity method. All material intercompany accounts and transactions have been eliminated in consolidation.



Earnings Per Share. The Company presents its per share
results in accordance with Statement of Accounting Standards (SFAS) No. 128, Earnings Per Share (SFAS 128). SFAS 128 requires the presentation of basic net loss per share and diluted net loss per share.
Basic per share amounts are computed by dividing net loss by average shares outstanding during the period, while diluted per share amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options.
Dilutive stock options of approximately 450,000 were not included in diluted calculations during the quarters ended December 31, 2004 and 2003 as the Company incurred a net loss during these periods and the effect would be antidilutive.



Accounting for Stock-Based Compensation. The Company
had a Key Employee Stock Option Plan (the Stock Option Plan) which ceased granting options in 2003. The Company accounts for the Stock Option Plan under the recognition and measurement principles of Accounting Principles Board Opinion
(APB) No. 25, Accounting for Stock Issued to Employees and related Interpretations. No significant stock-based employee compensation cost is reflected in net loss, as options granted under the Stock Option Plan typically had an
exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and loss per share as if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands except for per share amounts):



|                                                                                                                                            |  |                                |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                            |  | Three Months EndedDecember 31, |       
|                                                                                                                                            |  | 2004                           |        |   | 2003 |  
|Net loss applicable to common shares                                                                                                        |  | $                              | (1,917 | ) |      | $ | (1,907 | )
|                                                                                                                                            |  |                               
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                | 0      |   |      |   | 0      |  
|                                                                                                                                            |  |                                |        |   |      |   |        |  
|Pro forma net loss applicable to common shares                                                                                              |  | $                              | (1,917 | ) |      | $ | (1,907 | )
|                                                                                                                                            |  |                                |        |   |      |   |        |  
|Loss per share:                                                                                                                             |  |                                |        |   |      |   |        |  
|Basic and diluted - as reported                                                                                                             |  | $                              | (0.31  | ) |      | $ | (0.31  | )
|                                                                                                                                            |  |                                |        |   |      |   |        |  
|Basic and diluted - pro forma                                                                                                               |  | $                              | (0.31  | ) |      | $ | (0.31  | )
|                                                                                                                                            |  |                                |        |   |      |   |        |  



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Estimates and Assumptions. The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used by the Company include those related to customer incentives, bad debts, inventories, investments, estimated
useful lives for depreciable and amortizable assets, valuation reserves and estimated cash flows in assessing the recoverability of long-lived assets, estimated liabilities for slot club bonus point programs, income taxes, contingencies and
litigation. Actual results may differ from estimates.



Recently Issued Accounting Standards.



Emerging Issues Task Force (EITF) 04-8. In December 2004, the Financial Accounting Standards Board (the FASB) issued
EITF No. 04-8, The Effect of Contingently Convertible Debt on Diluted Earnings per Share, requiring the inclusion of convertible shares in diluted EPS regardless of whether the market price trigger has occurred for all periods presented. As
the Company does not have contingently convertible debt, this requirement will not have an impact on the Companys consolidated financial statements.



SFAS 123(R). In December 2004, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 123 (revised 2004),
Share-Based Payment, replacing SFAS No. 123, Accounting for Stock-Based Compensation, and superseding APB No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires recognition of share-based compensation in the
financial statements. SFAS No. 123(R) is effective as of the first interim or annual reporting period that begins after June 15, 2005 and will be adopted by the Company in the fourth quarter of fiscal 2005. We will continue to evaluate our
compensation practices, as well as other available valuation models, for valuing stock options. We anticipate no material impact on our results of operations or financial position as a result of adopting this statement.



SFAS 151.In November 2004, the FASB issued SFAS No. 151,
Inventory Costs, amending ARB 43 Chapter 4, Inventory Pricing. SFAS 151 clarifies the accounting for abnormal amounts of idle facility expense, freight and handling costs, and wasted material (spoilage). SFAS 151 introduces the concept
of normal capacity requiring allocation of fixed production overheads to inventory based upon normal capacity of production facilities. Unallocated overhead costs must be expensed in the period in which they are incurred. This statement
is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. We anticipate no material impact on our results of operations or financial position as a result of adopting this statement.



SFAS 153. In December 2004, the FASB issued SFAS No.
153, Exchanges of Nonmonetary Assets, amending APB No. 29, which treated nonmonetary exchanges of similar productive assets as an exception from fair value measurement. SFAS No. 153 replaces this exception with a general exception from fair
value measurement for exchanges of nonmonetary assets that do not have commercial substance. Nonmonetary exchanges have commercial substance if the future cash flows of an entity are expected to change significantly as a result of the



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exchange. This statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005, and will be adopted by the Company in the fourth quarter of fiscal 2005. We anticipate no material impact on our results of operations or financial position as a result of adopting this statement.



Reclassifications. Certain reclassifications have been made in
prior years condensed consolidated financial statements to conform to the presentations used in fiscal 2005.



2. Comprehensive Loss



Comprehensive loss is the total of net loss and all other non-stockholder changes in stockholders equity. Comprehensive loss for the three months
ended December 31, 2004 and 2003 is as follows (in thousands):



|                                         |  |                                |        |   |      |   |        |  
|---------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                         |  | Three Months EndedDecember 31, |       
|                                         |  | 2004                           |        |   | 2003 |  
|Net loss                                 |  | $                              | (1,531 | ) |      | $ | (1,513 | )
|Unrealized gain on marketable securities |  |                                | 594    |   |      |   | 81     |  
|                                         |  |                                |        |   |      |   |        |  
|Comprehensive loss                       |  | $                              | (937   | ) |      | $ | (1,432 | )
|                                         |  |                                |        |   |      |   |        |  



3. Other Assets



Included in Other Assets at December 31, 2004 and September 30,
2004 are unamortized loan issue costs and deferred rents of approximately $5.0 million which were incurred when the Company acquired certain rental property and debt instruments. The unamortized loan issue costs are being amortized on a
straight-line basis, which closely approximates the effective interest method, over the loan period, and the deferred rents are being amortized using the straight-line method over the remaining lease periods.



