##### 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: December 31, 2010



| ̈ | 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)

2200 Casino Drive, Laughlin,
Nevada 89029

(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.    Yesx    No   ̈

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer 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.



|          |  |       |  |                  
|--------- |  | ----- |  | -----------------
|5,792,944 |  | as of |  | February 18, 2011









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##### Table of Contents

ARCHON CORPORATION

INDEX



|        |  |                                                                                       |  |                                                                                                                   |    |      |   | 
|------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|        |  |                                                                                       |  |                                                                                                                   |    | Page |  
|PART I  |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                                   |    |     
|        |  |                                                                                      
|Item 1  |  | Unaudited Condensed Consolidated Financial Statements:                                |  |                                                                                                                   |    |     
|        |  |                                                                                       |  | Consolidated Balance Sheets as of December 31, 2010 (Unaudited) and September 30, 2010
(Audited)                  |    |      | 1 | 
|        |  |                                                                                       |  | Consolidated Statements of Operations for the Three Months Ended December 31, 2010 and 2009
(Unaudited)           |    |      | 3 | 
|        |  |                                                                                       |  | Consolidated Statements of Comprehensive Income for the Three Months Ended December 31, 2010 and 2009 (Unaudited) |    |      | 5 | 
|        |  |                                                                                       |  | Consolidated Statement of Stockholders Equity for the Three Months Ended December 31, 2010 (Unaudited)           |    |      | 6 | 
|        |  |                                                                                       |  | Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2010 and 2009
(Unaudited)           |    |      | 7 | 
|        |  |                                                                                       |  | Notes to Unaudited Consolidated Financial Statements                                                              |    |      | 8 | 
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of
Operations |  |                                                                                                                   | 21 |     
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |                                                                                                                   | 31 |     
|Item 4  |  | Controls and Procedures                                                               |  |                                                                                                                   | 32 |     
|        |  |                                                                                      
|PART II |  | OTHER INFORMATION                                                                     |  |                                                                                                                   |    |     
|        |  |                                                                                      
|Item 1  |  | Legal Proceedings                                                                     |  |                                                                                                                   | 35 |     
|Item 2  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities      |  |                                                                                                                   | 37 |     
|Item 3  |  | Defaults Upon Senior Securities                                                       |  |                                                                                                                   | 37 |     
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                                                                                   | 37 |     
|Item 5  |  | Other Information                                                                     |  |                                                                                                                   | 37 |     
|Item 6  |  | Exhibits                                                                              |  |                                                                                                                   | 38 |     



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PART I  FINANCIAL INFORMATION



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

Archon Corporation and Subsidiaries

Consolidated Balance Sheets



|                                    |  |                             |             |   |                             |   |             |  
|----------------------------------- |  | --------------------------- | ----------- | - | --------------------------- | - | ----------- | -
|                                    |  | December 31,2010(Unaudited) |             |   | September 
30,2010(Audited) |  
|ASSETS                              |  |                             |             |   |                             |   |             |  
|Current assets:                     |  |                             |             |   |                             |   |             |  
|Cash and cash equivalents           |  | $                           | 9,575,570   |   |                             | $ | 9,578,555   |  
|Investment in marketable securities |  |                             | 18,744,649  |   |                             |   | 17,773,265  |  
|Accounts receivable, net            |  |                             | 183,763     |   |                             |   | 189,895     |  
|Inventories                         |  |                             | 156,141     |   |                             |   | 152,437     |  
|Prepaid expenses and other          |  |                             | 939,942     |   |                             |   | 901,451     |  
|Assets held for sale, current       |  |                             | 506,889     |   |                             |   | 469,061     |  
|Deferred tax assets                 |  |                             | 166,555     |   |                             |   | 472,916     |  
|                                    |  |                             |             |   |                             |   |             |  
|Total current assets                |  |                             | 30,273,509  |   |                             |   | 29,537,580  |  
|                                    |  |                             |             |   |                             |   |             |  
|Assets held for sale                |  |                             | 54,171,475  |   |                             |   | 54,362,434  |  
|                                    |  |                             |             |   |                             |   |             |  
|Property and equipment:             |  |                             |             |   |                             |   |             |  
|Rental property, net                |  |                             | 87,405,768  |   |                             |   | 87,827,133  |  
|Land used in operations             |  |                             | 3,960,589   |   |                             |   | 3,960,589   |  
|Buildings and improvements          |  |                             | 25,704,561  |   |                             |   | 25,704,561  |  
|Machinery and equipment             |  |                             | 8,389,044   |   |                             |   | 8,331,826   |  
|Accumulated depreciation            |  |                             | (28,778,212 | ) |                             |   | (28,621,442 | )
|                                    |  |                             |             |   |                             |   |             |  
|Property and equipment, net         |  |                             | 96,681,750  |   |                             |   | 97,202,667  |  
|                                    |  |                             |             |   |                             |   |             |  
|Other assets                        |  |                             | 3,042,078   |   |                             |   | 3,020,626   |  
|                                    |  |                             |             |   |                             |   |             |  
|Total assets                        |  | $                           | 184,168,812 |   |                             | $ | 184,123,307 |  
|                                    |  |                             |             |   |                             |   |             |  

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



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Archon Corporation and Subsidiaries

Consolidated Balance Sheets (continued)



|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ----------- | - | --------------------------- | - | ----------- | -
|                                                                                                                                                            |  | December 31,2010(Unaudited) |             |   | September 
30,2010(Audited) |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                        |  |                             |             |   |                             |   |             |  
|Current liabilities:                                                                                                                                        |  |                             |             |   |                             |   |             |  
|Line of credit                                                                                                                                              |  | $                           | 9,812,500   |   |                             | $ | 5,000,000   |  
|Accounts payable                                                                                                                                            |  |                             | 933,241     |   |                             |   | 1,277,560   |  
|Accrued and other liabilities                                                                                                                               |  |                             | 2,272,360   |   |                             |   | 2,222,201   |  
|Exchangeable redeemable preferred stock - unredeemed                                                                                                        |  |                             | 798,021     |   |                             |   | 813,665     |  
|Current liabilities  assets held for sale                                                                                                                  |  |                             | 3,821,027   |   |                             |   | 3,718,020   |  
|Current liabilities  deferred rent income                                                                                                                  |  |                             | 3,426,648   |   |                             |   | 3,426,648   |  
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|Total current liabilities                                                                                                                                   |  |                             | 21,063,797  |   |                             |   | 16,458,094  |  
|                                                                                                                                                            |  |                            
|Long-term liabilities  assets held for sale                                                                                                                |  |                             | 32,583,853  |   |                             |   | 33,541,444  |  
|Nonrecourse debt                                                                                                                                            |  |                             | 31,199,288  |   |                             |   | 31,199,288  |  
|Deferred tax liabilities                                                                                                                                    |  |                             | 21,228,274  |   |                             |   | 21,513,085  |  
|Deferred rent income                                                                                                                                        |  |                             | 29,126,508  |   |                             |   | 29,983,170  |  
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|Total liabilities                                                                                                                                           |  |                             | 135,201,720 |   |                             |   | 132,695,081 |  
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|Commitments and contingencies (Note 6)                                                                                                                      |  |                             |             |   |                             |   |             |  
|                                                                                                                                                            |  |                            
|Stockholders equity:                                                                                                                                       |  |                             |             |   |                             |   |             |  
|Preferred stock, exchangeable, redeemable 16.0% cumulative $2.14 per share liquidation value, authorized - 10, 000, 000 shares;
none issued and outstanding |  |                             | 0           |   |                             |   | 0           |  
|Common stock, $.01 par value; authorized - 100,000,000 shares; issued and outstanding  6,316,576, and 6,316,576
shares                                     |  |                             | 63,166      |   |                             |   | 63,166      |  
|Additional paid-in capital                                                                                                                                  |  |                             | 63,247,158  |   |                             |   | 63,247,158  |  
|Accumulated deficit                                                                                                                                         |  |                             | (7,395,085  | ) |                             |   | (7,506,070  | )
|Accumulated other comprehensive loss                                                                                                                        |  |                             | (46,274     | ) |                             |   | (286,655    | )
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|                                                                                                                                                            |  |                             | 55,868,965  |   |                             |   | 55,517,599  |  
|Less: notes receivable from principal stockholders                                                                                                          |  |                             | (57,841     | ) |                             |   | (57,841     | )
|Less: treasury common stock  523,632 and 298,632 shares, at cost                                                                                           |  |                             | (6,844,032  | ) |                             |   | (4,031,532  | )
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|Total stockholders equity                                                                                                                                  |  |                             | 48,967,092  |   |                             |   | 51,428,226  |  
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  
|Total liabilities and stockholders equity                                                                                                                  |  | $                           | 184,168,812 |   |                             | $ | 184,123,307 |  
|                                                                                                                                                            |  |                             |             |   |                             |   |             |  

