##### Table of Contents







SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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



|                                |  |  |  |               |  | 
|------------------------------- |  |  |  | ------------- |  | 
|For the quarterly period ended: |  |  |  | June 30, 2009



| ̈ | 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

ARCHON CORPORATION



(Exact name of registrant as specified in its
charter)



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

4336 Losee Road, Suite 5, North Las Vegas, Nevada 89030



(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)

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 check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

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

Large accelerated filer:   ̈    Accelerated
filer:   ̈    Non-accelerated filer:   ̈    Small reporting company:  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes   ̈    No  x

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.



|          |  |       |  |                
|--------- |  | ----- |  | ---------------
|6,370,176 |  | as of |  | August 13, 2009









---

##### Table of Contents

ARCHON CORPORATION

INDEX



|        |  |                                                                                                                               |  |     
|------- |  | ----------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                               |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                                                         |  |     
|        |  |                                                                                                                              
|Item 1  |  | Unaudited Condensed Consolidated Financial Statements:                                                                        |  |     
|        |  |                                                                                                                              
|        |  | Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and September 30, 2008 (Audited)                                  |  | 1   
|        |  |                                                                                                                              
|        |  | Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2009 and 2008
(Unaudited)                  |  | 3   
|        |  |                                                                                                                              
|        |  | Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2009 and 2008 (Unaudited) |  | 4   
|        |  |                                                                                                                              
|        |  | Consolidated Statement of Stockholders Equity for the Nine Months Ended June 30, 2009
(Unaudited)                            |  | 5   
|        |  |                                                                                                                              
|        |  | Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2009 and 2008 (Unaudited)                            |  | 6   
|        |  |                                                                                                                              
|        |  | Notes to Unaudited Consolidated Financial Statements                                                                          |  | 7   
|        |  |                                                                                                                              
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                         |  | 17  
|        |  |                                                                                                                              
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                    |  | 29  
|        |  |                                                                                                                              
|Item 4  |  | Controls and Procedures                                                                                                       |  | 29  
|        |  |                                                                                                                              
|PART II |  | OTHER INFORMATION                                                                                                             |  |     
|        |  |                                                                                                                              
|Item 1  |  | Legal Proceedings                                                                                                             |  | 31  
|        |  |                                                                                                                              
|Item 2  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                              |  | 32  
|        |  |                                                                                                                              
|Item 3  |  | Defaults Upon Senior Securities                                                                                               |  | 32  
|        |  |                                                                                                                              
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                                           |  | 32  
|        |  |                                                                                                                              
|Item 5  |  | Other Information                                                                                                             |  | 33  
|        |  |                                                                                                                              
|Item 6  |  | Exhibits                                                                                                                      |  | 33  



-i-



---

##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Consolidated Financial Statements
|------- | ---------------------------------

Archon Corporation and Subsidiaries

Consolidated Balance Sheets



|                                        |  |                         |             |   |                   |   |             |  
|--------------------------------------- |  | ----------------------- | ----------- | - | ----------------- | - | ----------- | -
|                                        |  | June 30,2009(Unaudited) |             |   | September 30,2008 |  
|ASSETS                                  |  |                         |             |   |                   |   |             |  
|Current assets:                         |  |                         |             |   |                   |   |             |  
|Cash and cash equivalents               |  | $                       | 33,698,709  |   |                   | $ | 37,973,564  |  
|Investment in marketable securities     |  |                         | 4,708,207   |   |                   |   | 5,731,337   |  
|Accounts receivable, net                |  |                         | 548,920     |   |                   |   | 144,810     |  
|Inventories                             |  |                         | 248,585     |   |                   |   | 342,379     |  
|Prepaid expenses and other              |  |                         | 899,693     |   |                   |   | 1,371,281   |  
|                                        |  |                         |             |   |                   |   |             |  
|Total current assets                    |  |                         | 40,104,114  |   |                   |   | 45,563,371  |  
|                                        |  |                         |             |   |                   |   |             |  
|Property held for sale                  |  |                         | 21,504,400  |   |                   |   | 21,504,400  |  
|Property and equipment:                 |  |                         |             |   |                   |   |             |  
|Rental property held for investment net |  |                         | 120,403,833 |   |                   |   | 122,354,178 |  
|Land used in operations                 |  |                         | 3,925,589   |   |                   |   | 3,925,589   |  
|Buildings and improvements              |  |                         | 7,951,201   |   |                   |   | 7,951,200   |  
|Machinery and equipment                 |  |                         | 3,048,858   |   |                   |   | 1,816,546   |  
|Accumulated depreciation                |  |                         | (1,455,670  | ) |                   |   | (782,999    | )
|                                        |  |                         |             |   |                   |   |             |  
|Property and equipment, net             |  |                         | 133,873,811 |   |                   |   | 135,264,514 |  
|                                        |  |                         |             |   |                   |   |             |  
|Other assets                            |  |                         | 7,200,593   |   |                   |   | 7,641,889   |  
|                                        |  |                         |             |   |                   |   |             |  
|Total assets                            |  | $                       | 202,682,918 |   |                   | $ | 209,974,174 |  
|                                        |  |                         |             |   |                   |   |             |  

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



-1-



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets (continued)



|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | ----------------- | - | ----------- | -
|                                                                                                                                                          |  | June 30,2009(Unaudited) |             |   | September 30,2008 |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                      |  |                         |             |   |                   |   |             |  
|Current liabilities:                                                                                                                                      |  |                         |             |   |                   |   |             |  
|Loans payable                                                                                                                                             |  | $                       | 9,843,691   |   |                   | $ | 9,843,691   |  
|Accounts payable                                                                                                                                          |  |                         | 1,845,919   |   |                   |   | 2,848,701   |  
|Interest payable                                                                                                                                          |  |                         | 210,694     |   |                   |   | 219,233     |  
|Other accrued expenses                                                                                                                                    |  |                         | 3,321,894   |   |                   |   | 4,474,276   |  
|Exchangeable redeemable preferred stock  unredeemed                                                                                                      |  |                         | 341,756     |   |                   |   | 214,972     |  
|Current portion of debt                                                                                                                                   |  |                         | 17,483      |   |                   |   | 82,057      |  
|Current portion of nonrecourse debt                                                                                                                       |  |                         | 3,093,127   |   |                   |   | 2,828,304   |  
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Total current liabilities                                                                                                                                 |  |                         | 18,674,564  |   |                   |   | 20,511,234  |  
|Debt  less current portion                                                                                                                               |  |                         | 0           |   |                   |   | 441         |  
|Nonrecourse debt  less current portion                                                                                                                   |  |                         | 69,148,024  |   |                   |   | 71,500,098  |  
|Deferred income taxes                                                                                                                                     |  |                         | 23,051,571  |   |                   |   | 23,242,864  |  
|Deferred rent income and accrued expenses                                                                                                                 |  |                         | 36,885,577  |   |                   |   | 39,112,665  |  
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Total liabilities                                                                                                                                         |  |                         | 147,759,736 |   |                   |   | 154,367,302 |  
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Stockholders equity:                                                                                                                                     |  |                         |             |   |                   |   |             |  
|Common stock, $0.01 par value; authorized  100,000,000 shares; issued and outstanding  6,390,787, and 6,329,177
shares                                  |  |                         | 63,908      |   |                   |   | 63,292      |  
|Preferred stock, exchangeable, redeemable 16.0% cumulative $2.14 per share liquidation value, authorized  10,000,000 shares; none issued
and outstanding |  |                         | 0           |   |                   |   | 0           |  
|Additional paid-in capital                                                                                                                                |  |                         | 63,377,682  |   |                   |   | 63,300,848  |  
|Accumulated deficit                                                                                                                                       |  |                         | (5,759,497  | ) |                   |   | (6,582,794  | )
|Accumulated other comprehensive loss                                                                                                                      |  |                         | (2,251,706  | ) |                   |   | (974,978    | )
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Sub-total                                                                                                                                                 |  |                         | 55,430,387  |   |                   |   | 55,806,368  |  
|Less: Notes receivable from stockholders                                                                                                                  |  |                         | (111,721    | ) |                   |   | (111,722    | )
|Treasury stock  20,611 and 4,875 common shares, at cost                                                                                                  |  |                         | (395,484    | ) |                   |   | (87,774     | )
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Total stockholders equity                                                                                                                                |  |                         | 54,923,182  |   |                   |   | 55,606,872  |  
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  
|Total liabilities and stockholders equity                                                                                                                |  | $                       | 202,682,918 |   |                   | $ | 209,974,174 |  
|                                                                                                                                                          |  |                         |             |   |                   |   |             |  