Also included in Other Assets at December 31, 2004 and September
30, 2004 is approximately $0.4 million of commercial and residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third parties as well as loans made directly to J & J Mortgage under a master loan
agreement. The loans purchased by the Company were purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under the master loan arrangement bear interest at the prime rate plus 2%. J & J Mortgage is
owned by LICO, which in turn is wholly-owned by Paul W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W. Delaney, a director of the Company, is the president of J & J Mortgage.



Miscellaneous investments in key man life insurance policies and
unconsolidated entities are also included in Other Assets and total approximately $1.6 million and $1.5 million at December 31, 2004 and September 30, 2004, respectively.



4. Related Parties



The Company has entered into a Patent Rights and Royalty Agreement with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology
for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect to the technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David
Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect to the technology, which will be automatically renewed for additional two-year terms unless Archon terminates the agreement
within thirty



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days prior to the renewal or the agreement is otherwise earlier terminated in accordance with its terms. The Company also
has an understanding with David Lowden that it will pay for the costs of commercial development of the technology. Through December 31, 2004, the Company had expensed approximately $0.25 million for commercial development of the technology, although
none had been expensed in the three months ended December 31, 2004.



See Note 3 for information regarding transactions between the Company and J & J Mortgage.



5. Debt



The Company
has a financial covenant related to its outstanding long-term debt with a certain lender. This covenant requires the Company to maintain a minimum ratio of earnings before interest, taxes, depreciation and amortization, net of investment properties,
compared to current portions of long-term debt, excluding investment properties. At December 31, 2004, the Company was not in compliance with this covenant and, as such, was technically in default under the debt agreement. The Company has received a
waiver of default from the lender through March 31, 2005 and plans to amend or restructure this covenant with the lender. Management believes it is not the intention of the lender to declare a default relative this covenant. However, as the waiver
ends on March 31, 2005, the Company has included all amounts owing under the debt agreement, (approximately $12.5 million) at December 31, 2004, in the current portion of long-term debt in the Companys condensed consolidated financial
statements. Management believes the Company has sufficient assets to meet any unforeseen demands on current operations or significant debt obligations.



6. Federal Income Tax



The Company recorded federal income tax benefits, based on statutory rates, of approximately $0.8 million for the quarters ended December 31, 2004 and
2003. The Company has recorded deferred tax assets related to net operating assets as the Company is able to offset its assets with its deferred tax liabilities. Realization of the net deferred tax assets is dependent on the Companys ability
to generate profits from operations or from the sale of long-lived assets that would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will generate profits from operations or
sell those assets or will generate profits from sales if they were to occur in the future. In the event the Company does generate profits from sales of long-lived assets in the future, a valuation allowance would need to be recorded and would impact
the Companys future results of operations.



7. Lease Retirement



On December 29, 2003, the Company exercised an early
purchase option to acquire leases related to PHI from a third party. The Company paid approximately $35.6 million in exercising its option to retire certain lease obligations of approximately $37.0 million. Proceeds from debt of approximately $18.0
million as well as a use of marketable securities, cash and collections on certain receivables financed this acquisition. Previous agreements, covenants and restrictions on the use of cash related to the lease agreements are no longer applicable.
The $18.0 million debt instrument is secured by land held for development by the Company, as well as a personal guaranty from the Companys Chief Executive Officer and Chairman of the Board and requires monthly principal and interest payments
of approximately $0.12 million with a balloon payment of approximately $11.1 million in December 2006. The debt bears interest at a variable rate (approximately 6.25% at December 31, 2004).



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8. Supplemental Statement of Cash Flows Information



Supplemental statement of cash flows information for the three-month periods ended December 31, 2004 and 2003 is presented
below:



|                                                                           |  |                        |       |      |   |      
|-------------------------------------------------------------------------- |  | ---------------------- | ----- | ---- | - | -----
|                                                                           |  | 2004                   |       | 2003
|                                                                           |  | (amounts in thousands)
|Operating activities:                                                      |  |                        |       |      |   |      
|                                                                           |  |                       
|Cash paid during the period for interest                                   |  | $                      | 4,503 |      | $ | 5,468
|                                                                           |  |                        |       |      |   |      
|Cash paid during the period for income taxes                               |  | $                      | 0     |      | $ | 0    
|                                                                           |  |                        |       |      |   |      
|Investing and financing activities:                                        |  |                        |       |      |   |      
|                                                                           |  |                       
|Negative amortization of obligation under lease                            |  | $                      | 0     |      | $ | 345  
|                                                                           |  |                        |       |      |   |      
|Reduction of property and equipment from the acquisition of capital leases |  | $                      | 0     |      | $ | 1,412
|                                                                           |  |                        |       |      |   |      
|Unrealized gain on marketable securities                                   |  | $                      | 594   |      | $ | 81   
|                                                                           |  |                        |       |      |   |      



9. Segment Information



The Companys operations are in the hotel/casino
industry and investment properties. The Companys hotel/casino operations are conducted at the Pioneer in Laughlin, Nevada. The Company owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland. Other and
Eliminations below includes financial information for the Companys corporate operations and Archon Sparks Management Company, adjusted to reflect eliminations upon consolidation.