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



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Archon Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                                                        |  |                                |            |   |      |   |            |  
|--------------------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                        |  | Three Months EndedDecember 31, |           
|                                                                                        |  | 2010                           |            |   | 2009 |  
|Revenues:                                                                               |  |                                |            |   |      |   |            |  
|Casino                                                                                  |  | $                              | 2,715,426  |   |      | $ | 3,226,752  |  
|Hotel                                                                                   |  |                                | 283,294    |   |      |   | 320,807    |  
|Food and beverage                                                                       |  |                                | 876,144    |   |      |   | 1,214,213  |  
|Rental properties                                                                       |  |                                | 1,835,680  |   |      |   | 1,882,680  |  
|Other                                                                                   |  |                                | 73,770     |   |      |   | 640,613    |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Gross revenues                                                                          |  |                                | 5,784,314  |   |      |   | 7,285,065  |  
|Less casino promotional allowances                                                      |  |                                | (661,156   | ) |      |   | (909,358   | )
|                                                                                        |  |                                |            |   |      |   |            |  
|Net operating revenues                                                                  |  |                                | 5,123,158  |   |      |   | 6,375,707  |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Operating expenses:                                                                     |  |                                |            |   |      |   |            |  
|Casino                                                                                  |  |                                | 1,602,680  |   |      |   | 2,227,266  |  
|Hotel                                                                                   |  |                                | 149,930    |   |      |   | 135,655    |  
|Food and beverage                                                                       |  |                                | 450,492    |   |      |   | 744,468    |  
|Other                                                                                   |  |                                | 70,962     |   |      |   | 80,625     |  
|Selling, general and administrative:                                                    |  |                                |            |   |      |   |            |  
|Corporate                                                                               |  |                                | 745,640    |   |      |   | 832,644    |  
|Other                                                                                   |  |                                | 681,105    |   |      |   | 765,848    |  
|Utilities and property expenses                                                         |  |                                | 941,690    |   |      |   | 971,352    |  
|Depreciation                                                                            |  |                                | 578,135    |   |      |   | 594,300    |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Total operating expenses                                                                |  |                                | 5,220,634  |   |      |   | 6,352,158  |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Operating income (loss)                                                                 |  |                                | (97,476    | ) |      |   | 23,549     |  
|Other income and (expense):                                                             |  |                                |            |   |      |   |            |  
|Interest expense                                                                        |  |                                | (1,025,837 | ) |      |   | (1,104,209 | )
|Gain (loss) on sale of marketable securities                                            |  |                                | 99,865     |   |      |   | (64,278    | )
|Interest and other income                                                               |  |                                | 293,349    |   |      |   | 306,092    |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Loss before income tax benefit                                                          |  |                                | (730,099   | ) |      |   | (838,846   | )
|Federal income tax benefit, continuing operations                                       |  |                                | 364,506    |   |      |   | 318,570    |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Loss from continuing operations                                                         |  |                                | (365,593   | ) |      |   | (520,276   | )
|Discontinued operations gain, net of tax expense of $256,619 and $480,778, respectively |  |                                | 476,578    |   |      |   | 892,872    |  
|                                                                                        |  |                                |            |   |      |   |            |  
|Net income                                                                              |  | $                              | 110,985    |   |      | $ | 372,596    |  
|                                                                                        |  |                                |            |   |      |   |            |  

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



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Archon Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited) (continued)



|                                                          |  |                                |           |   |      |   |           |  
|--------------------------------------------------------- |  | ------------------------------ | --------- | - | ---- | - | --------- | -
|                                                          |  | Three Months EndedDecember 31, |          
|                                                          |  | 2010                           |           |   | 2009 |  
|Average common shares outstanding                         |  |                                | 5,792,944 |   |      |   | 6,316,576 |  
|                                                          |  |                                |           |   |      |   |           |  
|Average common and common equivalent shares outstanding   |  |                                | 5,792,944 |   |      |   | 6,316,576 |  
|                                                          |  |                                |           |   |      |   |           |  
|Loss from continuing operations per common share          |  |                                |           |   |      |   |           |  
|Net basic loss per common share                           |  | $                              | (0.06     | ) |      | $ | (0.08     | )
|                                                          |  |                                |           |   |      |   |           |  
|Diluted loss per common share                             |  | $                              | (0.06     | ) |      | $ | (0.08     | )
|                                                          |  |                                |           |   |      |   |           |  
|Discontinued operations gain, net of tax per common share |  |                                |           |   |      |   |           |  
|Net basic income per common share                         |  | $                              | 0.08      |   |      | $ | 0.14      |  
|                                                          |  |                                |           |   |      |   |           |  
|Diluted income per common share                           |  | $                              | 0.08      |   |      | $ | 0.14      |  
|                                                          |  |                                |           |   |      |   |           |  
|Income per common share                                   |  |                                |           |   |      |   |           |  
|Net basic income per common share                         |  | $                              | 0.02      |   |      | $ | 0.06      |  
|                                                          |  |                                |           |   |      |   |           |  
|Diluted income per common share                           |  | $                              | 0.02      |   |      | $ | 0.06      |  
|                                                          |  |                                |           |   |      |   |           |  

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



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Archon Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



|                                                                     |  |                            |         |  |      |   |         |  
|-------------------------------------------------------------------- |  | -------------------------- | ------- |  | ---- | - | ------- | -
|                                                                     |  | Three Months EndedDecember |        
|                                                                     |  | 2010                       |         |  | 2009 |  
|Net income                                                           |  | $                          | 110,985 |  |      | $ | 372,596 |  
|Unrealized gain (loss) on marketable securities, net of income taxes |  |                            | 240,381 |  |      |   | (65,741 | )
|                                                                     |  |                            |         |  |      |   |         |  
|Comprehensive income                                                 |  | $                          | 351,366 |  |      | $ | 306,855 |  
|                                                                     |  |                            |         |  |      |   |         |  

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



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Archon Corporation and Subsidiaries