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



-2-



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|------------------------------------------------------- |  | -------------------------- | ---------- | - | ------------------------- | - | ----------- | ---- |  | - | ---------- | - |  | - | ----------- | -
|                                                        |  | Three Months EndedJune 30, |            |   | Nine Months EndedJune 30, |  
|                                                        |  | 2009                       |            |   | 2008                      |   |             | 2009 |  |   | 2008       |  
|Revenues:                                               |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Casino                                                  |  | $                          | 3,814,896  |   |                           | $ | 4,848,404   |      |  | $ | 12,759,506 |   |  | $ | 16,029,032  |  
|Hotel                                                   |  |                            | 487,810    |   |                           |   | 614,217     |      |  |   | 1,285,349  |   |  |   | 1,710,756   |  
|Food and beverage                                       |  |                            | 1,515,505  |   |                           |   | 1,875,355   |      |  |   | 4,472,409  |   |  |   | 5,606,777   |  
|Rental properties                                       |  |                            | 3,100,562  |   |                           |   | 3,100,561   |      |  |   | 9,301,686  |   |  |   | 9,301,685   |  
|Other                                                   |  |                            | 1,164,912  |   |                           |   | 1,430,725   |      |  |   | 4,238,069  |   |  |   | 5,193,912   |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Gross revenues                                          |  |                            | 10,083,685 |   |                           |   | 11,869,262  |      |  |   | 32,057,019 |   |  |   | 37,842,162  |  
|Less casino promotional allowances                      |  |                            | (951,046   | ) |                           |   | (1,338,829  | )    |  |   | (3,018,179 | ) |  |   | (4,340,199  | )
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Net operating revenues                                  |  |                            | 9,132,639  |   |                           |   | 10,530,433  |      |  |   | 29,038,840 |   |  |   | 33,501,963  |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Operating expenses:                                     |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Casino                                                  |  |                            | 2,402,022  |   |                           |   | 2,814,791   |      |  |   | 7,447,874  |   |  |   | 9,367,860   |  
|Hotel                                                   |  |                            | 224,083    |   |                           |   | 299,670     |      |  |   | 586,833    |   |  |   | 796,932     |  
|Food and beverage                                       |  |                            | 1,062,455  |   |                           |   | 1,161,774   |      |  |   | 3,023,293  |   |  |   | 3,338,470   |  
|Other                                                   |  |                            | 136,830    |   |                           |   | 222,251     |      |  |   | 520,329    |   |  |   | 807,647     |  
|Selling, general and administrative:                    |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Corporate expenses                                      |  |                            | 760,175    |   |                           |   | 1,588,880   |      |  |   | 2,539,009  |   |  |   | 6,433,102   |  
|Other                                                   |  |                            | 789,725    |   |                           |   | 853,881     |      |  |   | 2,322,565  |   |  |   | 2,644,456   |  
|Utilities and property expenses                         |  |                            | 1,024,250  |   |                           |   | 1,255,897   |      |  |   | 2,986,598  |   |  |   | 3,640,892   |  
|Depreciation and amortization                           |  |                            | 850,381    |   |                           |   | 1,070,822   |      |  |   | 2,623,015  |   |  |   | 3,212,262   |  
|Gain on disposal of assets                              |  |                            | 0          |   |                           |   | 0           |      |  |   | 0          |   |  |   | (7,628      | )
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Total operating expenses                                |  |                            | 7,249,921  |   |                           |   | 9,267,966   |      |  |   | 22,049,516 |   |  |   | 30,233,993  |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Operating income                                        |  |                            | 1,882,718  |   |                           |   | 1,262,467   |      |  |   | 6,989,324  |   |  |   | 3,267,970   |  
|Other income and (expense):                             |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Interest expense                                        |  |                            | (2,015,368 | ) |                           |   | (2,069,057  | )    |  |   | (5,969,684 | ) |  |   | (6,159,877  | )
|Income realized upon termination of land sale option    |  |                            | 0          |   |                           |   | 67,130,836  |      |  |   | 0          |   |  |   | 67,130,836  |  
|Gain from settlement of liabilities                     |  |                            | 0          |   |                           |   | 1,060,576   |      |  |   | 0          |   |  |   | 1,060,576   |  
|Interest and other income                               |  |                            | 134,538    |   |                           |   | 396,307     |      |  |   | 439,703    |   |  |   | 3,463,553   |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Income before income tax expense                        |  |                            | 1,888      |   |                           |   | 67,781,129  |      |  |   | 1,459,343  |   |  |   | 68,763,058  |  
|Federal income tax expense                              |  |                            | (642       | ) |                           |   | (23,045,583 | )    |  |   | (496,176   | ) |  |   | (23,379,438 | )
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Net income                                              |  | $                          | 1,246      |   |                           | $ | 44,735,546  |      |  | $ | 963,167    |   |  | $ | 45,383,620  |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Average common shares outstanding                       |  |                            | 6,370,176  |   |                           |   | 6,393,093   |      |  |   | 6,356,510  |   |  |   | 6,385,742   |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Average common and common equivalent shares outstanding |  |                            | 6,370,176  |   |                           |   | 7,133,093   |      |  |   | 6,356,510  |   |  |   | 7,114,029   |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Income per common share:                                |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Basic                                                   |  | $                          | 0.00       |   |                           | $ | 7.00        |      |  | $ | 0.15       |   |  | $ | 7.11        |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Diluted                                                 |  | $                          | 0.00       |   |                           | $ | 6.27        |      |  | $ | 0.15       |   |  | $ | 6.38        |  
|                                                        |  |                            |            |   |                           |   |             |      |  |   |            |   |  |   |             |  

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



-3-



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)



|                                                                     |  |                            |         |      |                           |            |      |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------- |  | -------------------------- | ------- | ---- | ------------------------- | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                     |  | Three Months EndedJune 30, |         |      | Nine Months EndedJune 30, |           
|                                                                     |  | 2009                       |         | 2008 |                           |            | 2009 |  |   | 2008       |  
|Net income                                                           |  | $                          | 1,246   |      | $                         | 44,735,546 |      |  | $ | 963,167    |   |  | $ | 45,383,620 |  
|Unrealized gain (loss) on marketable securities, net of income taxes |  |                            | 480,477 |      |                           | (1,084,428 | )    |  |   | (1,276,728 | ) |  |   | (4,679,634 | )
|                                                                     |  |                            |         |      |                           |            |      |  |   |            |   |  |   |            |  
|Comprehensive income (loss)                                          |  | $                          | 481,723 |      | $                         | 43,651,118 |      |  | $ | (313,561   | ) |  | $ | 40,703,986 |  
|                                                                     |  |                            |         |      |                           |            |      |  |   |            |   |  |   |            |  

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



-4-



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statement of Stockholders Equity

For the Nine Months Ended June 30, 2009

(Unaudited)



|                                         |  |             |        |                          |   |            |                    |  |   |                                   |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | ------------------------ | - | ---------- | ------------------ |  | - | --------------------------------- | - |  | ------------------------------- | ---------- | - | ------------- | - | -------- | ----- |  | - | -------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | AdditionalPaid-InCapital |   |            | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveLoss |   |  | NotesReceivablefromStockholders |            |   | TreasuryStock |   |          | Total | 
|Balances, October 1, 2008                |  | $           | 63,292 |                          | $ | 63,300,848 |                    |  | $ | (6,582,794                        | ) |  | $                               | (974,978   | ) |               | $ | (111,722 | )     |  | $ | (87,774  | ) |  | $ | 55,606,872 |  
|Net income                               |  |             |        |                          |   |            |                    |  |   | 963,167                           |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   | 963,167    |  
|Preferred stock acquired                 |  |             |        |                          |   |            |                    |  |   | (139,870                          | ) |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   | (139,870   | )
|Common stock adjustments                 |  |             | 616    |                          |   | (596       | )                  |  |   |                                   |   |  |                                 |            |   |               |   | 1        |       |  |   |          |   |  |   | 21         |  
|Treasury stock transactions              |  |             |        |                          |   | 77,430     |                    |  |   |                                   |   |  |                                 |            |   |               |   |          |       |  |   | (307,710 | ) |  |   | (230,280   | )
|Unrealized loss on marketable securities |  |             |        |                          |   |            |                    |  |   |                                   |   |  |                                 | (1,276,728 | ) |               |   |          |       |  |   |          |   |  |   | (1,276,728 | )
|                                         |  |             |        |                          |   |            |                    |  |   |                                   |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  
|Balances, June 30, 2009                  |  | $           | 63,908 |                          | $ | 63,377,682 |                    |  | $ | (5,759,497                        | ) |  | $                               | (2,251,706 | ) |               | $ | (111,721 | )     |  | $ | (395,484 | ) |  | $ | 54,923,182 |  
|                                         |  |             |        |                          |   |            |                    |  |   |                                   |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  

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



-5-



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                           |            |   |      |   |             |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                                  |  | Nine Months EndedJune 30, |           
|                                                                                  |  | 2009                      |            |   | 2008 |  
|Cash flows from operating activities:                                             |  |                           |            |   |      |   |             |  
|Net income                                                                        |  | $                         | 963,167    |   |      | $ | 45,383,620  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |            |   |      |   |             |  
|Depreciation and amortization                                                     |  |                           | 2,623,015  |   |      |   | 3,212,262   |  
|Stock-based compensation expense                                                  |  |                           | 0          |   |      |   | 2,406,315   |  
|Termination of land sale purchase option                                          |  |                           | 0          |   |      |   | (67,130,836 | )
|Gain from settlement of liabilities                                               |  |                           | 0          |   |      |   | (1,060,576  | )
|Interest expense from amortization of debt issuance costs                         |  |                           | 355,679    |   |      |   | 310,392     |  
|Gain on sale of assets                                                            |  |                           | 0          |   |      |   | (7,628      | )
|Loss (gain) on sale of marketable securities                                      |  |                           | (94,989    | ) |      |   | 2,353,836   |  
|Change in assets and liabilities:                                                 |  |                           |            |   |      |   |             |  
|Accounts receivable                                                               |  |                           | (404,110   | ) |      |   | 941,459     |  
|Inventories                                                                       |  |                           | 93,794     |   |      |   | 57,791      |  
|Prepaid expenses and other                                                        |  |                           | 471,588    |   |      |   | 201,806     |  
|Deferred income taxes                                                             |  |                           | 496,176    |   |      |   | 23,179,438  |  
|Other assets                                                                      |  |                           | 85,617     |   |      |   | (476,218    | )
|Accounts payable                                                                  |  |                           | (1,002,782 | ) |      |   | (532,373    | )
|Interest payable                                                                  |  |                           | (8,539     | ) |      |   | (1,151,721  | )
|Accrued expenses and other current liabilities                                    |  |                           | (1,152,382 | ) |      |   | (87,585     | )
|Other liabilities                                                                 |  |                           | (2,227,088 | ) |      |   | (2,227,088  | )
|                                                                                  |  |                           |            |   |      |   |             |  
|Net cash provided by operating activities                                         |  |                           | 199,146    |   |      |   | 5,372,894   |  
|                                                                                  |  |                           |            |   |      |   |             |  
|Cash flows from investing activities:                                             |  |                           |            |   |      |   |             |  
|Proceeds from sale of assets                                                      |  |                           | 0          |   |      |   | 33,036      |  
|Payments received on sale or extension of land purchase option                    |  |                           | 0          |   |      |   | 17,379,169  |  
|Capital expenditures                                                              |  |                           | (1,232,312 | ) |      |   | (439,987    | )
|Marketable securities purchased                                                   |  |                           | (2,779,199 | ) |      |   | (10,217,590 | )
|Marketable securities sold or redeemed                                            |  |                           | 1,933,121  |   |      |   | 6,712,220   |  
|                                                                                  |  |                           |            |   |      |   |             |  
|Net cash provided by (used in) investing activities                               |  |                           | (2,078,390 | ) |      |   | 13,466,848  |  
|                                                                                  |  |                           |            |   |      |   |             |  
|Cash flows from financing activities:                                             |  |                           |            |   |      |   |             |  
|Payments on debt and obligation under capital lease                               |  |                           | (2,152,266 | ) |      |   | (2,914,035  | )
|Common stock purchased and retired                                                |  |                           | (230,259   | ) |      |   | (2,504,160  | )
|Preferred stock redeemed and retired                                              |  |                           | (13,086    | ) |      |   | (209,572    | )
|Stock options exercised                                                           |  |                           | 0          |   |      |   | 1,129       |  
|                                                                                  |  |                           |            |   |      |   |             |  
|Net cash used in financing activities                                             |  |                           | (2,395,611 | ) |      |   | (5,626,638  | )
|                                                                                  |  |                           |            |   |      |   |             |  
|Increase (decrease) in cash and cash equivalents                                  |  |                           | (4,274,855 | ) |      |   | 13,213,104  |  
|Cash and cash equivalents, beginning of period                                    |  |                           | 37,973,564 |   |      |   | 27,484,222  |  
|                                                                                  |  |                           |            |   |      |   |             |  
|Cash and cash equivalents, end of period                                          |  | $                         | 33,698,709 |   |      | $ | 40,697,326  |  
|                                                                                  |  |                           |            |   |      |   |             |  

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



-6-



---

##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



|1. | Basis of Presentation and General Information
|-- | ---------------------------------------------

The
primary business operations of Archon Corporation (the Company or Archon) 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, currently rented. It also owns rental properties in Dorchester, Massachusetts
and Gaithersburg, Maryland.