Set forth below is the unaudited financial information for the segments in
which the Company operates for the three-month periods ended December 31, 2004 and 2003:



|                                 |  |                                |        |   |                |   |        |  
|-------------------------------- |  | ------------------------------ | ------ | - | -------------- | - | ------ | -
|                                 |  | Three Months EndedDecember 31, |       
|                                 |  | 2004                           |        |   | 2003(Restated) |  
|                                 |  | (dollars in thousands)         |       
|Pioneer Hotel:                   |  |                                |        |   |                |   |        |  
|Net operating revenues           |  | $                              | 6,876  |   |                | $ | 8,037  |  
|                                 |  |                                |        |   |                |   |        |  
|Operating loss                   |  | $                              | (758   | ) |                | $ | (42    | )
|Depreciation and amortization    |  |                                | 660    |   |                |   | 606    |  
|                                 |  |                                |        |   |                |   |        |  
|EBITDA(1)                        |  | $                              | (98    | ) |                | $ | 564    |  
|                                 |  |                                |        |   |                |   |        |  
|Interest expense                 |  | $                              | 299    |   |                | $ | 1,252  |  
|                                 |  |                                |        |   |                |   |        |  
|Interest and other income        |  | $                              | 2      |   |                | $ | 7      |  
|                                 |  |                                |        |   |                |   |        |  
|Capital expenditures / transfers |  | $                              | 54     |   |                | $ | 468    |  
|                                 |  |                                |        |   |                |   |        |  
|Identifiable assets(2)           |  | $                              | 33,835 |   |                | $ | 35,569 |  
|                                 |  |                                |        |   |                |   |        |  



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|                                 |  |                                |         |   |                 |   |         |  
|-------------------------------- |  | ------------------------------ | ------- | - | --------------- | - | ------- | -
|                                 |  | Three Months EndedDecember 31, |        
|                                 |  | 2004                           |         |   | 2003 (Restated) |  
|                                 |  | (dollars in thousands)         |        
|Investment Properties:           |  |                                |         |   |                 |   |         |  
|Net operating revenues           |  | $                              | 3,101   |   |                 | $ | 3,101   |  
|                                 |  |                                |         |   |                 |   |         |  
|Operating income                 |  | $                              | 2,308   |   |                 | $ | 2,308   |  
|Depreciation and amortization    |  |                                | 793     |   |                 |   | 793     |  
|                                 |  |                                |         |   |                 |   |         |  
|EBITDA(1)                        |  | $                              | 3,101   |   |                 | $ | 3,101   |  
|                                 |  |                                |         |   |                 |   |         |  
|Interest expense                 |  | $                              | 2,646   |   |                 | $ | 2,559   |  
|                                 |  |                                |         |   |                 |   |         |  
|Interest and other income        |  | $                              | 0       |   |                 | $ | 0       |  
|                                 |  |                                |         |   |                 |   |         |  
|Capital expenditures / transfers |  | $                              | 0       |   |                 | $ | 0       |  
|                                 |  |                                |         |   |                 |   |         |  
|Identifiable assets(2)           |  | $                              | 137,636 |   |                 | $ | 140,568 |  
|                                 |  |                                |         |   |                 |   |         |  
|Other and Eliminations:          |  |                                |         |   |                 |   |         |  
|Net operating revenues           |  | $                              | 198     |   |                 | $ | 545     |  
|                                 |  |                                |         |   |                 |   |         |  
|Operating loss                   |  | $                              | (936    | ) |                 | $ | (985    | )
|Depreciation and amortization    |  |                                | 51      |   |                 |   | 160     |  
|                                 |  |                                |         |   |                 |   |         |  
|EBITDA(1)                        |  | $                              | (885    | ) |                 | $ | (825    | )
|                                 |  |                                |         |   |                 |   |         |  
|Interest expense                 |  | $                              | (41     | ) |                 | $ | 24      |  
|                                 |  |                                |         |   |                 |   |         |  
|Interest and other income        |  | $                              | 182     |   |                 | $ | 255     |  
|                                 |  |                                |         |   |                 |   |         |  
|Capital expenditures / transfers |  | $                              | 201     |   |                 | $ | 0       |  
|                                 |  |                                |         |   |                 |   |         |  
|Identifiable assets(2)           |  | $                              | 31,972  |   |                 | $ | 36,590  |  
|                                 |  |                                |         |   |                 |   |         |  
|Total:                           |  |                                |         |   |                 |   |         |  
|Net operating revenues           |  | $                              | 10,175  |   |                 | $ | 11,683  |  
|                                 |  |                                |         |   |                 |   |         |  
|Operating income                 |  | $                              | 614     |   |                 | $ | 1,281   |  
|Depreciation and amortization    |  |                                | 1,504   |   |                 |   | 1,559   |  
|                                 |  |                                |         |   |                 |   |         |  
|EBITDA(1)                        |  | $                              | 2,118   |   |                 | $ | 2,840   |  
|                                 |  |                                |         |   |                 |   |         |  
|Interest expense                 |  | $                              | 2,904   |   |                 | $ | 3,835   |  
|                                 |  |                                |         |   |                 |   |         |  
|Interest and other income        |  | $                              | 184     |   |                 | $ | 262     |  
|                                 |  |                                |         |   |                 |   |         |  
|Capital expenditures / transfers |  | $                              | 255     |   |                 | $ | 468     |  
|                                 |  |                                |         |   |                 |   |         |  
|Identifiable assets(2)           |  | $                              | 203,443 |   |                 | $ | 212,727 |  
|                                 |  |                                |         |   |                 |   |         |  



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---

|(1) | EBITDA represents earnings before interest, taxes, depreciation and amortization. The Companys definition of EBITDA may not be the same as that of similarly captioned measures
used by other companies. EBITDA is presented solely as a supplemental disclosure because management believes that it is (i) a widely used measure of operating performance in the gaming industry and (ii) a principal basis of valuation of gaming
companies by certain analysts and investors. Management uses segment-level EBITDA as the primary measure of the Companys business segments performance. EBITDA should not be construed as a substitute for operating income or a better
indicator of liquidity than cash flow from operating, investing and financing activities, which are determined in accordance with generally accepted accounting principles.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Identifiable assets represent total assets less elimination for intercompany items.
|--- | -----------------------------------------------------------------------------------



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ARCHON CORPORATION



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



This discussion is intended to further the readers understanding of the consolidated financial condition and results of operations of Archon
Corporation (the Company or Archon). It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and the Companys annual report on Form 10-K for the year ended September
30, 2004. These historical financial statements may not be indicative of the Companys future performance.