Consolidated Statement of Stockholders Equity

For the Three Months Ended December 31, 2010

(Unaudited)



|                                         |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   |            |                                 |  |   |               |   |  |       |         |   |  |   |            |   |  |   |            |  
|---------------------------------------- |  | ---------------- | - |  | ----------- |  | --------- | ------------- |  | - | ------------------------ |  |  | ------------------ | ---------- |  | ------------------------------------------ | - | ---------- | ------------------------------- |  | - | ------------- | - |  | ----- | ------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                         |  | PreferredStock $ |   |  | CommonStock |  |           | CommonStock $ |  |   | AdditionalPaid-InCapital |  |  | AccumulatedDeficit |            |  | AccumulatedOtherComprehensiveIncome (Loss) |   |            | NotesReceivableFromStockholders |  |   | TreasuryStock |   |  | Total |        
|Balances, October 1, 2010                |  | $                | 0 |  |             |  | 6,316,576 |               |  | $ | 63,166                   |  |  | $                  | 63,247,158 |  |                                            | $ | (7,506,070 | )                               |  | $ | (286,655      | ) |  | $     | (57,841 | ) |  | $ | (4,031,532 | ) |  | $ | 51,428,226 |  
|Net income                               |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   | 110,985    |                                 |  |   |               |   |  |       |         |   |  |   |            |   |  |   | 110,985    |  
|Purchase of treasury stock               |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   |            |                                 |  |   |               |   |  |       |         |   |  |   | (2,812,500 | ) |  |   | (2,812,500 | )
|Unrealized gain on marketable securities |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   |            |                                 |  |   | 240,381       |   |  |       |         |   |  |   |            |   |  |   | 240,381    |  
|                                         |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   |            |                                 |  |   |               |   |  |       |         |   |  |   |            |   |  |   |            |  
|Balances, December 31, 2010              |  | $                | 0 |  |             |  | 6,316,576 |               |  | $ | 63,166                   |  |  | $                  | 63,247,158 |  |                                            | $ | (7,395,085 | )                               |  | $ | (46,274       | ) |  | $     | (57,841 | ) |  | $ | (6,844,032 | ) |  | $ | 48,967,092 |  
|                                         |  |                  |   |  |             |  |           |               |  |   |                          |  |  |                    |            |  |                                            |   |            |                                 |  |   |               |   |  |       |         |   |  |   |            |   |  |   |            |  

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



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Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                                       |  |                                |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                                                       |  | Three Months EndedDecember 31, |           
|                                                                                                       |  | 2010                           |            |   | 2009 |  
|Cash flows from operating activities:                                                                  |  |                                |            |   |      |   |            |  
|Net income                                                                                             |  | $                              | 110,985    |   |      | $ | 372,596    |  
|Less: discontinued operations gain, net of tax effect                                                  |  |                                | (476,578   | ) |      |   | (892,872   | )
|                                                                                                       |  |                                |            |   |      |   |            |  
|Net loss from continuing operations                                                                    |  |                                | (365,593   | ) |      |   | (520,276   | )
|Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: |  |                                |            |   |      |   |            |  
|Income tax benefit                                                                                     |  |                                | (364,506   | ) |      |   | (318,569   | )
|Depreciation                                                                                           |  |                                | 578,135    |   |      |   | 594,300    |  
|Interest expense from amortization of debt issuance costs                                              |  |                                | (18,886    | ) |      |   | 57,023     |  
|(Gain) loss on sale of marketable securities                                                           |  |                                | (99,865    | ) |      |   | 64,278     |  
|Change in operating assets and liabilities:                                                            |  |                                |            |   |      |   |            |  
|Accounts receivable                                                                                    |  |                                | 6,132      |   |      |   | (7,333     | )
|Inventories                                                                                            |  |                                | (3,704     | ) |      |   | 18,110     |  
|Prepaid expenses and other                                                                             |  |                                | (38,491    | ) |      |   | (149,196   | )
|Other assets                                                                                           |  |                                | (2,566     | ) |      |   | (87,596    | )
|Accounts payable                                                                                       |  |                                | (344,319   | ) |      |   | (403,311   | )
|Accrued and other liabilities                                                                          |  |                                | 50,159     |   |      |   | (7,650     | )
|Deferred rent                                                                                          |  |                                | (856,662   | ) |      |   | (856,662   | )
|                                                                                                       |  |                                |            |   |      |   |            |  
|Net cash used in operating activities                                                                  |  |                                | (1,460,166 | ) |      |   | (1,616,882 | )
|                                                                                                       |  |                                |            |   |      |   |            |  
|                                                                                                       |  |                               
|Cash flows from investing activities:                                                                  |  |                                |            |   |      |   |            |  
|Proceeds from sale or disposal of assets                                                               |  |                                | 0          |   |      |   | 28,885     |  
|Capital expenditures                                                                                   |  |                                | (57,218    | ) |      |   | (30,722    | )
|Marketable securities purchased                                                                        |  |                                | (2,365,523 | ) |      |   | (2,190,324 | )
|Marketable securities sold or redeemed                                                                 |  |                                | 1,863,822  |   |      |   | 1,032,333  |  
|                                                                                                       |  |                                |            |   |      |   |            |  
|Net cash used in investing activities                                                                  |  |                                | (558,919   | ) |      |   | (1,159,828 | )
|                                                                                                       |  |                                |            |   |      |   |            |  
|                                                                                                       |  |                               
|Cash flows from financing activities:                                                                  |  |                                |            |   |      |   |            |  
|Proceeds from line of credit                                                                           |  |                                | 5,812,500  |   |      |   | 0          |  
|Payment on line of credit                                                                              |  |                                | (1,000,000 | ) |      |   | 0          |  
|Common stock purchased and retired                                                                     |  |                                | (2,812,500 | ) |      |   | 0          |  
|Preferred stock redeemed and retired                                                                   |  |                                | (15,644    | ) |      |   | 0          |  
|                                                                                                       |  |                                |            |   |      |   |            |  
|Net cash provided by financing activities                                                              |  |                                | 1,984,356  |   |      |   | 0          |  
|                                                                                                       |  |                                |            |   |      |   |            |  
|                                                                                                       |  |                               
|Cash flows from Discontinued Operations:                                                               |  |                                |            |   |      |   |            |  
|Cash flows from operating activities                                                                   |  |                                | 887,701    |   |      |   | 1,492,040  |  
|Cash flows from financing activities                                                                   |  |                                | (855,957   | ) |      |   | (845,954   | )
|                                                                                                       |  |                                |            |   |      |   |            |  
|Net cash provided by discontinued operations                                                           |  |                                | 31,744     |   |      |   | 646,086    |  
|                                                                                                       |  |                                |            |   |      |   |            |  
|Decrease in cash and cash equivalents                                                                  |  |                                | (2,985     | ) |      |   | (2,130,624 | )
|Cash and cash equivalents, beginning of period                                                         |  |                                | 9,578,555  |   |      |   | 31,646,498 |  
|                                                                                                       |  |                                |            |   |      |   |            |  
|Cash and cash equivalents, end of period                                                               |  | $                              | 9,575,570  |   |      | $ | 29,515,874 |  
|                                                                                                       |  |                                |            |   |      |   |            |  

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



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ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the quarters ended December 31, 2010 and 2009



|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 through
its wholly-owned subsidiary, Sahara Las Vegas Corp. (SLVC). It also owns rental properties in the Dorchester section of Boston, Massachusetts and in Gaithersburg, Maryland which are both currently rented through its wholly-owned
subsidiary, SFHI, Inc.

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 unaudited three month period ended December 31,
2010 are not necessarily indicative of results to be expected for the full fiscal year ended September 30, 2011. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K for the year ended September 30, 2010, from which the balance sheet information as of that date is derived.

Use of Estimates. The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. These estimates are based on historical information, information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable
under the circumstances. Actual results could vary from estimates.

Income Per Common Share. The Company
computes net income (loss) per share in accordance with FASB ASC 260-10, Earnings per Share. FASB ASC 260-10 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 741,500 were not included in calculations of diluted income per common share for the fiscal quarters ended December 31, 2010, and 2009 as the options were out of the money
and, therefore, would be anti-dilutive. The calculation would be anti-dilutive.



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As of August 31, 2007, the Company called for the redemption of all outstanding shares
of its Exchangeable Redeemable Preferred Stock at a redemption price of $5.241 per share, which sum included earned 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 earn dividends. As of the date of the preparation of these financial statements, the holders of 4,264,312 shares of the Exchangeable Redeemable Preferred Stock have surrendered their shares and
received payment of the redemption price. See Note 6

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

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
December 31, 2010 includes investments in corporate bonds.