The consolidated financial statements included herein have been prepared by management of the Company pursuant
to the rules and regulations of the United States Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual 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 under Regulation S-X of the SEC, although management believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments necessary for a fair presentation of results for the interim periods have been made. The results for the current three and nine month periods ended June 30, 2009, are not
necessarily indicative of results to be expected for the full fiscal year ended September 30, 2009. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in
the Companys amended Annual Report on Form 10-K for the year ended September 30, 2008, from which the balance sheet information as of that date is derived.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the
reported amounts. Actual results may differ from estimates.

Income (Loss) Per Common Share. The Company computes net
income (loss) per share in accordance with SFAS NO. 128, Earnings per share. SFAS NO. 128 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net
loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all potentially dilutive common shares outstanding during the period. In computing
diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all potentially dilutive shares if their effect is
anti-dilutive. Dilutive stock options of approximately 741,000 were not included in calculations of diluted income per common share for the nine months ended June 30, 2009, as the options were out of the money and, therefore, would be
anti-dilutive.

Uninsured Deposits. At various times during the period and subsequently, the
Company maintained account balances that may have exceeded federally and/or institutionally insured limits, and the risk of losses related to such concentrations may be increasing as a result of future economic developments.

Investment in Marketable Securities. Debt securities available-for-sale are stated at fair market value with unrealized gains or
losses determined by the specific identification method and reported as a component of accumulated other comprehensive income. Debt securities available-for-sale at June 30, 2009 includes investments in corporate bonds.



-7-



---

##### Table of Contents

Equity securities available-for-sale are reported at fair value with unrealized gains or losses reported
as a component of accumulated other comprehensive income. Realized and unrealized gains and losses are determined by the specific identification method. At June 30, 2009, investments in equity securities available-for-sale included common and
preferred stocks.

Included in Other income on the consolidated statements of operations are approximately $2,233 and $44,323
of realized losses for the three months ended June 30, 2009 and 2008, respectively. The Company recorded approximately $0.5 million and $(1.3) million and $(1.1) million and $(4.7) million of other comprehensive gain (loss), net of tax effect,
associated with unrealized losses on these investments during the three and nine months ended June 30, 2009 and 2008, respectively. Through June 30, 2009, the Company experienced a year-to-date $2.0 million further decline in the value of
these investments.

The following is a summary of available-for-sale marketable securities as of June 30, 2009 (amounts in thousands):



|                  |  |      |       |                |   |                  |  |   |                     |   |  |   |      
|----------------- |  | ---- | ----- | -------------- | - | ---------------- |  | - | ------------------- | - |  | - | -----
|                  |  | Cost |       | UnrealizedGain |   | UnrealizedLosses |  |   | Market orFair Value
|Debt securities   |  | $    | 3,268 |                | $ | 40               |  | $ | (363                | ) |  | $ | 2,945
|Equity securities |  |      | 4,904 |                |   | 83               |  |   | (3,224              | ) |  |   | 1,763
|                  |  |      |       |                |   |                  |  |   |                     |   |  |   |      
|Total             |  | $    | 8,172 |                | $ | 123              |  | $ | (3,587              | ) |  | $ | 4,708
|                  |  |      |       |                |   |                  |  |   |                     |   |  |   |      

The Company recorded the combined total of unrealized gains and (losses) shown in the above table,
on the balance sheet as $2.2 million or 65% as retained earnings  other comprehensive income, and $1.2 million or 35% as deferred income taxes.

Revenue Recognition. Casino revenue is recorded as gaming wins less losses. Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed. Casino
revenues are recognized net of certain sales incentives in accordance with Emerging Issues Task Force (EITF) Issue 01-9 Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)(EITF
01-9). Accordingly, cash incentives to customers for gambling, and the cash value of points and coupons earned by the slot club members totaling $0.3 million and $0.2 million for the nine months ended June 30, 2009 and 2008, have been
recognized as a direct reduction of casino revenue.

Advance deposits on rooms, if any, are recorded as deferred revenue until services are
provided to the customer. Revenues include the retail amount of room, food, beverage and other services provided gratuitously to customers totaling $3.0 million and $4.3 million for the nine months ended June 30, 2009 and 2008, respectively.
The estimated cost of providing these promotional services has been reported in the accompanying consolidated statements of operations as an expense of each department granting complimentary services. The table below summarizes the departments
costs of such services (amounts in thousands):



|                  |  |      |       |      |   |      
|----------------- |  | ---- | ----- | ---- | - | -----
|                  |  | 2009 |       | 2008
|Food and beverage |  | $    | 1,942 |      | $ | 3,073
|Hotel             |  |      | 383   |      |   | 373  
|Other             |  |      | 15    |      |   | 91   
|                  |  |      |       |      |   |      
|Total             |  | $    | 2,340 |      | $ | 3,537
|                  |  |      |       |      |   |      



-8-



---

##### Table of Contents

Rental revenue from rental properties is recognized as earned on a straight-line basis over the term of
the lease. When rental payments received exceed rents earned and recognized, the difference is recorded as other liabilities, and conversely, when rents earned and recognized exceed rental payments received, the difference is recorded as other
assets. See Note 5

Reclassifications. Certain reclassifications have been made in prior years consolidated
financial statements to conform to the presentations used in fiscal 2009.



|2. | Federal Income Tax
|-- | ------------------

Deferred income taxes are
reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with SFAS No. 109, Accounting for Income Taxes, which requires the use of
the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and for tax loss and credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.



|3. | Option Agreement
|-- | ----------------

On December 22, 2008, SLVC,
a wholly owned subsidiary of Archon Corporation, entered into an Option Agreement with Las Vegas Towers, LLC (LVT), a Delaware limited liability company, in which SLVC granted LVT an option to purchase SLVCs approximately 27-acre
parcel of land located at 2600 Las Vegas Boulevard South, Las Vegas, Nevada.

The Option Agreement designated the purchase price to acquire
the land at $618.0 million.

Simultaneous with the execution of the Option Agreement, SLVC executed a Contingent Warrant (the
Warrant) to Purchase Series A Preferred Stock (the Preferred Stock), entitling LVT to purchase 60,000 shares of Series A Preferred Stock of SLVC upon terms and conditions set forth in the Warrant. The designation and amount
of the Preferred Stock as well as the powers, preferences and relative, participating, optional and other special rights of the shares of the series of this Preferred Stock and the qualifications, limitations or restrictions thereof are set forth in
the Certificate of Designation, Preferences and Rights of the Series A Preferred Stock (the Certificate) also dated December 22, 2008. Had LVT exercised the Warrant prior to its expiration on April 1, 2009, the Option Agreement
would have remained valid until March 31, 2010. LVT failed to exercise the Warrant before its expiration, thus the Option Agreement terminated on March 31, 2009.



|4. | Related Parties
|-- | ---------------

The Company is subject to a Patent
Rights and Royalty Agreement with the brother of the Companys Chairman of the Board and CEO with respect to certain gaming technology for which he had been issued a patent. The Company 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



-9-



---

##### Table of Contents

patent. The patentholder granted the Company an exclusive five-year license that expired in January 2007 in the United States with respect to the technology,
but which automatically renewed until 2009 and will renew for an additional two-year term unless the Company terminates the agreement. The Company also has an understanding with the related party patentholder that it will pay for the costs of
commercial development of the technology. Through September 30, 2006, the Company had expended approximately $0.4 million for commercial development of the technology, and no additional costs were expended during the three-month and nine-month
periods ended June 30, 2009 or 2008. No royalties were paid to the patentholder during the periods presented.



|5. | Sale of Gaithersburg Property
|-- | -----------------------------

On May 28,
2009, the Company, through its wholly owned subsidiary SFHI, LLC (SFHI), entered into a Purchase and Sale Agreement (the Agreement) with Montgomery County, Maryland (the County) whereby the County will purchase
SFHIs 51.57 acre parcel of land together with an approximately 341,693 square feet office building erected thereon (the Property), located at 100 Edison Park Drive in Gaithersburg, Maryland. The purchase price for the Property will
be seventy-six million three hundred forty thousand dollars ($76,340,000). The Agreement provides the County with a 90-day feasibility study period, during which the County will determine if the Property is, or is not, suitable for the Countys
intended use. If the County determines that the Property is not suitable, then it may terminate the Agreement without financial cost. If the County determines that the Property is suitable, then it will proceed to close escrow by notifying the
Company of the closing date, which closing date may be no sooner than 90 days from the date of notice and no later than April 30, 2014.

Simultaneous with the execution of the Purchase and Sale Agreement, the County has entered into a sublease with the existing tenant of SFHI at this location, GXS, Inc., whereby the County will, commencing October 1, 2009, and
thereafter, lease and occupy the entire Property until the earlier of (i) completion of its purchase of the Property or (ii) April 30, 2014. Pursuant to the applicable provisions of the existing lease with GXS, Inc., SFHI has
consented to the sublease. In addition, GXS, Inc. has agreed to pay SFHI the sum of $2,125,000, with $1,725,000 payable on the later of (i) October 1, 2009 or (ii) the date the County pays GXS, Inc. the first monthly rent payment
under the sublease, and with the remainder of $400,000 payable on or before July 1, 2010.



|6. | Open Market Purchases of Company Common Stock
|-- | ---------------------------------------------

In
December 2008, the Board of Directors of the Company approved the Companys adoption of a plan, effective January 5, 2009, for the Company to make periodic and ongoing open market purchases of up to 5.0% of its own common stock (up to
319,539 shares of common stock) in accordance with Rule 10b-18 (the Rule) of the Rules and Regulations Promulgated Under The Securities Exchange Act Of 1934 (the Act), and, more specifically, in accordance with SEC Release
No. 33-8335 (the Release). The Release is a safe harbor and approved method to make open market purchases of a companys own common stock in compliance with the Rule without those purchases being deemed manipulative
under the Act.

The Rule and Release impose certain specific restrictions on the Company as to purchases of its own common shares. These
include specific restrictions as to timing of open market purchases, manner of purchases, pricing of purchases and when purchases will (and will not) be allowed.

The Rule and Release also mandate certain additional and periodic disclosures that the Company must make concerning the open market purchases in its Series 10 filings (Report on Forms 10-K and 10-Q).



-10-



---

##### Table of Contents

The open market purchase(s) are intended to be voluntary and there are no assurances that the Company
will actually purchase all or any of its common shares noted above.

The Company is in possession of sufficient and available liquid funds
to undertake any open market purchase(s) of its own shares without the need for additional borrowing. The Company will be utilizing licensed securities broker-dealers to effect any open market purchases.

The Company has determined that in the current difficult economy and in light of low interest rates being paid on deposit of surplus funds that the open
market purchase(s) of its own shares, up to 5.0% of its outstanding common stock, represents a desirable use of its available and surplus cash.