General



Overview of Business Operations and Trends



The Company historically has owned, managed and operated hotel/casino properties through a number of acquisitions or developments, and it has subsequently divested certain of these properties. Presently, the Company
operates a hotel/casino in Laughlin, Nevada, known as the Pioneer Hotel & Gambling Hall (the Pioneer). It also owns land in Las Vegas, Nevada on the Las Vegas Strip that it plans to develop in the future (the Strip
Property). Management may develop the Strip Property as it believes that the trend of continued development in Las Vegas, Nevada of themed resorts which attract visitors will continue in the foreseeable future.



The Companys property in Laughlin, Nevada has experienced a flattening
of its revenues over the last few years after experiencing strong revenue and profit growth in the early 1990s. Management believes the growth and expansion of casino properties on Native American lands in such locations as California and
Arizona within the last several years caused revenue declines and caused the Company to focus on market definition and development in Laughlin to maintain or achieve profitability. Management believes Laughlin has now become a mature market with
marginal, if any, growth forecasted for the next few years based on its current plans. Management also believes it will be necessary to make certain capital improvements to maintain its existing customer base and remain competitive in its market as
evidenced by an approximate $1.0 million refurbishment to its primary restaurant facilities in late 2003.



The Company also owns two investment properties. These investment properties do not contribute significant profitability or net cash flow to the Company.



Management believes the recent revenue and expense trends in
its Laughlin hotel/casino property may not change significantly over the next few years, but believes the opportunity to develop a Las Vegas strip property could greatly enhance the Companys ability to generate future profitability.



During the quarters ended December 31, 2004 and 2003, the
Company incurred a net loss applicable to common shareholders of approximately $1.9 million. Although the net results remained generally the same between quarters, the results of the 2004 quarter included a decline in operating income of
approximately $0.7 million compared to the 2003 quarter. This was a result of decreased revenues which management believes occurred due to competitive marketing strategies used by competitors to attract some of the Companys local market share.
Management believes marketing strategies used in the second half of calendar 2004 were unsuccessful and may have contributed to the decline in overall revenues. Management believes recent management changes and marketing changes may recapture some
or all of the revenue decrease experienced in the quarter ended December 31, 2004. Management is aggressively pursuing additional strategies to regain market share but can give no



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assurance that this will occur. The 2004 period also includes a significant reduction in interest expense compared to the 2003 quarter as certain lease
obligations were retired in late December 2003 and were replaced with less debt at a significantly lower cost.



Critical Accounting Policies and Estimates



Managements Discussion and Analysis of Financial Condition and Results of Operations discusses Archons unaudited, condensed consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management 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 the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including
those related to customer incentives, bad debts, inventories, investments, estimated useful lives for depreciable and amortizable assets, valuation reserves and estimated cash flows in assessing the recoverability of long-lived assets, estimated
liabilities for slot club bonus point programs, income taxes, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions
or conditions.



Management believes the following critical
accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:



Allowance for Doubtful Accounts. The Company allows for an estimated amount of receivables that may not be collected. The Company estimates
its allowance for doubtful accounts using a specific formula applied to aged receivables as well as a specific review of large balances. Historical experience is considered, as are customer relationships, in determining specific reserves.



Long-Lived Assets. The Company has a significant
investment in long-lived property and equipment. We estimate that the undiscounted future cash flows expected to result from the use of these assets exceeds the current carrying value of these assets. Any adverse change in the estimate of these
undiscounted future cash flows could necessitate an impairment charge that would adversely affect operating results. The Company estimates useful lives for its assets based on historical experience, estimates of assets commercial lives, and
the likelihood of technological obsolescence. Should the actual useful life of a class of assets differ from the estimated useful life, the Company would record an impairment charge. The Company reviews useful lives and obsolescence and assesses
commercial viability of these assets periodically.



Income Taxes. The Company has recorded deferred tax assets related to net operating assets as the Company is able to offset its assets with its deferred tax liabilities. Realization of the net deferred tax assets is dependent
on the Companys ability to generate profits from operations or from the sale of long-lived assets that would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will
generate profits from operations or sell those assets or will generate profits from sales if they were to occur in the future. In the event the Company does generate profits from sales of long-lived assets in the future a valuation allowance would
need to be recorded and would impact the Companys future results of operations.



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Results of Operations  Three Months Ended December 31, 2004 and 2003



Consolidated



Net Operating Revenues.Consolidated net operating revenues for the quarter ended December 31, 2004
were $10.2 million, a $1.5 million, or 13%, decrease from $11.7 million for the quarter ended December 31, 2003. Income from the investment properties was $3.1 million in each of the quarters ended December 31, 2004 and 2003. Revenues decreased $1.1
million, or approximately 14%, at the Pioneer. Archon Sparks Management Company (ASMC) had revenues of $0 and $0.4 million for the three months ended December 31, 2004 and 2003, respectively. Management believes the decrease in the
revenues at the Pioneer for the 2004 quarter as compared to the 2003 quarter was a result of increased competitive marketing strategies utilized by other casino operators in Laughlin, Nevada to attract the Pioneers local customer base.
Management has recently implemented aggressive marketing plans in an attempt to regain market share.