Marketable securities held by Merrill Lynch, MorganStanley
SmithBarney, Contango Capital Advisors, UBS Financial Services, and Interactive Brokers LLC are held for an indefinite period of time and thus are classified as available-for-sale securities. Realized investment gains and losses are included in the
consolidated statement of operations, as are provisions for other than temporary declines in the market value of available-for-sale securities. Unrealized gains and unrealized losses deemed to be temporary are excluded from earnings (losses), net of
applicable taxes, as a component of other comprehensive income (loss). Factors considered in judging whether an impairment is other than temporary include the financial condition, business prospects and creditworthiness of the issuer, the length of
time that fair value has been less than cost, the relative amount of decline, and the Companys ability and intent to hold the investment until the fair value recovers. During fiscal 2011, the Company did not record an impairment charge
regarding its investment in marketable securities because, based on managements evaluation of the circumstances, management believed that the decline in fair value below the cost of certain of the Companys marketable securities was
temporary. At December 31, 2010 and 2009, investments in equity securities available-for-sale included common and preferred stocks.

Included in Gain (loss) on sale of marketable securities in the consolidated statements of operations are approximately $99,865 and $64,278 of realized gain for the quarter ended
December 31, 2010 and realized loss for the quarter ended December 31, 2009, respectively. The Company recorded approximately $0.1 million and $(0.1) million of other comprehensive income (loss) associated with unrealized gains and losses
on these investments during the quarter ended December 31, 2010 and 2009, respectively.

The following is a summary of
available-for-sale marketable securities as of December 31, 2010 and September 30, 2010 (amounts to the nearest thousand):



|                  |  |          |        |  |                |   |       |                    |  |   |                      |   |  |   |        | 
|----------------- |  | -------- | ------ |  | -------------- | - | ----- | ------------------ |  | - | -------------------- | - |  | - | ------ | 
|                  |  | 12/31/10 |       
|                  |  | Cost     |        |  | UnrealizedGain |   |       | Unrealized(Losses) |  |   | Market orFair 
Value |  
|Debt securities   |  | $        | 8,259  |  |                | $ | 64    |                    |  | $ | (39                  | ) |  | $ | 8,284  | 
|Equity securities |  |          | 10,557 |  |                |   | 819   |                    |  |   | (915                 | ) |  |   | 10,461 | 
|                  |  |          |        |  |                |   |       |                    |  |   |                      |   |  |   |        | 
|Total             |  | $        | 18,816 |  |                | $ | 883   |                    |  | $ | (954                 | ) |  | $ | 18,745 | 
|                  |  |          |        |  |                |   |       |                    |  |   |                      |   |  |   |        | 
|                  | 
|                  |  | 09/30/10 |       
|                  |  | Cost     |        |  | UnrealizedGain |   |       | Unrealized(Losses) |  |   | Market orFair Value  |  
|Debt securities   |  | $        | 9,807  |  |                | $ | 429   |                    |  | $ | (27                  | ) |  | $ | 10,209 | 
|Equity securities |  |          | 8,407  |  |                |   | 616   |                    |  |   | (1,459               | ) |  |   | 7,564  | 
|                  |  |          |        |  |                |   |       |                    |  |   |                      |   |  |   |        | 
|Total             |  | $        | 18,214 |  |                | $ | 1,045 |                    |  | $ | (1,486               | ) |  | $ | 17,773 | 
|                  |  |          |        |  |                |   |       |                    |  |   |                      |   |  |   |        | 



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The following is a summary of the net unrealized gains and losses as presented in
Accumulated Other Comprehensive Income as of December 31, 2010 and September 30, 2010 (amounts to the nearest thousand):



|                  |  |                 |       |  |                               |   |     |                             |  |   |                        |   |  |                                     |      |   |  |   |      |  
|----------------- |  | --------------- | ----- |  | ----------------------------- | - | --- | --------------------------- |  | - | ---------------------- | - |  | ----------------------------------- | ---- | - |  | - | ---- | -
|                  |  | 12/31/10        |      
|Description       |  | UnrealizedGains |       |  | Unrealized(Losses)Short-Term  |   |     | Unrealized(Losses)Long-Term |  |   | DeferredTaxes(Benefit) |   |  | Acc.
OtherComprehensiveIncome(Loss) |     
|Debt Securities   |  | $               | 64    |  |                               | $ | 0   |                             |  | $ | (39                    | ) |  | $                                   | 9    |   |  | $ | 16   |  
|Equity Securities |  |                 | 819   |  |                               |   | 0   |                             |  |   | (915                   | ) |  |                                     | (34  | ) |  |   | (62  | )
|                  |  |                 |       |  |                               |   |     |                             |  |   |                        |   |  |                                     |      |   |  |   |      |  
|Total             |  | $               | 883   |  |                               | $ | 0   |                             |  | $ | (954                   | ) |  | $                                   | (25  | ) |  | $ | (46  | )
|                  |  |                 |       |  |                               |   |     |                             |  |   |                        |   |  |                                     |      |   |  |   |      |  
|                  | 
|                  |  | 09/30/10        |      
|Description       |  | UnrealizedGains |       |  | Unrealized(Losses)Short -Term |   |     | Unrealized(Losses)Long-Term |  |   | DeferredTaxes(Benefit) |   |  | Acc.
OtherComprehensiveIncome(Loss) |     
|Debt Securities   |  | $               | 429   |  |                               | $ | (24 | )                           |  | $ | (3                     | ) |  | $                                   | 141  |   |  | $ | 261  |  
|Equity Securities |  |                 | 616   |  |                               |   | (7  | )                           |  |   | (1,452                 | ) |  |                                     | (295 | ) |  |   | (548 | )
|                  |  |                 |       |  |                               |   |     |                             |  |   |                        |   |  |                                     |      |   |  |   |      |  
|Total             |  | $               | 1,045 |  |                               | $ | (31 | )                           |  | $ | (1,455                 | ) |  | $                                   | (154 | ) |  | $ | (287 | )
|                  |  |                 |       |  |                               |   |     |                             |  |   |                        |   |  |                                     |      |   |  |   |      |  

The Company recorded the combined total of unrealized gains and (losses) disclosed in the above tables, on
the balance sheet with 65% as retained earnings  other comprehensive income, and 35% as deferred income taxes, in the amounts shown in the above tables.

The following is a summary of the proceeds from the sale of marketable securities and the gains or losses reclassified (realized) from Other Comprehensive Income (OCI) as of December 31, 2010 and
2009 (amounts to the nearest thousand):



|                  |  |                   |       |  |                    |   |     |                       |  |   |                                    |   |  |   |     |  
|----------------- |  | ----------------- | ----- |  | ------------------ | - | --- | --------------------- |  | - | ---------------------------------- | - |  | - | --- | -
|                  |  | 2010              |      
|Description       |  | ProceedsFromSales |       |  | GrossRealizedGains |   |     | GrossRealized(Losses) |  |   | Gain or (Loss)ReclassifiedFrom OCI |  
|Debt securities   |  | $                 | 0     |  |                    | $ | 0   |                       |  | $ | 0                                  |   |  | $ | 0   |  
|Equity securities |  |                   | 994   |  |                    |   | 102 |                       |  |   | (2                                 | ) |  |   | 100 |  
|                  |  |                   |       |  |                    |   |     |                       |  |   |                                    |   |  |   |     |  
|Total             |  | $                 | 994   |  |                    | $ | 102 |                       |  | $ | (2                                 | ) |  | $ | 100 |  
|                  |  |                   |       |  |                    |   |     |                       |  |   |                                    |   |  |   |     |  
|                  | 
|                  |  | 2009              |      
|Description       |  | ProceedsFromSales |       |  | GrossRealizedGains |   |     | GrossRealized(Losses) |  |   | Gain or (Loss)ReclassifiedFrom OCI |  
|Debt securities   |  | $                 | 0     |  |                    | $ | 0   |                       |  | $ | 0                                  |   |  | $ | 0   |  
|Equity securities |  |                   | 1,032 |  |                    |   | 0   |                       |  |   | (64                                | ) |  |   | (64 | )
|                  |  |                   |       |  |                    |   |     |                       |  |   |                                    |   |  |   |     |  
|Total             |  | $                 | 1,032 |  |                    | $ | 0   |                       |  | $ | (64                                | ) |  | $ | (64 | )
|                  |  |                   |       |  |                    |   |     |                       |  |   |                                    |   |  |   |     |  



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Revenue Recognition. Casino revenue is recorded as the aggregate of
gaming wins and 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 FASB ASC 605-50, Revenue
Recognition, Customer Payments and Incentives. Accordingly, cash incentives to customers for gambling, and the cash value of points and coupons earned by the slot club members totaling $0.1 million and $0.1 million for the quarter ended
December 31, 2010 and 2009, respectively, 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.