The table below summarizes the Companys buy back of its common stock for the last 12-month period ended June 30, 2009:



|                  |  |                                               |  |                                          |       |                                                                                             |        |                                                                                                                        |        
|----------------- |  | --------------------------------------------- |  | ---------------------------------------- | ----- | ------------------------------------------------------------------------------------------- | ------ | ---------------------------------------------------------------------------------------------------------------------- | -------
|Period            |  | (a) Total Number ofShares (or Units)Purchased |  | (b) Average PricePaid per Share (orUnit) |       | (c) Total Number ofShares (or Units)Purchased as Part ofPublicly AnnouncedPlans or
Programs |        | (d) Maximum Number (orApproximate Dollar Value)of Shares (or Units) thatMay Yet Be
PurchasedUnder the Plans orPrograms
|Beginning balance |  |                                               |  |                                          |       |                                                                                             |        |                                                                                                                        | 316,215
|January 2009      |  | 3,996                                         |  | $                                        | 27.83 |                                                                                             | 3,996  |                                                                                                                        | 312,219
|February 2009     |  | 4,590                                         |  | $                                        | 16.96 |                                                                                             | 8,586  |                                                                                                                        | 307,629
|March 2009        |  | 7,150                                         |  | $                                        | 16.60 |                                                                                             | 15,736 |                                                                                                                        | 300,479
|April 2009        |  | 0                                             |  |                                          | 0     |                                                                                             | 15,736 |                                                                                                                        | 300,479
|May 2009          |  | 0                                             |  |                                          | 0     |                                                                                             | 15,736 |                                                                                                                        | 300,479
|June 2009         |  | 0                                             |  |                                          | 0     |                                                                                             | 15,736 |                                                                                                                        | 300,479
|Ending balance    |  | 15,736                                        |  | $                                        | 19.56 |                                                                                             | 15,736 |                                                                                                                        | 300,479



|7. | Redemption of the Companys Preferred Stock and Redemption Price Disputes
|-- | -------------------------------------------------------------------------

The Company called all outstanding shares of its Exchangeable Redeemable Preferred Stock for redemption on and as of August 31, 2007, at a redemption price of $5.241 per share, which sum included accrued and
unpaid dividends to the date of redemption. From and after August 31, 2007, all shares of the Exchangeable Redeemable Preferred Stock ceased to be outstanding and to accrue dividends. As of August 13, 2009, the holders of 4,259,878 shares
of the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of the redemption price; while 156,699 shares have yet to be surrendered and still have the right to receive their payment due without interest.

On August 27, 2007, a group of institutional investors filed an action, in Nevada, against the registrant. The Complaint was
subsequently amended to add an additional party plaintiff (collectively, the Plaintiffs). The Amended Complaint: (i) seeks a finding by the Court that the Company has breached its obligations under the Companys Certificate of
Designation of the Preferred Stock, dated September 30, 1993 (the Certificate), and awarding the Plaintiffs full compensation of any and all available damages suffered by the Plaintiffs as a result of the Companys breach of
the Certificate; (ii) seeks a finding by the Court that the Companys issuance of its redemption notice with an improper redemption price is an anticipatory breach of a material term of the Certificate and awarding the Plaintiffs full
compensation of any and all available damages suffered as a result of the Companys anticipatory breach of the Certificate; (iii) seeks a declaration by the Court that the dividends be properly calculated and compounded per the terms of
the Certificate in an amount no less than $7,235,351 up through and including the date of final judgment; (iv) seeks an order from the Court calling for the Company to reimburse the Plaintiffs attorneys fees, expenses and costs
incurred in enforcing their rights; and



-11-



---

##### Table of Contents

(v) seeks such other and further relief as the Court may deem appropriate. The Plaintiffs, thereafter, filed a motion for partial summary judgment (the
Motion), seeking a ruling from the court that the Company breached its obligations under the Certificate of Designation by calculating the redemption price as it did. The Court granted that Motion on August 8, 2008, finding the
language of the Certificate of Designation to be unambiguous and that the redemption price should have been calculated differently. The Court has not yet issued a monetary judgment against the Company. Mediation of certain issues is on going. If
mediation is unsuccessful, the Company intends to appeal the adverse decision of the Court on the Motion. The Company has initiated proceedings against a third-party firm concerning that firms potential liability related to the drafting
of the Certificate of Designation. This third-party action has subsequently been removed by the firm to Federal Court in late April, 2009 and is at an early stage of resolution. The Company is also considering rights and remedies it may have
with regard to other parties who participated in the issuance of the Preferred Stock in the event that the Company does not prevail on its interpretation of the Certificate of Designation.

Also, two other former holders of the Exchangeable Redeemable Preferred Stock filed Complaints, both alleging essentially the same claim as the first
complaint related to the case set forth immediately above. If the plaintiffs in these two additional actions are correct, the redemption price as of August 31, 2007 should have been $8.69 per share and not $5.241 per share as calculated by the
Company. If applied to all the then outstanding shares of Exchangeable Redeemable Preferred Stock, including the shares held by the Companys officers and directors, valuation of the redemption price at $8.69 per share would increase the
redemption price in excess of $15.2 million.

Management is unable to estimate the minimum liability that may be incurred, if any, as a
result of the ultimate outcome of each of the above matters and, therefore, has made no provision in the financial statements for liability related to these cases.



|8. | Stock-Based Compensation
|-- | ------------------------

The Companys Stock
Option Plan (Plan) provides for the grant of up to 1.2 million shares of its common stock to key employees. The Plan provides for both incentive stock options and non-qualified stock options. Stock option grants generally vest over
a three-year period from the employees hire date. During the nine-month period ended June 30, 2009 and 2008, zero options were granted. As of June 30, 2009 and 2008, there were approximately 741,500 and 740,000 options, respectively,
outstanding and exercisable under the Plan. During the third quarters ended June 30, 2009 and 2008, no options were exercised.

The
outstanding options have expiration dates through 2018 and have an average remaining life of approximately 7.5 years. The average exercise price of the outstanding options at June 30, 2009 is approximately $28.09.

In December 2008, the Companys Board of Directors authorized, approved by the shareholders at the June 15, 2009 annual meeting, an increase of
250,000 shares in the number of shares available for grant under the Plan.

SFHI Inc., SLVC and PHI (collectively, the
Subsidiaries), have adopted subsidiary stock option plans (the Subsidiary Plans). The Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding
shares of such Subsidiarys Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries and the Company to attract, retain
and motivate their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As of June 30, 2009, no options had been granted under any of the
Subsidiary Plans.



-12-



---

##### Table of Contents

The following table summarizes stock option activity during the nine months ended June 30, 2009
under all plans:



|                                           |  |                       |  |                                         |       |                                          |          |                                 |   |         |  
|------------------------------------------ |  | --------------------- |  | --------------------------------------- | ----- | ---------------------------------------- | -------- | ------------------------------- | - | ------- | -
|                                           |  | NumberofShares(000s) |  | Weighted-AverageExercise PricePer Share |       | Weighted-AverageRemainingContractualTerm |          | AggregateIntrinsicValue($000s) |  
|Options outstanding at September 30, 2008: |  | 742                   |  | $                                       | 28.09 |                                          | 8.3 yrs. |                                 | $ | (5,829  | )
|Granted                                    |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Exercised                                  |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Canceled                                   |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Options outstanding at June 30, 2009       |  | 742                   |  | $                                       | 28.09 |                                          | 7.5 yrs. |                                 | $ | (13,013 | )
|Exercisable at June 30, 2009               |  | 742                   |  | $                                       | 28.09 |                                          | 7.5 yrs. |                                 | $ | (13,013 | )

As of June 30, 2009, there was no unrecognized compensation cost related to unvested stock
options.



|9. | Supplemental Statement of Cash Flows Information
|-- | ------------------------------------------------



|                                         |  |                        |        |   |      |   |        |  
|---------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | -
|                                         |  | 2009                   |        |   | 2008 |  
|                                         |  | (amounts in thousands) |       
|Operating activities:                    |  |                        |        |  
|Cash paid during the period for interest |  | $                      | 5,978  |   |      | $ | 7,312  |  
|                                         |  |                        |        |   |      |   |        |  
|Non cash:                                |  |                        |        |   |      |   |        |  
|Unrealized losses on securities          |  | $                      | (1,964 | ) |      |   | (7,199 | )
|                                         |  |                        |        |   |      |   |        |  
|Adjustment to redeemable preferred       |  | $                      | 139    |   |      | $ | 0      |  
|                                         |  |                        |        |   |      |   |        |  



-13-



---

##### Table of Contents

|10. | Segment Information
|--- | -------------------

The Companys operations
are in the hotel/casino industry and rental properties. The Companys hotel/casino operations are conducted at the Pioneer in Laughlin, Nevada. The Company owns rental properties in Dorchester, Massachusetts and Gaithersburg, Maryland.
Other and Eliminations below includes financial information for the Companys corporate operations, 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 and nine month periods ended June 30, 2009 and 2008.



|                                  |  |                            |        |   |      |   |        |  
|--------------------------------- |  | -------------------------- | ------ | - | ---- | - | ------ | -
|                                  |  | Three Months EndedJune 30, |       
|                                  |  | 2009                       |        |   | 2008 |  
|                                  |  | (amounts in thousands)     |       
|Pioneer Hotel / Casino:           |  |                            |        |   |      |   |        |  
|Net operating revenues            |  | $                          | 5,021  |   |      | $ | 6,523  |  
|Operating loss                    |  |                            | (813   | ) |      |   | (507   | )
|Depreciation and amortization     |  |                            | 163    |   |      |   | 385    |  
|Interest expense                  |  |                            | 336    |   |      |   | 326    |  
|Interest and other income         |  |                            | 1      |   |      |   | 3      |  
|Income (loss) before income taxes |  |                            | (1,148 | ) |      |   | 230    |  
|Capital expenditures / transfers  |  |                            | 45     |   |      |   | 258    |  
|                                  |  |                           
|Rental Properties:                |  |                            |        |   |      |   |        |  
|Net operating revenues            |  | $                          | 3,101  |   |      | $ | 3,101  |  
|Operating income                  |  |                            | 2,450  |   |      |   | 2,450  |  
|Depreciation and amortization     |  |                            | 650    |   |      |   | 650    |  
|Interest expense                  |  |                            | 1,743  |   |      |   | 1,791  |  
|Interest and other income         |  |                            | 1      |   |      |   | 1      |  
|Income before income taxes        |  |                            | 709    |   |      |   | 660    |  
|Capital expenditures / transfers  |  |                            | 0      |   |      |   | 0      |  
|                                  |  |                           
|Other and Eliminations:           |  |                            |        |   |      |   |        |  
|Net operating revenues            |  | $                          | 1,011  |   |      | $ | 906    |  
|Operating income (loss)           |  |                            | 246    |   |      |   | (681   | )
|Depreciation and amortization     |  |                            | 37     |   |      |   | 36     |  
|Interest expense                  |  |                            | (64    | ) |      |   | (48    | )
|Interest and other income         |  |                            | 133    |   |      |   | 392    |  
|Income before income taxes        |  |                            | 441    |   |      |   | 66,891 |  
|Capital expenditures / transfers  |  |                            | 0      |   |      |   | 0      |  
|                                  |  |                           
|Total:                            |  |                            |        |   |      |   |        |  
|Net operating revenues            |  | $                          | 9,133  |   |      | $ | 10,530 |  
|Operating income                  |  |                            | 1,883  |   |      |   | 1,262  |  
|Depreciation and amortization     |  |                            | 850    |   |      |   | 1,071  |  
|Interest expense                  |  |                            | 2,015  |   |      |   | 2,069  |  
|Interest and other income         |  |                            | 135    |   |      |   | 396    |  
|Income before income taxes        |  |                            | 2      |   |      |   | 67,781 |  
|Capital expenditures / transfers  |  |                            | 45     |   |      |   | 258    |  