Operating Expenses. Total operating expenses decreased approximately $0.8 million, or approximately 8%, to $9.6 million for the quarter
ended December 31, 2004 from $10.4 million for the quarter ended December 31, 2003. Total operating expenses as a percentage of net revenue increased to 94.0% for the 2004 quarter from 89.0% for the 2003 quarter. Operating expenses decreased by $0.4
million, or 5.5%, at the Pioneer due primarily to employee headcount reductions throughout 2004 but increased by approximately $0.4 million in general corporate expenses during the three months ended December 31, 2004. The increase in corporate
expenses was primarily due to increased payroll and other expenses. ASMC had operating expenses of $0 and $0.7 million during the three months ended December 31, 2004 and 2003, respectively.



Operating Income. Consolidated operating income for the quarter
ended December 31, 2004 was $0.6 million, a decrease of $0.7 million, or 52.1%, from $1.3 million for the quarter ended December 31, 2003. Operating income of $2.3 million for each of the three-month periods ended December 31, 2004 and 2003 is
attributable to the investment properties. Operating income decreased by $0.7 million at the Pioneer due to an operating loss of $0.7 million and declined by $0.4 million for general corporate expenses. ASMC had an operating loss of $0 and $0.3
million for the three months ended December 31, 2004 and 2003, respectively.



Interest Expense. Consolidated interest expense for the three months ended December 31, 2004 was $2.9 million, a $0.9 million decrease compared to $3.8 million for the three months ended December 31,
2003. The decrease was primarily due to the retirement of lease obligations of approximately $36.0 million at the Pioneer in December 2003 and the replacement thereof with approximately $18.0 million of lower-cost debt.



Interest and Other Income. Consolidated interest and other
income was $0.2 million and $0.3 million for each of the quarters ended December 31, 2004 and 2003, respectively.



Loss on Disposal of Assets.During the three months ended December 31, 2004, the Company disposed of certain older slot machines no longer
deemed useful and incurred a loss with the disposal of approximately $0.2 million. No such charges were incurred in the 2003 period.



Loss Before Income Tax. Consolidated loss before income tax for the quarter ended December 31, 2004 was $2.4 million, a $0.1 million
increase in the pre-tax loss compared to a loss before income tax of $2.3 million for the quarter ended December 31, 2003.



Federal Income Tax. The Company recorded federal income tax benefits, based on federal statutory rates, of $0.8 million for the quarters
ended December 31, 2004 and 2003, respectively.



Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred
stock. However, dividends of approximately $0.4 million for each of the three-month periods ended December 31, 2004 and 2003, respectively, accrued on the preferred stock for purposes of calculating net loss applicable to common shares.



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Net Loss. Consolidated net loss attributable to common shares was $1.9 million, or
$0.31 per common share, for the quarters ended December 31, 2004 and 2003, respectively.



Pioneer



Net
Operating Revenues. Net operating revenues at the Pioneer decreased $1.1 million, or approximately 14%, to $6.9 million in the three months ended December 31, 2004 from $8.0 million in the three months ended December 31, 2003.



Casino revenues decreased $1.2 million, or 18%, to $5.8 million in the three
months ended December 31, 2004 from $7.0 million in the three months ended December 31, 2003. Slot and video poker revenues decreased $0.9 million, or 15%, to $5.2 million in the three months ended December 31, 2004 from $6.1 million in the three
months ended December 31, 2003. Management believes this decrease was a result of increased competitive marketing strategies utilized by other casino operators in Laughlin, Nevada to attract the Pioneers local customer base. Other gaming
revenues, including table games, decreased $0.4 million, or approximately 41%, to $0.5 million in the three months ended December 31, 2004 from $0.9 million in the three months ended December 31, 2003. Casino promotional allowances decreased $0.6
million, or 29%, to $1.4 million in the three months ended December 31, 2004 from $2.0 million in the three months ended December 31, 2003 primarily due to overall decreases in revenues.



Hotel revenues decreased $0.1 million, or 17.7%, to $0.5 million for the three months ended December 31, 2004 from $0.6
million for the three months ended December 31, 2003, due to a decrease in occupancy rates and a decrease in average daily room rates from $28.52 in the 2003 period to $24.73 in the 2004 period. Management believes competitive pressures in the
Laughlin market in the 2004 period caused the decline in average room rates charged. Food and beverage revenues decreased $0.4 million, or 19.6%, to $1.7 million for the three months ended December 31, 2004 compared to $2.1 million in the three
months ended December 31, 2003, primarily due to the decrease in overall gross revenues and hotel occupants. Other revenues remained relatively flat at $0.4 million and $0.3 million for the quarters ended December 31, 2004 and 2003, respectively.



Operating Expenses. Operating expenses decreased
$0.4 million, or 5.5%, to $7.6 million in the three months ended December 31, 2004 from $8.0 million in the three months ended December 31, 2003. Operating expenses as a percentage of net revenue increased to 111% in the current year period from
101% in the prior year period.



Casino expenses decreased $0.6
million, or 15.4%, to $3.3 million in the three months ended December 31, 2004 from $3.9 million in the three months ended December 31, 2003. Management believes the elimination of certain payroll costs, the decline in revenues and the usage of
newer technology slot machines in the 2004 period contributed significantly to this decrease. Casino expenses as a percentage of casino revenues increased to 57.2% in the current year period from 55.4% in the prior year period.



Hotel expenses increased from $0.1 million in the 2003 period to $0.2 million
in the 2004 period. This increase occurred as county-mandated requirements for room maintenance and cleaning procedures increased during 2004. Food and beverage expenses increased $0.1 million to $1.0 million in the three months ended December 31,
2004 from $0.9 million in the three months ended December 31, 2003. Food and beverage expenses as a percentage of food and beverage revenues increased to 61.7% in the current year period from 41.4% in the prior year period. However, food and
beverage promotional allowances decreased approximately $0.4 million in the 2004 period. Other expenses decreased less than $0.1 million to $0.2 million for the three months ended December 31, 2004. Other expenses as a percentage of other revenues
decreased to 65.5% in the current year period from 81.6% in the prior year period.