In accordance with industry practice, the retail value of room, food, beverage and other services furnished to the Companys guests
without charge is included in gross revenue and then deducted as promotional allowances. The estimated retail value of such promotional allowances is included in revenues for the quarter ended December 31, 2010 and 2009 as follows (amounts to
the nearest thousand):



|                  |  |      |     |  |      |   |     | 
|----------------- |  | ---- | --- |  | ---- | - | --- | 
|                  |  | 2010 |     |  | 2009 |  
|Food and beverage |  | $    | 551 |  |      | $ | 757 | 
|Hotel             |  |      | 109 |  |      |   | 150 | 
|Other             |  |      | 1   |  |      |   | 2   | 
|                  |  |      |     |  |      |   |     | 
|Total             |  | $    | 661 |  |      | $ | 909 | 
|                  |  |      |     |  |      |   |     | 

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 deferred rental income in the liabilities section of the balance sheet, and conversely, when rents earned and recognized exceed rental payments
received, the difference is recorded as other assets.

Concentrations. The Companys primary
operations are concentrated in the geographic area of Laughlin, Nevada and in the hotel and casino industry. As a result, the Company is at risk of unfavorable changes in general economic conditions including recession, economic slowdown, or higher
fuel or other transportation costs. These factors may reduce disposable income of casino patrons or result in fewer patrons visiting casinos.

The Company owns real estate on the Las Vegas Strip in Las Vegas, Nevada and on the East Coast of the United States. Although the Company is presently not dependent on cash flows from these properties, a
significant decline in real estate values in these markets could have an impact on the Companys ability to readily generate cash flow from the real estate.



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Concentrations of revenue by segment for the quarter ended December 31, 2010 and 2009
follows (amounts to the nearest thousand):



|                                      |  |      |       |  |  |  |    |  
|------------------------------------- |  | ---- | ----- |  |  |  | -- | -
|                                      |  | 2010 |      
|Pioneer                               |  | $    | 3,287 |  |  |  | 64 | %
|                                      |  |      |       |  |  |  |    |  
|Rental properties held for investment |  | $    | 1,836 |  |  |  | 36 | %
|                                      |  |      |       |  |  |  |    |  
|Other and eliminations                |  | $    | 0     |  |  |  | 0  | %
|                                      |  |      |       |  |  |  |    |  
|                                      | 
|                                      |  | 2009 |      
|Pioneer                               |  | $    | 3,959 |  |  |  | 62 | %
|                                      |  |      |       |  |  |  |    |  
|Rental properties held for investment |  | $    | 1,883 |  |  |  | 30 | %
|                                      |  |      |       |  |  |  |    |  
|Other and eliminations                |  | $    | 534   |  |  |  | 8  | %
|                                      |  |      |       |  |  |  |    |  

Recent Accounting Pronouncements. FASB ASC 820-10: In
January 2010, the FASB issued Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This amendment to Topic 820 has improved
disclosures about fair value measurements on the basis of input received from the users of financial statements. This is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about
purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those
fiscal years. Early adoption is permitted. The Company does not expect the provisions of ASU 2010-06 to have a material effect on the financial position, results of operations or cash flows of the Company.



|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 FASB ASC 740-10, 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. | RELATED PARTIES
|-- | ---------------

The Companys Chairman of the Board and CEO has personally guaranteed certain loans for which the Company has accrued a loan
guarantee fee equal to 0.5% of the guaranteed loan balance per calendar quarter. There was no significant change during the current quarter from the $0.1 million balance during the quarter ended December 31, 2010 and, 2009.

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 patent. The patentholder granted the Company an exclusive five-year license that expired in January 2007 in the



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##### Table of Contents

United States with respect to the technology, but which automatically renews for an additional two-year terms 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 December 31, 2010, the Company had expended approximately $0.4 million for commercial development of the technology, and no
additional costs have been expended. There were no expenditures incurred during the three month periods ended December 31, 2010 and 2009. No royalties were paid to the patentholder during the periods presented.

On January 14, 2008, nonqualified stock options were exercised by both the brother and son of the Companys Chairman of the
Board and CEO, which were granted under the Companys 1993 Stock Option Plan. The date of the grants was January 21, 1998 and the exercise price was $1.00 per share. 58,425 shares were exercised by the brother and 54,425 shares were
exercised by the son. Both the brother and son paid the par value of $0.01 for each share of stock exercised, and signed a promissory note for the remaining balance. The son paid his promissory note in full, in July 2010, and the remaining balance
of $57,841, shown as Notes receivable from stockholders, in the Companys December 31, 2010 balance sheet, is from the brother.

On October 13, 2007 the Company sold a 2005 Ford F-150 SuperCrew Short Bed vehicle owned by the Company and transferred under a promissory installment note to the son of the Companys Chairman
of the Board and CEO. The promissory installment note was amended on April 12, 2010 to have a payment period of twelve months with a payoff on or before April 15, 2011. The remaining balance of $19,575 is included in Accounts receivable,
net, in the Companys December 31, 2010 balance sheet.



|4. | PURCHASE AND SALE AGREEMENT 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 Gaithersburg Property), located at 100 Edison Park
Drive in Gaithersburg, Maryland. The purchase price for the Property will be $76.3 million. The Agreement provided the County with a 90-day feasibility period during which the County determined that the Property is suitable for its intended use, and
the County will now proceed to close escrow by notifying the Company of the closing date, which closing date may be no later than April 30, 2014.

Simultaneously with the execution of the Purchase and Sale Agreement, the County entered into a sublease with the existing tenant of SFHI at this location, GXS, Inc., whereby the County, as of
October 1, 2009, leased and occupied the entire Gaithersburg Property until the earlier of (i) completion of its purchase of the Gaithersburg Property or (ii) April 30, 2014. Pursuant to the applicable provisions of the existing
lease with GXS, Inc., SFHI consented to the sublease. In addition, GXS, Inc. agreed to pay SFHI the sum of $2.1 million, $1.7 million of which was paid on October 1, 2009, with the balance of $0.4 million paid on July 1, 2010. Due to the
pending sale of this property, the related results of operations have been reported as discontinued operations.