-14-



---

##### Table of Contents

|                                 |  |                           |         |   |      |   |         |  
|-------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                 |  | Nine Months EndedJune 30, |        
|                                 |  | 2009                      |         |   | 2008 |  
|                                 |  | (amounts in thousands)    |        
|Pioneer Hotel / Casino:          |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 16,110  |   |      | $ | 20,179  |  
|Operating loss                   |  |                           | (1,404  | ) |      |   | (1,657  | )
|Depreciation and amortization    |  |                           | 561     |   |      |   | 1,156   |  
|Interest expense                 |  |                           | 854     |   |      |   | 897     |  
|Interest and other income        |  |                           | 5       |   |      |   | 9       |  
|Loss before income taxes         |  |                           | (2,253  | ) |      |   | (1,485  | )
|Capital expenditures / transfers |  |                           | 1,217   |   |      |   | 292     |  
|Identifiable assets(1)           |  |                           | 16,491  |   |      |   | 27,471  |  
|                                 |  |                          
|Rental Properties:               |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 9,302   |   |      | $ | 9,302   |  
|Operating income                 |  |                           | 7,351   |   |      |   | 7,351   |  
|Depreciation and amortization    |  |                           | 1,950   |   |      |   | 1,950   |  
|Interest expense                 |  |                           | 5,257   |   |      |   | 5,405   |  
|Interest and other income        |  |                           | 4       |   |      |   | 3       |  
|Income before income taxes       |  |                           | 2,098   |   |      |   | 1,949   |  
|Capital expenditures / transfers |  |                           | 0       |   |      |   | 0       |  
|Identifiable assets(1)           |  |                           | 124,409 |   |      |   | 127,316 |  
|                                 |  |                          
|Other and Eliminations:          |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 3,627   |   |      | $ | 4,021   |  
|Operating income (loss)          |  |                           | 1,042   |   |      |   | (2,426  | )
|Depreciation and amortization    |  |                           | 112     |   |      |   | 106     |  
|Interest expense                 |  |                           | (141    | ) |      |   | (142    | )
|Interest and other income        |  |                           | 431     |   |      |   | 3,452   |  
|Income before income taxes       |  |                           | 1,614   |   |      |   | 68,299  |  
|Capital expenditures / transfers |  |                           | 15      |   |      |   | 148     |  
|Identifiable assets(1)           |  |                           | 61,780  |   |      |   | 68,527  |  
|                                 |  |                          
|Total:                           |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 29,039  |   |      | $ | 33,502  |  
|Operating income                 |  |                           | 6,989   |   |      |   | 3,268   |  
|Depreciation and amortization    |  |                           | 2,623   |   |      |   | 3,212   |  
|Interest expense                 |  |                           | 5,970   |   |      |   | 6,160   |  
|Interest and other income        |  |                           | 440     |   |      |   | 3,464   |  
|Income before income taxes       |  |                           | 1,459   |   |      |   | 68,763  |  
|Capital expenditures / transfers |  |                           | 1,232   |   |      |   | 440     |  
|Identifiable assets(1)           |  |                           | 202,683 |   |      |   | 223,314 |  



|(1) | Identifiable assets represent total assets
less elimination for intercompany items.
|--- | -----------------------------------------------------------------------------------



-15-



---

##### Table of Contents

|11. | Subsequent Events
|--- | -----------------

The Company has a balloon
payment due in August 2009 of approximately $9.8 million related to debt owed to a bank, which is likely to be extended ninety days until November 2009 while a more formal renewal is in process. The Company has sufficient cash and cash resources to
pay the debt in full when the debt becomes due. The debt obligation is secured by 27 acres of land owned on the Las Vegas Strip and is personally guaranteed by the Companys CEO, Chairman of the Board and primary stockholder and his wife, who
is the Executive Vice President, Secretary and Treasurer of the Company.



-16-



---

##### Table of Contents

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, 2008. 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 recently divested itself of certain of these properties. Presently, the Company operates the
Pioneer in Laughlin, Nevada.

The Pioneer has experienced a flattening and, to a certain extent, a decline of its revenues over the last
few years after experiencing strong revenue and profit growth in the early 1990s. Management believes the growth 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 profitability. Harsh economic conditions impacting customers, including high fuel costs, has significantly reduced disposable income, and
limited customer travel and gaming practices. Management believes Laughlin is a mature market with marginal growth forecasted for the next few years based on its current plans. Management believes the recent revenue and expense trends in its
Laughlin hotel/casino property may not change significantly over the next few years, or until the current economic conditions and trends begin to reverse.

The Company also owns rental properties on the East Coast but these rental properties do not contribute significant profitability or net cash flow to the Company.

Rental Properties

During fiscal year 2001,
the Company acquired certain rental properties as part of an IRS Section 1031 exchange. The rental properties are located in Gaithersburg, Maryland and Dorchester, Massachusetts. The Company acquired the properties and nonrecourse debt
associated with the properties which are subject to long-term leases. Tenants remit payments to banks according to the terms of the leases and notes. The payments are used to liquidate the nonrecourse debt obligations. Rental income is recorded by
the Company on a straight-line basis and totals approximately $12.4 million annually and will remain at this level until approximately 2020 or until the assets are sold, otherwise disposed of or become impaired. The buildings are also being
depreciated on a straight-line basis and the depreciation expense is approximately $3.2 million annually and will remain at this level until approximately 2020 or until the assets are sold, otherwise disposed of or become impaired. Interest expense
is also recorded based on the outstanding nonrecourse debt remaining to be paid based on unamortized loan issue costs and remaining debt amortization timetables. At any time during the life of the leases and debt amortization, the fair market values
of the properties may be different from their book values. Interest is presently being expensed at approximately $7.0 million annually and will decrease in



-17-



---

##### Table of Contents

relation to debt principal reductions through 2020 or until the assets are sold, otherwise disposed of or become impaired .On May 28, 2009, the
Company, through its wholly owned subsidiary SFHI, LLC (SFHI), entered into a Purchase and Sale Agreement (the Agreement) with Montgomery County, Maryland (the County) whereby the County will purchase SFHIs
51.57 acre parcel of land together with an approximately 341,693 square feet office building erected thereon (the Property), located at 100 Edison Park Drive in Gaithersburg, Maryland. The purchase price for the Property will be
seventy-six million three hundred forty thousand dollars ($76,340,000). The Agreement provides the County with a 90-day feasibility study period, during which the County will determine if the Property is, or is not, suitable for the Countys
intended use. If the County determines that the Property is not suitable, then it may terminate the Agreement without financial cost. If the County determines that the Property is suitable, then it will proceed to close escrow by notifying the
Company of the closing date, which closing date may be no sooner than 90 days from the date of notice and no later than April 30, 2014.

Simultaneous with the execution of the Purchase and Sale Agreement, the County has entered into a sublease with the existing tenant of SFHI at this location, GXS, Inc., whereby the County will, commencing October 1, 2009, and
thereafter, lease and occupy the entire Property until the earlier of (i) completion of its purchase of the Property or (ii) April 30, 2014. Pursuant to the applicable provisions of the existing lease with GXS, Inc., SFHI has
consented to the sublease. In addition, GXS, Inc. has agreed to pay SFHI the sum of $2,125,000, with $1,725,000 payable on the later of (i) October 1, 2009 or (ii) the date the County pays GXS, Inc. the first monthly rent payment
under the sublease, and with the remainder of $400,000 payable on or before July 1, 2010.

Critical Accounting Policies and Estimates

The preparation of these consolidated 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. Management reviews useful lives and obsolescence and assesses commercial viability of these assets periodically, at least annually. Based on these
reviews, management estimates 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. Management also 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. We review useful lives and obsolescence and we assess commercial viability of these
assets periodically.



-18-



---

##### Table of Contents

Income Taxes. The Company has recorded deferred tax assets related to net operating
losses as the Company is able to offset these assets with 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 which 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 may need to be recorded, which would impact the Companys future results of operations. Annualized effective
income tax rates for calculating interim period provisions and benefits have been estimated to be not significantly different than the estimated annual effective rate and the statutory rate. Although Financial Accounting Standards Board (FASB)
Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income TaxesAn Interpretation of FASB Statement No. 109, became effective for the year ending September 30, 2008, based on its evaluation, management
determined that FIN 48 did not have a material effect on the financial statements or the net operating loss carryovers or the related deferred tax assets or valuation allowance.

Recently Issued Accounting Standards

SFAS NO. 168. In June 2009, the
Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, (SFAS
168). SFAS 168 replaces FASB Statement No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes the FASB Accounting Standards Codification (Codification) as the source of authoritative
accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (GAAP). SFAS 168 is effective for interim and
annual periods ending after September 15, 2009. The Company will begin to use the new Codification when referring to GAAP in its annual report on Form 10-K for the fiscal year ending September 30, 2009. This will not have an impact on the
consolidated results of the Company.

SFAS NO. 167. In June 2009, the FASB issued SFAS No. 167, Amendments
to FASB Interpretation No. 46(R), (SFAS 167). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a
variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS 167 is effective for the first annual reporting period beginning after November 15, 2009 and for interim
periods within that first annual reporting period. The Company will adopt SFAS 167 in fiscal 2010. The Company does not expect that the adoption of SFAS 167 will have a material impact on the consolidated financial statements.

SFAS NO. 166. In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment
to SFAS No. 140, (SFAS 166). SFAS 166 eliminates the concept of a qualifying special-purpose entity, changes the requirements for derecognizing financial assets, and requires additional disclosures in order to
enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entitys continuing involvement in and exposure to the risks
related to transferred financial assets. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company will adopt SFAS 166 in fiscal 2010. The Company does not expect that the adoption of SFAS 166 will have a
material impact on the consolidated financial statements.

SFAS NO. 165. In June 2009, the FASB issued SFAS
No. 165, Subsequent Events, (SFAS 165). SFAS 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are
available to be issued. SFAS 165 applies to both interim financial statements and annual financial statements. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. SFAS 165 does not have a material impact on
our consolidated financial statements.



-19-



---

##### Table of Contents

SFAS NO. 163. In May 2008, the FASB issued SFAS No. 163, Accounting for
Financial Guarantee Insurance Contracts  an interpretation of FASB Statement No. 60. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that
credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium
revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee
insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 will be effective for financial statements issued for fiscal years beginning
after December 15, 2008. The Company does not expect the adoption of SFAS 163 will have a material impact on its financial condition or results of operation.