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Selling, general and administrative expenses remained unchanged at $1.2 million during the quarters ended
December 31, 2004 and 2003. Selling, general and administrative expenses as a percentage of revenues increased to 17.8% in the current year period from 15.0% in the prior year period. Depreciation and amortization expenses increased less than $0.1
million to $0.7 million in the 2004 period and utility and property expenses decreased approximately $0.1 million in the 2004 period.



Liquidity and Capital Resources; Trends and Factors Relevant to Future Operations



Contractual Obligations and Commitments: The following table summarizes the Companys fiscal year
contractual obligations and commitments as of December 31, 2004 (for the nine-month period ending September 30, 2005 and for the fiscal years ending September 30, 2006, 2007, 2008, 2009, 2010, 2011 and thereafter.)



|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|------------------- |  | -------------------------- | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | ------------------ | ----- | ----- | - | ----- |  | - | ------ |  | - | -------
|                    |  | Payments Due By Periods(1)
|                    |  | 2005                       |        | 2006 |   | 2007  |  | 2008 |       | 2009 |   | 2010  |  | 2011 andThereafter |       | Total
|                    |  | (dollars in thousands)    
|Non-recourse debt:  |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Gaithersburg        |  | $                          | 1,265  |      | $ | 1,915 |  | $    | 2,195 |      | $ | 2,490 |  | $                  | 2,828 |       | $ | 3,186 |  | $ | 37,116 |  | $ | 50,995 
|Sovereign           |  |                            | 25,705 |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 31,199 |  |   | 56,904 
|                    |  |                            |        |      |   |       |  |     
|Debt:               |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Building            |  |                            | 53     |      |   | 80    |  |      | 14    |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 147    
|Equipment           |  |                            | 553    |      |   | 623   |  |      | 419   |      |   | 3     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 1,598  
|Mortgage obligation |  |                            | 12,506 |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 12,506 
|Other               |  |                            | 794    |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 794    
|                    |  |                            |        |      |   |       |  |     
|Operating leases:   |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Ground lease        |  |                            | 227    |      |   | 302   |  |      | 302   |      |   | 302   |  |                    | 302   |       |   | 302   |  |   | 20,648 |  |   | 22,385 
|Corporate offices   |  |                            | 117    |      |   | 100   |  |      | 22    |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 239    
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Total               |  | $                          | 41,220 |      | $ | 3,020 |  | $    | 2,952 |      | $ | 2,795 |  | $                  | 3,130 |       | $ | 3,488 |  | $ | 88,963 |  | $ | 145,568
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        

---

|(1) | Expected cash interest payments are $8.5 million, $8.1 million, $7.3 million, $7.0 million, $6.8 million, $6.6 million and $46.3 million for the nine months ending September 30,
2005, the fiscal years ending September 30, 2006, 2007, 2008, 2009, 2010, 2011 and thereafter, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company has no significant purchase commitments or obligations other than those included in the above schedule.



The Company has a financial covenant related to its outstanding long-term
debt with a certain lender. This covenant requires the Company to maintain a minimum ratio of earnings before interest, taxes, depreciation and amortization, net of investment properties, compared to current portions of long-term debt, excluding
investment properties, as defined. At December 31, 2004, the Company was not in compliance with this covenant and, as such, was technically in default under the debt agreement. The Company has received a waiver of default from the lender through
March 31, 2005 and plans to amend or restructure this covenant with the lender. Management believes it is not the intention of the lender to declare a default relative this covenant. However, as the waiver ends on March 31, 2005, the Company has
included all amounts owing under the debt agreement, (approximately $12.5 million) at December 31, 2004, in the current portion of long-term debt in the Companys condensed consolidated financial statements. Management believes the Company has
sufficient assets to meet any unforeseen demands on current operations or significant debt obligations.



The Companys ability to service its contractual obligations and commitments, other than the non-recourse debt, will be dependent on the future
performance of the Pioneer, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, including competitive pressure from the expansion of Native American gaming facilities in the
southwest United States, certain of which are beyond the Companys control. The Company may also be required to liquidate certain of its marketable securities or long-term assets to service contractual obligations, commitments and operating
costs. In addition, the Company will be dependent on the continued ability of the tenants in the investment properties in Gaithersburg, Maryland and Dorchester, Massachusetts to make payments pursuant to the leases with the Company. The payments
under the leases are contractually committed to be used to make payments on the Companys non-recourse debt obligations related to the properties.



Liquidity. As of December 31, 2004, the Company held cash and cash equivalents of approximately $2.6 million compared to $3.4 million at
September 30, 2004. The Company had $7.1 million in investment in marketable securities at December 31, 2004 compared to $5.4 million at September 30, 2004. The investment properties are structured such that future tenants payments cover future
required mortgage payments including balloon payments. Management believes that the Company will have sufficient available cash and cash resources to meet its cash requirements for a reasonable period of time.



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##### Table of Contents

Cash Flows from Operating Activities. The Companys cash provided by operating
activities was $2.9 million for the three months ended December 31, 2004 as compared to $1.4 million for the three months ended December 31, 2003. The increase of $1.5 million was primarily due to working capital changes in accounts payable, accrued
liabilities and accounts receivable within the periods.



Cash Flows from Investing Activities. Cash used in investing activities was $1.1 million for the three months ended December 31, 2004, as compared to cash provided by investing activities of approximately $16.2 million for the
three months ended December 31, 2003. The decline was due principally to a reduction in restricted cash and marketable securities sold in the 2003 period of nearly $16.8 million, neither of which occurred in the 2004 period. The restricted cash and
marketable securities sold were used to fund, in part, the purchase of property subject to certain lease obligations as described below in December 2003.