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Assets Held For Sale. The Company reviewed the guidance provided by
FASB ASC 360-10-45-11, and thus has classified the assets associated with the Gaithersburg property as held for sale. The following table summarizes the components classified as held for sale as of December 31, 2010 and September 30, 2010
(amounts to the nearest thousand):



|                                 |  |          |         |   |          |   |         |  
|-------------------------------- |  | -------- | ------- | - | -------- | - | ------- | -
|                                 |  | 12/31/10 |         |   | 09/30/10 |  
|Current portion of deferred rent |  | $        | 507     |   |          | $ | 469     |  
|                                 |  |          |         |   |          |   |         |  
|Long-term assets held for sale:  |  |          |         |   |          |   |         |  
|Loan Issue Cost                  |  |          | 671     |   |          |   | 723     |  
|Deferred Rent                    |  |          | 1,754   |   |          |   | 1,893   |  
|Property and equipment           |  |          |         |   |          |   |         |  
|Land                             |  |          | 23,000  |   |          |   | 23,000  |  
|Buildings & Improvements         |  |          | 36,600  |   |          |   | 36,600  |  
|Machinery & Equipment            |  |          | 3,000   |   |          |   | 3,000   |  
|Allowance for depreciation       |  |          | (10,854 | ) |          |   | (10,854 | )
|                                 |  |          |         |   |          |   |         |  
|Assets held for sale             |  |          | 54,171  |   |          |   | 54,362  |  
|                                 |  |          |         |   |          |   |         |  
|Total                            |  | $        | 54,678  |   |          | $ | 54,831  |  
|                                 |  |          |         |   |          |   |         |  

Liabilities On Assets Held For Sale. The Company issued approximately $55.4 million of
first mortgage debt with a 7.01% interest rate per annum in connection with its acquisition of a commercial office building located in Gaithersburg, Maryland. The building is under lease through April 2014. The monthly lease payments are applied
against the outstanding indebtedness. Monthly principal and interest payments amortize the debt to approximately $22.3 million by the end of the lease in April 2014. The Company anticipates that the future tenant payments related to the net lease
will be sufficient to fund required payments under the first mortgage notes and Internal Revenue Code of 1986 Section 467 debt. The principle balance as of December 31, 2010 and September 30, 2010 was $36.4 million and $37.3 million,
respectively. The following debt table is related to assets held for sale (amounts to the nearest thousand):



|                                    |  |          |        |  |         |   |        | 
|----------------------------------- |  | -------- | ------ |  | ------- | - | ------ | 
|                                    |  | 12/31/10 |        |  | 9/30/10 |  
|Interest payable                    |  | $        | 146    |  |         | $ | 145    | 
|Current portion of debt             |  |          | 3,675  |  |         |   | 3,573  | 
|                                    |  |          |        |  |         |   |        | 
|Total current liability             |  |          | 3,821  |  |         |   | 3,718  | 
|Long-term debt less current portion |  |          | 32,584 |  |         |   | 33,541 | 
|                                    |  |          |        |  |         |   |        | 
|Total                               |  | $        | 36,405 |  |         | $ | 37,259 | 
|                                    |  |          |        |  |         |   |        | 

The monthly lease payments are applied against the outstanding indebtedness. Monthly principal and interest
payments amortize the debt to approximately $22.3 million by the end of the lease in April 2014. The Company anticipates that the future tenant payments related to the net leases will be sufficient to fund required payments under the first mortgage
notes and Section 467 debt. The following table shows the debt related to the Gaithersburg Property to be paid by year until the property is sold (amounts to the nearest thousand):



|      |  |   |        | 
|----- |  | - | ------ | 
|2011  |  | $ | 2,718  | 
|2012  |  |   | 3,987  | 
|2013  |  |   | 4,448  | 
|2014  |  |   | 25,107 | 
|      |  |   |        | 
|Total |  | $ | 36,260 | 
|      |  |   |        | 



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Discontinued Operations. As a result of the pending sale of the
Gaithersburg Property, the result of operations related to the Gaithersburg Property has been reflected as discontinued operations.

The Gaithersburg Property is a building used for commercial office space. The property is under a net lease through 2014 with a single tenant. Under the lease, the tenant is responsible for substantially
all obligations related to the property. The property was acquired for $62.6 million, plus debt issuance costs of $2.7 million. The Company paid $9.9 million in cash and issued $55.4 million in nonrecourse first mortgage indebtedness. The Company
allocated approximately $23.0 million of the purchase price to land, $3.0 million to machinery and equipment and the balance to building and improvements.

The following table shows the schedule of rent proceeds that will be used to meet future debt obligations related to the Gaithersburg Property until it is sold (amounts to the nearest thousand):



|                      |  |      |       |  |      |   |       |      |  |   |       |  |  |       |       |  |  |   |        | 
|--------------------- |  | ---- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ----- | ----- |  |  | - | ------ | 
|                      |  | 2011 |       |  | 2012 |   |       | 2013 |  |   | 2014  |  |  | Total |      
|Gaithersburg Property |  | $    | 4,602 |  |      | $ | 6,268 |      |  | $ | 6,425 |  |  | $     | 4,257 |  |  | $ | 21,552 | 
|                      |  |      |       |  |      |   |       |      |  |   |       |  |  |       |       |  |  |   |        | 



|5. | OPEN MARKET PURCHASES OF COMPANY COMMON STOCK
|-- | ---------------------------------------------

In December 2008 and June 2010, the Board of Directors of the Company approved the Companys adoption of plans, effective January 5, 2009 and June 30, 2010, for the Company to make periodic
and ongoing open market purchases of up to 5.0% of its own common stock (up to 0.3 million shares of common stock) and 0.2 million shares, respectively, 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). Acting in compliance with 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).

On January 8, 2010, the Company purchased a grouping of shares of common stock of the Company sufficient to cause it to effectively reach the maximum shares allotted to be purchased pursuant to the
Rule and Release referenced above (when combined with prior program purchases since December 2008). As a result, the Company, on January 13, 2010, announced the close of the common stock purchase program with an effective date of
January 8, 2010.

Since the announcement of the June 23, 2010 program, no purchases of its common stock had been
made by the Company, until November 3, 2010, at which time the Company became legally obligated to purchase a grouping of 0.2 million shares of its common stock, causing the Company to reach the maximum shares allotted to be purchased
pursuant to the Rule and Release referenced in the first paragraph above. As a result, on November 3, 2010, the Company announced the close of the common stock purchase program referenced above.



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The table below summarizes the Companys buy back of its common stock for the last
12-month period ended December 31, 2010 (amounts to the nearest thousand except for amounts reported per share):



|                  |  |                                             |     |  |                                         |   |       |                                                                                            |  |  |                                                                                                                        |  |  |  |     | 
|----------------- |  | ------------------------------------------- | --- |  | --------------------------------------- | - | ----- | ------------------------------------------------------------------------------------------ |  |  | ---------------------------------------------------------------------------------------------------------------------- |  |  |  | --- | 
|Period            |  | (a)
TotalNumber ofShares (orUnits)Purchased |     |  | (b) AveragePrice Paid perShare (orUnit) |   |       | (c) Total Number ofShares (or Units)Purchased as Partof
PubliclyAnnounced Plans orPrograms |  |  | (d) Maximum Number(or Approximate DollarValue) of Shares (orUnits)
that May Yet BePurchased Under thePlans or Programs | 
|Beginning balance |  |                                             | 16  |  |                                         | $ | 19.56 |                                                                                            |  |  | 16                                                                                                                     |  |  |  | 301 | 
|January 2010      |  |                                             | 298 |  |                                         |   | 13.50 |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|February 2010     |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|March 2010        |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|April 2010        |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|May 2010          |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|June 2010         |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 2   | 
|July 2010         |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 225 | 
|August 2010       |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 225 | 
|September 2010    |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 225 | 
|October 2010      |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 225 | 
|November 2010     |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 314                                                                                                                    |  |  |  | 225 | 
|December 2010     |  |                                             | 225 |  |                                         |   | 12.50 |                                                                                            |  |  | 539                                                                                                                    |  |  |  | 225 | 
|January 2011      |  |                                             | 0   |  |                                         |   | 0     |                                                                                            |  |  | 583                                                                                                                    |  |  |  | 0   | 
|Ending balance    |  |                                             | 539 |  |                                         | $ | 13.26 |                                                                                            |  |  | 539                                                                                                                    |  |  |  | 0   | 

As of
December 31, 2010, the Company is holding 0.5 million shares in treasury.



|6. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

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 February 11, 2011, the holders of 4.3 million shares of the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of the redemption price; while
0.2 million shares have yet to be surrendered and still have the right to receive their payment due without interest. As of December 31, 2010 and September 30, 2010, exchangeable redeemable preferred stock  unredeemed was $0.8
million and $0.8 million, respectively.

On August 27, 2007, a group of institutional investors filed an action against
the Company in the United States District Court, entitled DE Shaw Laminar Portfolios et al. v. Archon Corporation, District of Nevada, Case No. 2:07-cv-1146. 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 not less than $7.2
million 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.