SFAS NO. 161. In March 2008, the FASB issued SFAS 161, Disclosures about Derivative Instruments and Hedging Activities  an Amendment of SFAS 133 (SFAS 161). SFAS
161, which will require enhanced disclosures regarding the impact on financial position, financial performance, and cash flows, will be effective for the Company beginning on October 1, 2009. However, since the Company does not now
have, nor does it contemplate issuing or obtaining any derivative instruments, or engaging in any hedging activities, in the foreseeable future, we do not currently expect any effect on our future financial statements by adopting SFAS 161.

SFAS NO. 160. In December 2007, the FASB issued Statement of Accounting Standards (SFAS) No. 160,
Noncontrolling Interests in Consolidated Financial Statements (SFAS 160). It requires that a noncontrolling (minority) interest in a subsidiary, including a consolidatable variable interest entity should be reported as equity in
the consolidated financial statements. SFAS 160 will not likely have any effect on the Companys consolidated financial statements since we do not presently have and are not contemplating investing in, establishing or acquiring a
subsidiary with a noncontrolling interest. SFAS 160 will be effective, if applicable, for the Companys fiscal year beginning October 1, 2009.

SFAS NO. 157 and 159. In September 2006, the FASB issued SFAS 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring
fair value in accounting principles generally accepted in the United States, and expands disclosure about fair value measurements. In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement 115 (SFAS), which will permit the option of choosing to measure certain eligible items at fair value at specified election dates and report unrealized gains and losses in
earnings. We have no present intention of opting to adopt SFAS 159. SFAS 157 will become effective for us for financial assets and liabilities carried at fair value for fiscal year ended September 30, 2009 but will not become effective for
nonfinancial assets until fiscal year ended September 30, 2010 (including interim periods within those years). We do not now expect any other effects of SFAS 157 since it is unlikely that we will choose to value assets or liabilities at fair
value.

SFAS NO. 141R. In December 2007, the FASB issued SFAS 141(R), Business Combinations. This Statement
replaces SFAS 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination. We have not yet evaluated this statement for the impact, if any, that SFAS 141R might have on its consolidated financial statements, in the event we make any business
combination or other covered acquisitions after September 30, 2009.



-20-



---

##### Table of Contents

Results of Operations  Nine Months Ended June 30, 2009 and 2008

General

During the nine months ended June 30,
2009, the Companys net operating revenues decreased $4.5 million and operating expenses decreased $8.2 million, resulting in an increase in operating income of $3.7 million from the nine months ended June 30, 2008. The change in operating
results was primarily due to a decrease in revenues at the Pioneer, which was more than offset by lower expenses at the Pioneer and corporate. The operating results at the rental properties were unchanged.

Consolidated

Net Operating Revenues.
Consolidated net operating revenues for the nine months ended June 30, 2009 were $29.0 million, a $4.5 million decrease or 13%, as compared to $33.5 million for the nine months ended June 30, 2008. The change in net operating revenues
was primarily related to lower revenues at the Pioneer, which were partially offset by lower casino promotional allowances. Revenues at the Pioneer for the nine months ended June 30, 2009 were $16.1 million, a $4.1 million decrease or 20%, as
compared to $20.2 million for the nine months ended June 30, 2008. Revenues from the investment properties were $9.3 million for each of the nine months ended June 30, 2009 and 2008. Revenues at Corporate for the nine months ended
June 30, 2009 decreased $0.4 million as compared to the nine months ended June 30, 2008.

Operating Expenses. Total
operating expenses for the nine months ended June 30, 2009 were $22.0 million, a $8.2 million decrease or 27%, as compared to $30.2 million for the nine months ended June 30, 2008. The change in operating expenses resulted from a
decrease in corporate stock-based compensation expense of $2.4 million, combined with a decrease in other expenses of $1.5 million, and a $4.3 million reduction in operating expenses at the Pioneer. Total operating expenses as a percentage of
revenue decreased to 76% in the current year period from 90% in the prior year period, as a result of the lower revenues and operating expenses. Operating expenses at the Pioneer for the nine months ended June 30, 2009 were $17.5 million, a
$4.3 million decrease or 20%, as compared to $21.8 million for the nine months ended June 30, 2008.

Operating Income.
Consolidated operating income for the nine months ended June 30, 2009 was approximately $7.0 million, a $3.7 million increase or 114%, as compared to approximately $3.3 million for the nine months ended June 30, 2008. This increase was due
to the aforementioned change in corporate and Pioneer operating income and expenses. Operating income for the nine months ended June 30, 2009 at the rental properties was unchanged with an operating income of $7.4 million. Operating income at
the Pioneer increased by $0.3 million to an operating loss of $1.4 million for the nine months ended June 30, 2009. The operating income at corporate increased by $3.4 million to $1.0 million for the nine months ended June 30, 2009.

Interest Expense. Consolidated interest expense for the nine months ended June 30, 2009 was $6.0 million, a $0.2
million decrease or 3%, as compared to $6.2 million for the nine months ended June 30, 2008. The decrease was primarily due to the reduction of nonrecourse debt associated with the rental properties.

Income Realized Upon Termination of Land Sale Option. During the nine months ended June 30, 2008, the Company realized income of $67.1
million, from nonrefundable deposits associated with a terminated land sale option, on an owned rental property.

Gain
from Settlement of Liabilities. During the nine months ended June 30, 2008 the Company realized a gain of $1.1 million, from settlement of a debt associated with the Pioneer.



-21-



---

##### Table of Contents

Interest and Other Income. Consolidated interest and other income for the nine months ended
June 30, 2009 was $0.4 million, a $3.0 million decrease or 87%, as compared to approximately $3.4 million for the nine months ended June 30, 2008. The decrease was primarily due to the decrease in cash flows from operating and
investing activities.

Federal Income Tax. The Company recorded a federal income tax expense for the nine months ended
June 30, 2009 of $0.5 million based on estimated annual effective rates. The Company recorded a net federal income tax provision of $23.4 million for the nine months ended June 30, 2008.

Net Income (Loss) Applicable to Common Shares. Consolidated net income attributable to common shares for the nine months ended
June 30, 2009 was $0.1 million, or $0.15 per common share, as compared to net income attributable to common shares of $45.4 million, or $7.15 per common share, for the nine months ended June 30, 2008.

Pioneer

Net Operating
Revenues. Net operating revenues at the Pioneer for the nine months ended June 30, 2009 were $16.1 million, a $4.1 million decrease or 20%, as compared to $20.2 million for the nine months ended June 30, 2008 primarily due to
the reasons set forth below.

Casino revenues for the nine months ended June 30, 2009 were approximately $12.7 million, a $3.3 million
decrease or 20%, as compared to $16.0 million for the nine months ended June 30, 2008. Slot and video poker revenues for the nine months ended June 30, 2009 were $11.5 million, a $3.0 million decrease or 20%, as compared to
$14.5 million for the nine months ended June 30, 2008. Other gaming revenues, including table games for the nine months ended June 30, 2009 were $1.3 million, a $0.3 million decrease or 20%, as compared to $1.6 million for the nine
months ended June 30, 2008. Casino promotional allowances were $3.0 million compared to $4.3 million, a decrease of $1.3 million.

Hotel revenues for the nine months ended June 30, 2009 were $1.3 million, a $0.4 million decrease or 25%, as compared to $1.7 million for the nine months ended June 30, 2008. A decrease in rooms occupied was compounded by a
decrease in the average room rate. Food and beverage revenues for the nine months ended June 30, 2009 were $4.5 million, a $1.1 million decrease or 20%, as compared to $5.6 million for the nine months ended June 30, 2008. Other
revenues for the nine months ended June 30, 2009 were $0.6 million, a $0.6 million decrease or 48%, as compared to $1.2 million for the nine months ended June 30, 2008.

Operating Expenses. Operating expenses for the nine months ended June 30, 2009 were approximately $17.5 million a $4.3 million
decrease or 20%, from $21.8 million for the nine months ended June 30, 2008. The decrease was primarily associated with the reduction in the operating revenues. Operating expenses as a percentage of revenue increased to 109% in the current
year period from 108% in the prior year period.

Casino expenses for the nine months ended June 30, 2009 were approximately $7.5
million, a $1.9 million decrease or 20%, as compared to $9.4 million for the nine months ended June 30, 2008. Casino expenses as a percentage of revenue were unchanged at 46%.

Hotel expenses for the nine months ended June 30, 2009 were $0.6 million, a $0.2 million decrease or 26%, as compared to $0.8 million for the nine
months ended June 30, 2008, due to the decrease in occupied rooms and associated expenses. Hotel expenses as a percentage of revenue were 4% in both the current and prior year periods. Food and beverage expenses for the nine months ended
June 30, 2009 were $3.0 million, a $0.3 million decrease or 9%, as compared to $3.3 million for the nine months ended June 30, 2008. Food and beverage expenses as a percentage of revenue increased to 19% in the current year period from 17%
in the prior period. Other expenses for the nine months ended June 30, 2009 were $0.5 million, a $0.3 million decrease or 37%, as compared to $0.8 million for the nine months ended June 30, 2008. Other expenses as a percentage of revenue
declined to 3% in the current year period from 4% in the prior year period.



-22-



---

##### Table of Contents

Selling, general and administrative expenses for the nine months ended June 30, 2009 were $3.1
million, a $0.3 million decrease or 9%, as compared to $3.4 million for the nine months ended June 30, 2008. Selling, general and administrative expenses as a percentage of revenue increased to 19% in the current year period from 17% in the
prior year period. Pioneers selling, general and administrative expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses for the nine months ended
June 30, 2009 were approximately $2.3 million, a $0.7 million decrease or 23%, as compared to $3.0 million for the nine months ended June 30, 2008. Utilities and property expenses as a percentage of revenue were 15% in both the current and
prior year periods. Depreciation and amortization expenses for the nine months ended June 30, 2009 were approximately $0.6 million, a $0.6 million decrease or 51%, as compared to $1.2 million for the nine months ended June 30, 2008.

Results of Operations  Three Months Ended June 30, 2009 and 2008

General

During the quarter ended June 30, 2009, the Companys net operating revenues
decreased $1.4 million and operating expenses decreased $2.0 million, resulting in an increase in operating income of $0.6 million as compared to the three months ended June 30, 2008. The change in operating results was primarily due to the
economic conditions which are currently impacting the customers of the Pioneer. The operating results at the rental properties were unchanged.

Consolidated

Net Operating Revenues. Consolidated net operating revenues were $9.1 million for the quarter
ended June 30, 2009, a $1.4 million or 13% decrease, from $10.5 million for the quarter ended June 30, 2008. Revenues at the Pioneer of $5.0 million for the three months ended June 30, 2009 decreased $1.5 million, or 23%, from $6.5
million for the three months ended June 30, 2008. Income from the rental properties was approximately $3.1 million for the three months ended June 30, 2009 and 2008. Revenues at corporate increased $0.1 million for the three months ended
June 30, 2009 as compared to the three months ended June 30, 2008, related to a judgment associated with Slot Tables Inc.