Cash Used in Financing Activities. Cash used in financing activities was $2.6 million for the three months ended December 31, 2004 as
compared to $18.6 million for the three months ended December 31, 2003. In the 2003 period, the Company paid an approximate $36 million lease obligation to acquire certain assets at the Pioneer, paid approximately $3 million on other lease and debt
obligations, collected on a $2.5 million note and also borrowed $18.0 million to finance the acquisition of assets and retirement of leases, all of which caused a usage of cash of $18.5 million. In the 2004 period, debt payments offset, in part, by
borrowings caused the cash usage of approximately $2.6 million.



The Companys primary source of operating cash is from the Pioneer operations and from interest income on available cash and cash equivalents and investments in marketable securities. Rental income from the Companys two
investment properties is contractually committed to reducing the non-recourse indebtedness issued or assumed in connection with the acquisition of the investment properties. Under the two leases, the tenants are responsible for substantially all
obligations related to the property. Sahara Las Vegas Corp. (SLVC), an indirect wholly-owned subsidiary of the Company, owns an approximately 27-acre parcel of real property on Las Vegas Boulevard South which is subject to a lease with a
condominium developer. SLVC generates minimal cash from the lease agreement after payment of property costs, most notably property taxes.



Throughout the latter half of calendar 2004, the Company financed certain legal costs associated with certain arbitration between Dukes LLC and a
general contractor. Christopher Lowden, son of Paul W. Lowden, is a limited partner in Dukes LLC which was the managing member of Dukes Casino, a casino managed and operated by a subsidiary of the Company. The Company had previously
written-off its investment in and receivables from Dukes LLC, related to the operation of Dukes Casino, of approximately $1.4 million in the fiscal year ended September 30, 2003. In January 2005, the American Arbitration Association
awarded Dukes LLC approximately $4.9 million against the general contractor of a casino renovation at Dukes Casino. The Company has an agreement with Dukes LLC whereby the Company is to be reimbursed for legal and other costs
related to the arbitration as well as recovery of amounts previously written-off, which in total may exceed $2 million. However due to various contingencies surrounding the enforcement, collection or settlements with Dukes LLC and the general
contractor, management can give no assurance of the timing or the amount it will ultimately receive.



Pioneer



Pioneers principal uses of cash are for payments of slot machine debt obligations, ground lease rent and capital expenditures to maintain the facility. The Company has implemented changes in personnel and promotional programs and
installed new slot equipment to address the decreases in revenues and operating income. One of managements main focuses is to recapture market share in the Laughlin market. Management, however, can give no assurance that market share will be
recaptured in its Laughlin market as its competition in the market typically has greater capital resources than does the Pioneer.



Payments of obligations under capital lease were $0 and $0.9 million. for the three months ended December 31, 2004 and 2003, respectively, and rent
expense was approximately $0.1 million and $0.2 million for the three months ended December 31, 2004 and 2003, respectively. Capital expenditures to maintain the facility in fiscal 2005 are expected to be approximately $1.0 million.



Preferred Stock



The Companys preferred stock provides that dividends accrue on a
semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company has not declared the semiannual preferred
stock dividends since October 1, 1996. The dividend rate per annum was equal to 8.0% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11.0%; the dividend rate continued to increase by
an additional 50 basis points on each succeeding semiannual dividend payment date up to a maximum of 16.0% per annum. In October 2003, the dividend rate increased to 16.0%. As of December 31, 2004, the aggregate liquidation preference of the
preferred stock was approximately $19.2 million, or $4.24 per share.



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##### Table of Contents

Pursuant to the Certificate of Designation of Preferred Stock, dividends are payable only when, as
and if declared by the Board of Directors and the liquidation preference is payable only upon a liquidation, dissolution or winding up of the Company. Because dividends in an amount equal to dividend payments for one dividend period have accrued and
remain unpaid for at least two years, the preferred stockholders, voting as a separate class, are entitled to elect two directors. As such, two of the Companys six directors have been elected by the preferred shareholders.



The Board of Directors of the Company authorized an increase in the amount of
cash that may be used to purchase preferred stock to $2.5 million. As of February 11, 2005, the Company had purchased 879,559 shares of preferred stock for $1.4 million under this program. During the three months ended December 31, 2004, the Company
purchased 202 shares for less than $1,000.



Recently Issued Accounting
Standards



The Company keeps abreast of new
generally accepted accounting principles and disclosure reporting requirements issued by the SEC and other standard setting agencies. Recently issued accounting standards which may affect our financial results are noted in Note 1 of our Unaudited
Condensed Consolidated Financial Statements.



Effects of Inflation



The Company has been generally successful in
recovering costs associated with inflation through price adjustments in its hotel. Any such future increases in costs associated with casino operations and maintenance of properties may not be completely recovered by the Company.



Private Securities Litigation Reform Act



Certain statements in this Quarterly Report on Form 10-Q which are not
historical facts are forward-looking statements, such as statements relating to future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities,
capital expenditures and expansion of business operations into new areas. Such forward-looking statements involve a number of risks and uncertainties that may significantly affect the Companys liquidity and results in the future and,
accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not limited to, those related to effects of competition, leverage and debt service, general
economic conditions, changes in gaming laws or regulations (including the legalization of gaming in various jurisdictions) and risks related to development activities and the startup of non-gaming operations.



Item 3. Quantitative and Qualitative Disclosures About Market Risk



Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity
process. Excluding its non-recourse debt, the Company has total interest-bearing debt at December 31, 2004 of approximately $15 million, of which approximately $13 million bears interest at a variable rate (approximately 6.25% at December 31, 2004).
Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would cause an approximate $130,000 change in the amount of interest the Company would incur based on the amount of
variable-interest rate debt outstanding for any current or future year in which this debt is outstanding. Future borrowings related to this debt will be exposed to this same market rate risk.



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##### Table of Contents

The Company holds investments in various available-for-sale securities; however, management believes that
exposure to price risk arising from the ownership of these investments is not material to the Companys consolidated financial position, results of operations or cash flow as historically price fluctuations of these securities have not been
material.