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The Plaintiffs, thereafter, filed a motion for partial summary judgment, seeking a ruling
from the court that the Company breached its obligations under the Certificate by calculating the redemption price as it did. The Court granted that motion on August 8, 2008, finding the language of the Certificate to be unambiguous and that
the redemption price should have been calculated differently. Subsequent to the Courts ruling on the motion for partial summary judgment, Plaintiffs filed a motion for entry of final judgment, seeking entry of judgment that the redemption
price for the preferred shares should have been $8.69 per share. On December 22, 2010, the District Court granted that motion and entered judgment against the Company in the amount of $9,5 million. The District Court based its decision
primarily on its order from August of 2008. The Company has filed a motion for reconsideration of the District Courts December 22, 2010 order. That motion has been fully briefed and is pending before the District Court. In the event the
motion for reconsideration is denied, the Company intends to appeal the District Courts decision to the Ninth Circuit Court of Appeals.

The Company has initiated proceedings against a third-party law 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 defendant law firm to Federal Court in April, 2009 and is at an early stage of resolution. The defendant law firm has moved to compel arbitration of the dispute. The Magistrate Judge issued an order that the matter
be referred to arbitration and the District Court confirmed that order. The Company intends to pursue its claims against the defendant law firm in arbitration. 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.

Also, two other 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.
The two other lawsuits brought by former holders of the Exchangeable Redeemable Preferred Stock are entitled Rainero v. Archon Corporation, District of Nevada, Case No. 2:07-cv-01553, and Leeward Capital, L.P. v. Archon
Corporation, District of Nevada Case No. 2:08-cv-00007. 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.

In the Leeward Capital matter, both the Leeward Plaintiffs and the
Company have filed motions for summary judgment. The Leeward Plaintiffs made arguments similar to the Laminar Plaintiffs in their motion. On December 22, 2010, the District Court issued an order granting the Leeward
Plaintiffs motion for summary judgment on the same grounds as the Laminar order and denying Archons motion without analysis. Contemporaneous with the filing of the December 22, 2010 order, the District Court entered judgment
in favor of the Leeward Plaintiffs and against the Company in the amount of $0.3 million. The Company has filed a motion for reconsideration of the District Courts December 22, 2010 order. That motion has been fully briefed and is
pending before the District Court. In the event the motion for reconsideration is denied, the Company intends to appeal the District Courts decision to the Ninth Circuit Court of Appeals.

The Rainero action is purported to be brought on behalf of David Rainero individually as well as a class of all former preferred
shareholders, although a class has not yet been certified by the District Court. Plaintiff Rainero filed a motion for class certification in December of 2010 which the Company intends to oppose. The Companys opposition brief to the motion for
class certification is due February 15, 2011. Mr. Rainero was deposed in early January of 2011.



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The Company plans to appeal the District Courts decisions to the Ninth Circuit Court
of Appeals. The Company believes that it has valid bases in law and fact to overturn or appeal these verdicts. As a result, the Company believes that affirmation of the judgments is possible but not probable, and, accordingly, that the amount of any
loss cannot be reasonably estimated at this time. Because the Company believes that this potential loss is not probable or estimable, it has not recorded any reserves or contingencies related to this legal matter. In the event that the
Companys assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it will be required to record a liability for an adverse outcome, which may include post-judgment interest.



|7. | STOCK-BASED COMPENSATION
|-- | ------------------------

The Companys Stock Option Plan provides for the grant of up to approximately 1.3 million (net of options previously exercised) shares of its common stock to key employees. Currently there are
approximately 0.5 million stock options available for grant. The Stock Option 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. No options were granted during the quarter ended December 31, 2010 and 2009. As of December 31, 2010 and 2009, there were approximately 0.7 million options outstanding and exercisable under the Stock Option Plan. During the
quarter ended December 31, 2010 and 2009, no options were exercised or granted.

The outstanding options have expiration
dates through 2018 and have an average remaining life of approximately 6.0 years. The average exercise price of the outstanding options at December 31, 2010 was approximately $28.09.

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 December 31, 2010, no options had been granted under any of the Subsidiary Plans.

The following table summarizes stock option activity during the first fiscal quarter 2011 under all plans (amounts to the nearest
thousand except for per share amounts):



|                                           |  |                |     |  |                                        |   |       |                                          |  |  |                         |  |  |   |         |  
|------------------------------------------ |  | -------------- | --- |  | -------------------------------------- | - | ----- | ---------------------------------------- |  |  | ----------------------- |  |  | - | ------- | -
|                                           |  | NumberofShares |     |  | Weighted-AverageExercisePricePer Share |   |       | Weighted-AverageRemainingContractualTerm |  |  | AggregateIntrinsicValue | 
|Options outstanding at September 30, 2010: |  |                | 742 |  |                                        | $ | 28.09 |                                          |  |  | 6.3 yrs                 |  |  | $ | (10,447 | )
|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 December 31, 2010   |  |                | 742 |  |                                        | $ | 28.09 |                                          |  |  | 6.0 yrs                 |  |  | $ | (11,857 | )
|Options exercisable at December 31, 2010   |  |                | 742 |  |                                        | $ | 28.09 |                                          |  |  | 6.0 yrs                 |  |  | $ | (11,857 | )

As of December 31,
2010, there was no unrecognized compensation cost related to unvested stock options.



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|8. | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|-- | ------------------------------------------------

Supplemental disclosure of cash flow information for the quarter ended December 31, 2010 and 2009 is presented below (amounts to the nearest thousand):



|                                                                   |  |          |       |  |          |   |       |  
|------------------------------------------------------------------ |  | -------- | ----- |  | -------- | - | ----- | -
|                                                                   |  | 12/31/10 |       |  | 12/31/09 |  
|Operating activities:                                              |  |          |       | 
|Cash paid during the period for interest  continuing operations   |  | $        | 1,044 |  |          | $ | 1,097 |  
|                                                                   |  |          |       |  |          |   |       |  
|Cash paid during the period for interest  discontinued operations |  | $        | 653   |  |          | $ | 710   |  
|                                                                   |  |          |       |  |          |   |       |  
|Noncash investing and financing activities:                       |  |          |       |  |          |   |       |  
|Unrealized gains (losses) on securities                            |  | $        | 364   |  |          | $ | (101  | )
|                                                                   |  |          |       |  |          |   |       |  



|9. | SEGMENT INFORMATION
|-- | -------------------

The Companys operations are in the hotel/casino industry and the rental of commercial real estate properties. The Companys
hotel/casino operations are conducted at the Pioneer in Laughlin, Nevada. As discussed above, the Company owns rental properties held for investment in the Dorchester section of Boston, Massachusetts and Las Vegas Strip, Nevada. Assets Held
for Sale below includes a rental property in Gaithersburg, Maryland. Other and Eliminations below includes financial information for the Companys corporate operations, adjusted to reflect eliminations upon consolidation.