Operating Expenses. Total operating expenses for the three months ended June 30, 2009 were approximately $7.3 million, a $2.0 million decrease or 22%, as compared to $9.3 million for the three months ended
June 30, 2008. Total operating expenses as a percentage of revenue decreased to 79% in the current period from 88% in the prior year period.

Operating Income. Consolidated operating income for the three months ended June 30, 2009 was $1.9 million, a $0.6 million increase, as compared to $1.3 million for the three months ended June 30, 2008. The
decrease was due to the aforementioned decrease in operating revenues and expenses. Operating income at the rental properties was unchanged at $2.5 million for the three months ended June 30, 2009. Operating loss at the Pioneer for the three
months ended June 30, 2009 was $0.8 million, a $0.3 million increase, or 61%, as compared to $0.5 million for the three months ended June 30, 2008. The operating income at corporate increased by $0.9 million to $0.2 million. Operating
income changes are a result of the aforementioned changes in operating revenues and expenses.

Interest Expense. Consolidated
interest expense for the three months ended June 30, 2009 was $2.0 million, a $0.1 million decrease or 3%, as compared to $2.1 million for the three months ended June 30, 2008.



-23-



---

##### Table of Contents

Income Realized Upon Termination of Land Sale Option. During the quarter ended
June 30, 2008, the Company realized income of $67.1 million, from nonrefundable deposits associated with a terminated land sale option, on an owned rental property.

Gain from Settlement of liabilities. During the three months ended June 30, 2008 the Company realized a gain of $1.1 million, from
settlement of a debt associated with the Pioneer.

Interest and Other Income. Consolidated interest and other income for the
three months ended June 30, 2009 was $0.1 million, a $0.3 million decrease, as compared to $0.4 million for the three months ended June 30, 2008.

Income (Loss) Before Income Tax (Expense) Benefit and Discontinued Operations. Consolidated income before income tax and discontinued operations for the three months ended June 30, 2009 was $0.0
million, a $67.8 million decrease, as compared to a $67.8 million for the three months ended June 30, 2008.

Federal Income
Tax. The Company recorded a federal income tax expense for the three months ended June 30, 2009 of $0.0 million as compared to a $23.0 million for the three months ended June 30, 2008 based on estimated annual effective rates.

Preferred Share Dividends. Undeclared preferred share dividends were not recorded in the stockholders equity section
of the balance sheet; the Company had elected at its sole discretion to redeem its preferred stock on August 31, 2007.

Net
Income (Loss) Applicable to Common Shares. Consolidated net income attributable to common shares for the three months ended June 30, 2009 was $0.0 million, or $0.00 per common share, as compared to $44.7 million, or $7.00 per common
share, for the three months ended June 30, 2008.

Pioneer

Net Operating Revenues. Net operating revenues at the Pioneer for the three months ended June 30, 2009 were $5.0 million, a $1.5
million decrease or 23%, as compared to $6.5 million for the three months ended June 30, 2008, primarily for the reasons set forth below.

Casino revenues for the three months ended June 30, 2009 were $3.8 million, a $1.0 million decrease or 21%, as compared to $4.8 million for the three months ended June 30, 2008. Slot and video poker revenues for the three
months ended June 30, 2009 were $3.4 million, a $0.9 million decrease or 21%, as compared to $4.3 million for the three months ended June 30, 2008. Management believes the lower slot handle was a direct result of the weaker economic
conditions impacting the Laughlin market. Other gaming revenues, including table games, for the three months ended June 30, 2009 were $0.4 million, a $0.2 million decrease or 27%, as compared to $0.6 million, for the three months ended
June 30, 2008. Casino promotional allowances for the quarter ended June 30, 2009 were approximately $0.9 million, a $0.4 million decrease or 29%, as compared to $1.3 million for the three months ended June 30, 2008.

Hotel revenues for the quarter ended June 30, 2009 were $0.5 million, an approximately $0.1 million decrease or 21%, as compared to $0.6 million for
the three months ended June 30, 2008. Food and beverage revenues for the quarter ended June 30, 2009 were $1.5 million, a $0.4 million decrease or 19%, as compared to $1.9 million for the three months ended June 30, 2008. Other
revenues for the three months ended June 30, 2009 were $0.2 million, an approximate $0.3 million decrease or 71%, as compared to $0.5 million for the three months ended June 30, 2008.

Operating Expenses. Operating expenses for the quarter ended June 30, 2009 were $5.8 million, a $1.2 million decrease or 17%, as
compared to $7.0 million for the three months ended June 30, 2008. Operating expenses as a percentage of revenue increased to 116% from 108% as a result of the aforementioned lower revenues.



-24-



---

##### Table of Contents

Casino expenses for the three months ended June 30, 2009 were $2.4 million, a $0.4 million decrease
or 15%, as compared to $2.8 million for the three months ended June 30, 2008. Casino expenses as a percentage of revenue increased to 48% from 43% resulting from the more rapid decline in revenues than expenses.

Hotel expenses for the three months ended June 30, 2009 were $0.2 million, a $0.1 million decrease or 25%, as compared to $0.3 million in the three
months ended June 30, 2008. Hotel expenses as a percentage of revenue decreased to 4% for the three months ended June 30, 2009 from 5% for the three months ended June 30, 2008. Food and beverage expenses for the three months ended
June 30, 2009 were $1.1 million, a $0.1 million decrease or 9%, as compared to $1.2 million in the three months ended June 30, 2008. Food and beverage expenses as a percentage of revenue increased to 21% for the three months ended
June 30, 2009 from 18% for the three months ended June 30, 2008. Other expenses for the three months ended June 30, 2009 were $0.1 million, an approximate $0.1 million decrease or 40%, as compared to $0.2 million for the three months
ended June 30, 2008. Other expenses as a percentage of revenue were at 3% in both of the three months ended June 30, 2009 and 2008.

Selling, general and administrative expenses for the three months ended June 30, 2009 were $1.0 million, a $0.1 million decrease or 5%, as compared to $1.1 million in the three months ended June 30, 2008. Selling, general and
administrative expenses as a percentage of revenue increased to 21% for the three months ended June 30, 2009 from 17% for the three months ended June 30, 2008. Pioneers selling, general and administrative expenses are greater than
the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses for the three months ended June 30, 2009 were $0.8 million, a $0.2 million decrease or 23%, as compared to
approximately $1.0 million in the three months ended June 30, 2008. Utilities and property expenses as a percentage of revenue were unchanged at 16% both of the three months ended June 30, 2009 and 2008. Depreciation and amortization
expenses for the three months ended June 30, 2009 were $0.2 million, a $0.2 million decrease or 58%, as compared to $0.4 million for the three months ended June 30, 2008.



-25-



---

##### Table of Contents

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

Contractual Obligations and Commitments: The following table summarizes the Companys September 30thfiscal year contractual obligations and commitments as of June 30, 2009 (for the
nine-month period ending September 30, 2008) and for the fiscal years ending September 30, 2009, 2010, 2011, 2012, 2013, 2014 and thereafter (amounts in thousands).



|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|------------------- |  | -------------------------- | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | ------------------ | ----- | ----- | - | ------ |  | - | ------ |  | - | -------
|                    |  | Payments Due By Periods(1)
|                    |  | 2009                       |        | 2010 |   | 2011  |  | 2012 |       | 2013 |   | 2014  |  | 2015 andthereafter |       | Total
|Nonrecourse debt:   |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Gaithersburg        |  | $                          | 742    |      | $ | 3,186 |  | $    | 3,573 |      | $ | 3,987 |  | $                  | 4,448 |       | $ | 25,107 |  | $ | 0      |  | $ | 41,043 
|Sovereign           |  |                            | 0      |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 31,199 |  |   | 31,199 
|Debt:               |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Equipment           |  |                            | 17     |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 17     
|Mortgage obligation |  |                            | 9,844  |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 9,844  
|Operating leases:   |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Ground lease        |  |                            | 97     |      |   | 386   |  |      | 386   |      |   | 386   |  |                    | 386   |       |   | 386    |  |   | 24,750 |  |   | 26,777 
|Corporate offices   |  |                            | 14     |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 14     
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Total               |  | $                          | 10,714 |      | $ | 3,572 |  | $    | 3,959 |      | $ | 4,373 |  | $                  | 4,834 |       | $ | 25,493 |  | $ | 55,949 |  | $ | 108,894
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        



|(1) | The Company is required to make the following cash interest payments related to the foregoing debt obligations: (i) Non-recourse debt  $1.7 million
(2009), $6.6 million (2010), $6.3 million (2011), $6.1 million (2012), $5.8 million (2013), $4.8 million (2014) and $21.9 million (2015 and thereafter)), and (ii) Long-term debt  $0.2 million (2009), $0 million (2010), $0 million
(2011), $0 million (2012), $0 million (2013), $0 million (2014) and $0 million (2015 and thereafter).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

The Companys ability to
service its contractual obligations and commitments, other than the nonrecourse 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. In addition, the Company will be dependent on the
continued ability of the tenants in the rental 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 nonrecourse debt obligations related to the properties.

Liquidity. As of June 30, 2009,
the Company held cash and cash equivalents of approximately $33.7 million compared to $38.0 million at September 30, 2008. The Company had $4.7 million in investment in marketable securities at June 30, 2009 compared to $5.7 million at
September 30, 2008. The rental properties are structured such that future tenants payments cover future required mortgage payments including any 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.

The Company has a balloon payment due on August 20,
2009 of approximately $9.8 million related to debt owed to a bank, which is likely to be extended ninety days until November 2009 while a more formal renewal is in process. The Company has sufficient cash and cash resources to pay the debt in full
when the debt becomes due. The debt obligation is secured by 27 acres of land owned on the Las Vegas Strip and is personally guaranteed by the Companys CEO, Chairman of the Board and primary stockholder and his wife, who is the Executive Vice
President, Secretary and Treasurer of the Company.



-26-



---

##### Table of Contents

Cash Flows from Operating Activities. The Companys cash provided by operating
activities was $0.2 million for the nine months ended June 30, 2009 as compared to $5.4 million for the nine months ended June 30, 2008.

Cash Flows from Investing Activities. Cash used in investing activities was $2.1 million for the nine months ended June 30, 2009, as compared to cash provided by investing activities of $13.5
million for the nine months ended June 30, 2008. In the current year period, the company paid $1.2 million for capital improvements at the Pioneer, and $2.8 million for marketable securities which were offset by the sale of $1.9 million in
marketable securities. In the prior year period, the Company received $17.4 million in payments on sale or extension of the land purchase option, $6.7 million in marketable securities sold or redeemed; which was offset by purchases of marketable
securities of $10.2 million and $0.4 million in capital expenditures.

Cash Used in Financing Activities. Cash used in
financing activities was $2.4 million for the nine months ended June 30, 2009 as compared to $5.6 million for the nine months ended June 30, 2008. In the current year period, $2.2 million was used for debt payments and $0.2 million for the
purchase of common stock for retirement. In the prior year period, $2.9 million was used for debt payments, $2.5 million for the purchase and retirement of common stock and $0.2 million for the redemption and retirement of preferred stock.