Item 4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures:



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



As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing except as noted below, our Chief Executive Officer and Chief
Financial Officer concluded that Archons disclosure controls and procedures are effective. However, it has been concluded that the Companys failure to determine that it was in technical default of a loan agreement during the period
covered by this report (as described in Note 5 to the Financial Statements in Item 1 of Part I and Management Discussion and Analysis in Item 2 of Part I above) constitutes a material weakness in our internal control over financial reporting. A
material weakness, as defined by the Public Company Accounting Oversight Board, is a reportable condition in which the design or operation of one or more elements of the internal control structure does not sufficiently reduce the risk of material
errors and irregularities occurring and not being timely detected.



As a part of our normal operations, we update our internal controls as necessary to accommodate any modifications to our business processes or accounting procedures. There have not been any other changes in our internal controls or in other
factors that materially affected, or are reasonably likely to materially affect these controls as of the end of the period covered by this report, except as noted below.



Our previous independent accountants noted a significant deficiency in the design or operation of the Companys
internal control that could adversely the Companys ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. Specifically, it was noted the Company did not have a
documented process in place for its financial closing and reporting process and for the research and conclusions on unusual transactions. It also appeared to our previous independent accountants that detailed reviews of significant balance sheet
accounts by individuals independent of the preparer and supporting analyses were not performed.



Management of the Company has reviewed these items noted by our previous independent accountants with the Audit Committee of the Board and has implemented
procedures and plans to document its financial closing and reporting processes and the research and conclusions on unusual transactions. Additionally, the Company is ensuring that detailed reviews of significant balance sheet accounts and supporting
analyses are performed by individuals independent of the preparer.



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##### Table of Contents

ARCHON CORPORATION



PART II
 OTHER INFORMATION



Item 1. Legal Proceedings



None



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



The table below sets forth information regarding repurchases of Archon preferred stock during the three months ended December 31, 2004.



|                                           |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|------------------------------------------ |  | ----------------------------- |  | -------------------------- | ---- | ------------------------------------------------------------------------ | ------- | ----------------------------------------------------------------------------- | - | ---------
|Period                                     |  | TotalNumber ofSharesPurchased |  | AveragePrice PaidPer Share |      | TotalNumber ofSharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms |         | MaximumDollar Valueof Shares thatMay Yet BePurchasedUnder thePlans orPrograms
|October 2004:                              |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|October 1, 2004 through October 31, 2004   |  | 0                             |  | $                          | 0    |                                                                          | 879,357 |                                                                               | $ | 1,094,136
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|November 2004:                             |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|November 1, 2004 through November 30, 2004 |  | 202                           |  | $                          | 2.65 |                                                                          | 879,559 |                                                                               | $ | 1,093,601
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|December 2004:                             |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          
|December 1, 2004 through December 31, 2004 |  | 0                             |  | $                          | 0    |                                                                          | 879,559 |                                                                               | $ | 1,093,601
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                               |   |          



All shares of
preferred stock were purchased pursuant to a $2.5 million stock repurchase program which was previously approved by our Board of Directors. Funds are available until expended or until the program is suspended by the Chief Executive Officer or by the
Board of Directors.



Item 3. Defaults Upon Senior Securities



The Company has outstanding redeemable exchangeable cumulative preferred stock (Preferred Stock). Prior to fiscal 1997, the Company satisfied the semi-annual dividend payments on its Preferred Stock
through the issuance of paid in kind dividends. Commencing in fiscal 1997, dividends paid on the Preferred Stock, to the extent declared, must be paid in cash. No dividends have been declared on the Preferred Stock since October 1, 1996.



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##### Table of Contents

Pursuant to the terms of the Certificate of Designation on Preferred Stock with respect to the Preferred Stock, dividends that are not declared are
cumulative and accrue. The dividend rate per annum was equal to 8% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11% and the dividend continued to increase by an additional 50 basis
points on each succeeding semi-annual dividend payment date up to a maximum of 16% per annum. The dividend rate is 16% effective October 1, 2003. The accrued stock dividends have not been recorded as an increase to the Preferred Stock account. As of
December 31, 2004, the aggregate liquidation preference of the Preferred Stock was approximately $19.2 million, or $4.24 per share.



The Company has a financial covenant related to its outstanding long-term debt with a certain lender. This covenant requires the Company to maintain a
minimum ratio of earnings before interest, taxes, depreciation and amortization, net of investment properties, compared to current portions of long-term debt, excluding investment properties. At December 31, 2004, the Company was not in compliance
with this covenant and, as such, was technically in default under the debt agreement. The Company has received a waiver of default from the lender through March 31, 2005 and plans to amend or restructure this covenant with the lender.



Item 4. Submission of Matters to a Vote of Security Holders



None



Item 5. Other Information



None



Item 6. Exhibits and Reports on Form 8-K



Exhibits.

|   |  |                      |  |                                                                                                                                                                                        
|-- |  | -------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |  |                     
|a. |  | ExhibitNumber        |  | Description of Exhibit                                                                                                                                                                 
|   |  | 31.1                 |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 dated March 25, 2005 (filed by Amendment No.
1).                                        
|   |  | 31.2                 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 dated March 25, 2005 (filed by Amendment
No. 1).                                    
|   |  | 32                   |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated March 25, 2005 (filed by Amendment No.
1).                                                               
|   | 
|b. |  | Reports on Form 8-K.
|   |  |                     
|   |  |                      |  | The Company filed a Form 8-K dated October 25, 2004, announcing the issuance of a press release providing an update on the status of the Companys Las Vegas Strip site under Item
801.



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SIGNATURES



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



ARCHON CORPORATION, RegistrantBy:

/s/ Paul W. LowdenPaul W. Lowden Chairman of the Board and Chief Executive OfficerBy:

/s/ John M. GarnerJohn M. Garner, Chief Financial Officer




Date: March 29, 2005



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