The Companys primary source of operating cash is from the Pioneer operations, from interest income on available cash and cash
equivalents and investments in marketable securities and, to a lesser extent, from net cash generated from the leasing of certain land owned on the Las Vegas strip. Rental income from the Companys two rental properties is contractually
committed to reducing the nonrecourse indebtedness issued or assumed in connection with the acquisition of the rental properties. Under the two leases, the tenants are responsible for substantially all obligations related to the property. 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 the adjacent property owner to facilitate development of the adjacent property.

Pioneer

Pioneers principal uses
of cash are for 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 rent were approximately $0.3 million in each of the nine months ended
June 30, 2009 and 2008, respectively. Capital expenditures to maintain the facility in fiscal 2009 are expected to be approximately $1.3 million.



-27-



---

##### Table of Contents

Redemption of the Companys Preferred Stock and Redemption Price Disputes

The Company called all outstanding shares of its Exchangeable Redeemable Preferred Stock for redemption on and as of August 31, 2007, at a redemption
price of $5.241 per share, which sum included accrued and unpaid dividends to the date of redemption. From and after August 31, 2007, all shares of the Exchangeable Redeemable Preferred Stock ceased to be outstanding and to accrue dividends. As
of August 13, 2009, the holders of 4,259,878 shares of the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of the redemption price; while 156,699 shares have yet to be surrendered and still have the
right to receive their payment due without interest.

On August 27, 2007, a group of institutional investors filed an action, in
Nevada, against the registrant. The Complaint was subsequently amended to add an additional party plaintiff (collectively, the Plaintiffs). The Amended Complaint: (i) seeks a finding by the Court that the Company has breached its
obligations under the Companys Certificate of Designation of the Preferred Stock, dated September 30, 1993 (the Certificate), and awarding the Plaintiffs full compensation of any and all available damages suffered by the
Plaintiffs as a result of the Companys breach of the Certificate; (ii) seeks a finding by the Court that the Companys issuance of its redemption notice with an improper redemption price is an anticipatory breach of a material term
of the Certificate and awarding the Plaintiffs full compensation of any and all available damages suffered as a result of the Companys anticipatory breach of the Certificate; (iii) seeks a declaration by the Court that the dividends be
properly calculated and compounded per the terms of the Certificate in an amount no less than $7,235,351 up through and including the date of final judgment; (iv) seeks an order from the Court calling for the Company to reimburse the
Plaintiffs attorneys fees, expenses and costs incurred in enforcing their rights; and (v) seeks such other and further relief as the Court may deem appropriate. The Plaintiffs, thereafter, filed a motion for partial summary judgment
(the Motion), seeking a ruling from the court that the Company breached its obligations under the Certificate of Designation by calculating the redemption price as it did. The Court granted that Motion on August 8, 2008, finding the
language of the Certificate of Designation to be unambiguous and that the redemption price should have been calculated differently. The Court has not yet issued a monetary judgment against the Company. Mediation of certain issues is on going. If
mediation is unsuccessful, the Company intends to appeal the adverse decision of the Court on the Motion. The Company has initiated proceedings against a third-party firm concerning that firms potential liability related to the drafting
of the Certificate of Designation. This third-party action has subsequently been removed by the firm to Federal Court in late April, 2009 and is at an early stage of resolution. The Company is also considering rights and remedies it may have
with regard to other parties who participated in the issuance of the Preferred Stock in the event that the Company does not prevail on its interpretation of the Certificate of Designation.

Also, two other former holders of the Exchangeable Redeemable Preferred Stock filed Complaints, both alleging essentially the same claim as the first
complaint related to the case set forth immediately above. If the plaintiffs in these two additional actions are correct, the redemption price as of August 31, 2007 should have been $8.69 per share and not $5.241 per share as calculated by the
Company. If applied to all the then outstanding shares of Exchangeable Redeemable Preferred Stock, including the shares held by the Companys officers and directors, valuation of the redemption price at $8.69 per share would increase the
redemption price in excess of $15.2 million.

Management is unable to estimate the minimum liability that may be incurred, if any, as a
result of the outcome of each of these matters and, therefore, has made no provision in the financial statements for liability related to these cases.



-28-



---

##### Table of Contents

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 nonrecourse debt, the Company has total
interest-bearing debt at June 30, 2009 of approximately $9.9 million, of which approximately $9.8 million bears interest at a variable rate (approximately 6% at June 30, 2009). Therefore, the Company maintains certain market rate risk
related to this debt. A change in the interest rates of 1% would cause an approximate $0.1 million 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.

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 Securities Exchange Act of 1934 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 Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes
that any



-29-



---

##### Table of Contents

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 Principal Accounting Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Principal Accounting Officer concluded that Archons disclosure controls and procedures are effective.

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.



-30-



---

##### Table of Contents

ARCHON CORPORATION

PART II  OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

Mercury Real Estate Securities
Fund, LP and Mercury Real Estate Securities Offshore Limited v. Archon Corporation:

The Company called all outstanding shares
of its Exchangeable Redeemable Preferred Stock for redemption on and as of August 31, 2007, at a redemption price of $5.241 per share, which sum included accrued and unpaid dividends to the date of redemption. From and after August 31,
2007, all shares of the Exchangeable Redeemable Preferred Stock ceased to be outstanding and to accrue dividends. As of August 13, 2009, the holders of 4,259,878 shares of the Exchangeable Redeemable Preferred Stock have surrendered their
shares and received payment of the redemption price; while 156,699 shares have yet to be surrendered and still have the right to receive their payment due without interest.

On August 27, 2007, a group of institutional investors filed an action, in Nevada, against the registrant. The Complaint was subsequently amended to
add an additional party plaintiff (collectively, the Plaintiffs). The Amended Complaint: (i) seeks a finding by the Court that the Company has breached its obligations under the Companys Certificate of Designation of the
Preferred Stock, dated September 30, 1993 (the Certificate), and awarding the Plaintiffs full compensation of any and all available damages suffered by the Plaintiffs as a result of the Companys breach of the Certificate;
(ii) seeks a finding by the Court that the Companys issuance of its redemption notice with an improper redemption price is an anticipatory breach of a material term of the Certificate and awarding the Plaintiffs full compensation of any
and all available damages suffered as a result of the Companys anticipatory breach of the Certificate; (iii) seeks a declaration by the Court that the dividends be properly calculated and compounded per the terms of the Certificate in an
amount no less than $7,235,351 up through and including the date of final judgment; (iv) seeks an order from the Court calling for the Company to reimburse the Plaintiffs attorneys fees, expenses and costs incurred in enforcing
their rights; and (v) seeks such other and further relief as the Court may deem appropriate. The Plaintiffs, thereafter, filed a motion for partial summary judgment (the Motion), seeking a ruling from the court that the Company
breached its obligations under the Certificate of Designation by calculating the redemption price as it did. The Court granted that Motion on August 8, 2008, finding the language of the Certificate of Designation to be unambiguous and that the
redemption price should have been calculated differently. The Court has not yet issued a monetary judgment against the Company. Mediation of certain issues is on going. If mediation is unsuccessful, the Company intends to appeal the adverse decision
of the Court on the Motion. The Company has initiated proceedings against a third-party firm concerning that firms potential liability related to the drafting of the Certificate of Designation. This third-party action has
subsequently been removed by the firm to Federal Court in late April, 2009 and is at an early stage of resolution. The Company is also considering rights and remedies it may have with regard to other parties who participated in the
issuance of the Preferred Stock in the event that the Company does not prevail on its interpretation of the Certificate of Designation.

Also, two other former holders of the Exchangeable Redeemable Preferred Stock filed Complaints, both alleging essentially the same claim as the first complaint related to the case set forth immediately above. If the plaintiffs in these two
additional actions are correct, the redemption price as of August 31, 2007 should have been $8.69 per share and not $5.241 per share as calculated by the Company. If applied to all the then outstanding shares of Exchangeable Redeemable
Preferred Stock, including the shares held by the Companys officers and directors, valuation of the redemption price at $8.69 per share would increase the redemption price in excess of $15.2 million.



-31-



---

##### Table of Contents

Management is unable to estimate the minimum liability that may be incurred, if any, as a result of the
outcome of each of these matters and, therefore, has made no provision in the financial statements for liability related to these cases.



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

None



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None



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

Stockholders and investors may obtain a free copy of the information statement (when available) and other related documents filed by the Company with the SEC at its website at www.sec.gov.

At the Annual Meeting of Stockholders held on June 15, 2009, common stockholders elected two directors, John W. Delaney and Howard E. Foster,
approved the increase in the number of stock options available under the Companys 1993 Key Employee Stock Option Plan and voted on a proposal to ratify the selection of De Joya Griffith & Company LLC (De Joya) as the
Companys independent registered public accounting firm and approval of the financial statements of September 30, 2008.

The
Directors whose terms in office continued after the meeting are as follows:



|                   |  |            
|------------------ |  | -----------
|                   |  | TermExpires
|Suzanne Lowden     |  | 2010       
|Richard H. Taggart |  | 2010       
|Paul W. Lowden     |  | 2011       
|William J. Raggio  |  | 2011       
|John W. Delaney    |  | 2012       
|Howard E. Foster   |  | 2012       



-32-



---

##### Table of Contents

There were 6,337,187shares of Common Stock entitled to vote at the meeting. A total of
6,291,700 votes (99.3%) were represented at the meeting.

The result of the vote taken on the election of Directors
elected by the common stockholders to hold office until the 2012 Annual Meeting of Stockholders and until their successors are elected and have qualified are as follows:



|                 |  |           |  |         
|---------------- |  | --------- |  | --------
|                 |  | For       |  | Withheld
|John W. Delaney  |  | 5,915,488 |  | 376,211 
|Howard E. Foster |  | 5,917,223 |  | 374,476 

The result of the vote taken for approval of the increase in the number of stock options available
under the Companys 1993 Key Employee Stock Option Plan is as follows:



|          |  |         |  |         |  |               
|--------- |  | ------- |  | ------- |  | --------------
|For       |  | Against |  | Abstain |  | BrokerNon-Vote
|4,900,374 |  | 701,113 |  | 1,703   |  | 688,510       

The result of the vote taken for ratification of the selection of De Joya as the Companys
independent registered public accounting firm and approval of the Companys financial statements as of September 30, 2008 are as follows:



|          |  |         |  |         |  |               
|--------- |  | ------- |  | ------- |  | --------------
|For       |  | Against |  | Abstain |  | BrokerNon-Vote
|6,014,229 |  | 176,899 |  | 259,785 |  | 0             



|Item 5. | Other Information
|------- | -----------------

None



|Item 6. | Exhibits
|------- | --------



| | a. | Exhibits.
| | -- | ---------



|              |  |                                                                                                         
|------------- |  | --------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                  
|31.1          |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.         
|              | 
|31.2          |  | Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|32            |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                



-33-



---

##### Table of Contents

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. LowdenChairman of the Board, President andChief Executive Officer


Date:August 13, 2009



-34-