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Set forth below is the unaudited financial information for the segments, which the Company
operates, as of and for the quarter ended December 31, 2010 and 2009 (amounts to nearest thousand).



|                                    |  |      |         |   |      |   |         |  
|----------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                    |  | 2010 |         |   | 2009 |  
|Pioneer Hotel                       |  |      |         |   |      |   |         |  
|Net operating revenues              |  | $    | 3,287   |   |      | $ | 3,959   |  
|Operating loss                      |  |      | (496    | ) |      |   | (872    | )
|Depreciation                        |  |      | 134     |   |      |   | 137     |  
|Interest expense                    |  |      | 0       |   |      |   | 0       |  
|Interest and other income           |  |      | 0       |   |      |   | 0       |  
|Loss before income taxes            |  |      | (496    | ) |      |   | (872    | )
|Capital expenditures / transfers    |  |      | 54      |   |      |   | 31      |  
|Identifiable assets(1)              |  |      | 11,158  |   |      |   | 11,896  |  
|                                    |  |     
|Rental Properties:                  |  |      |         |   |      |   |         |  
|Net operating revenues              |  | $    | 1,836   |   |      | $ | 1,883   |  
|Operating income                    |  |      | 1,173   |   |      |   | 1,250   |  
|Depreciation                        |  |      | 421     |   |      |   | 421     |  
|Interest expense                    |  |      | 1,026   |   |      |   | 1,102   |  
|Interest and other income           |  |      | 0       |   |      |   | 4       |  
|Income before income taxes          |  |      | 148     |   |      |   | 152     |  
|Capital expenditures / transfers    |  |      | 0       |   |      |   | 0       |  
|Identifiable assets(1)              |  |      | 87,890  |   |      |   | 90,244  |  
|                                    |  |     
|Assets Held for Sale:               |  |      |         |   |      |   |         |  
|Net operating revenues              |  | $    | 0       |   |      | $ | 0       |  
|Operating income                    |  |      | 0       |   |      |   | 0       |  
|Depreciation                        |  |      | 0       |   |      |   | 0       |  
|Interest expense                    |  |      | 0       |   |      |   | 0       |  
|Interest and other income           |  |      | 0       |   |      |   | 0       |  
|Discontinued operations, net of tax |  |      | 477     |   |      |   | 893     |  
|Capital expenditures / transfers    |  |      | 0       |   |      |   | 0       |  
|Identifiable assets(1)              |  |      | 54,171  |   |      |   | 55, 242 |  
|                                    |  |     
|Other and Eliminations:             |  |      |         |   |      |   |         |  
|Net operating revenues              |  | $    | 0       |   |      | $ | 534     |  
|Operating income                    |  |      | (774    | ) |      |   | (354    | )
|Depreciation                        |  |      | 23      |   |      |   | 36      |  
|Interest expense                    |  |      | 0       |   |      |   | 2       |  
|Interest and other income           |  |      | 293     |   |      |   | 302     |  
|Loss before income taxes            |  |      | (382    | ) |      |   | (119    | )
|Capital expenditures / transfers    |  |      | 3       |   |      |   | 0       |  
|Identifiable assets(1)              |  |      | 30,950  |   |      |   | 41,718  |  
|                                    |  |     
|Total:                              |  |      |         |   |      |   |         |  
|Net operating revenues              |  | $    | 5,123   |   |      | $ | 6,376   |  
|Operating income (loss)             |  |      | (97     | ) |      |   | 24      |  
|Depreciation                        |  |      | 578     |   |      |   | 594     |  
|Interest expense                    |  |      | 1,026   |   |      |   | 1,104   |  
|Interest and other income           |  |      | 293     |   |      |   | 306     |  
|Income before income taxes          |  |      | (730    | ) |      |   | (839    | )
|Discontinued operations, net of tax |  |      | 477     |   |      |   | 893     |  
|Capital expenditures / transfers    |  |      | 57      |   |      |   | 31      |  
|Identifiable assets(1)              |  |      | 184,169 |   |      |   | 199,100 |  



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



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|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, and is qualified in its entirety by, the financial statements and notes thereto and other information 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, 2010. These historical financial statements may not be indicative of the Companys future performance.

General

Overview of
Business Operations and Trends

Historically, the Company, has owned, managed and operated hotel/casino properties
through a number of acquisitions or developments, and it has divested itself of certain of these properties. Presently, the Company operates the Pioneer in Laughlin, Nevada.

The Pioneer has experienced 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 increase in the number
of casino properties on Native American lands in such nearby locations as California and Arizona within the last decade has caused revenue declines. In response, the Company focused on market definition and development in the local Laughlin area to
maintain profitability. Unexpectedly difficult economic conditions impacting customers, including relatively high fuel costs, has significantly reduced disposable income, and limited customer travel and gaming activity. Management believes Laughlin
is a mature market with marginal growth forecasted for the next few years based on its current development 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 materially improve.

The Company also owns rental
properties on the East Coast and on the Las Vegas Strip, but revenues from these rental properties are used to meet their related mortgages and thus do not contribute significant net cash flow to the Company.

Assets Held for Sale

During fiscal year 2001, the Company acquired certain properties as part of an IRS Section 1031 exchange. The property held for sale is located in Gaithersburg, Maryland (the Gaithersburg
Property). The Company acquired the Gaithersburg Property and nonrecourse debt associated with the Gaithersburg Property which is subject to a long-term lease. A tenant remits payment to the bank according to the terms of the lease and note.
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 $5.6 million annually and will remain at this level until approximately 2014 or until the
asset is sold, otherwise disposed of or becomes impaired. The buildings on the Gaithersburg Property are no longer being depreciated subsequent to the classification being changed from a rental property held for investment to assets held for sale.
Interest expense is also recorded based on the outstanding nonrecourse debt remaining to be paid and based on unamortized loan issue costs and remaining debt amortization timetables. At any time during the term of the lease and debt amortization,
the fair market value of the Gaithersburg Property may be different from its book values. Interest is presently being expensed at approximately $2.5 million annually and will decrease in relation to debt principal reductions through 2014 or until
the asset is sold, otherwise disposed of or becomes impaired.



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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 comprising the Gaithersburg Property, located at 100 Edison Park Drive in Gaithersburg, Maryland. The purchase price for the Gaithersburg Property will be $76.3 million. The Agreement
provided the County with a 90-day feasibility period during which the County determined that the Gaithersburg Property is suitable for its intended use, and the County will now proceed to close escrow by notifying the Company of the closing date,
which date may be no later than April 30, 2014.

Simultaneous with the execution of the Purchase and Sale Agreement, the
County entered into a sublease with the existing tenant of SFHI at this location, GXS, Inc., whereby the County, as of October 1, 2009, leased and occupied the entire Gaithersburg Property until the earlier of (i) completion of its
purchase of the Gaithersburg Property or (ii) April 30, 2014. Pursuant to the applicable provisions of the existing lease with GXS, Inc., SFHI consented to the sublease. In addition, GXS, Inc. agreed to pay SFHI the sum of $2.1 million,
$1.7 million of which was paid on October 1, 2009, with the balance of $0.4 million paid on July 1, 2010. Due to the pending sale of the Gaithersburg Property, the related results of operations have been reported as discontinued
operations. See Notes to Consolidated Financial Statements, Note 4, Purchase and Sale Agreement of Gaithersburg Property

Rental Properties

During fiscal year 2001, the Company acquired certain rental property as part of an IRS Section 1031 exchange. The rental property is located in the Dorchester section of Boston, Massachusetts (the
Dorchester Property). The Company acquired the Dorchester Property with improvements and nonrecourse debt associated with the Dorchester Property which is subject to a long-term lease. A tenant remits payments to a bank according to the
terms of the lease and note. 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 $6.7 million annually and will remain at this level until
approximately 2020 or until the asset is sold, otherwise disposed of or becomes impaired. The buildings on the Dorchester Property are being depreciated on a straight-line basis and the depreciation expense is approximately $1.7 million annually and
will remain at this level until approximately 2041 or until the asset is sold, otherwise disposed of or becomes impaired. Interest expense is 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 term of the lease and debt amortization, the fair market values of the Dorchester Property may be different from its book value. Interest is presently being expensed at
approximately $3.8 million annually on a straight-line basis through 2020 or until the asset is sold, otherwise disposed of or becomes impaired.

The Company owns, through its wholly owned subsidiary, Sahara Las Vegas Corp. (SLVC), an approximately 27-acre parcel of land (the Strip Property) located on the east side of Las
Vegas Boulevard South, to the south of Sahara Avenue. The Company presently leases portions of the Strip Property to two different lessees for an aggregate amount of $9,500 per month. The leases may be terminated in the event the property is sold or
developed by the Company. In addition, the Company leased the balance of the property on a short-term basis for $25,000 per month for the four month period commencing December 1, 2010 and ending March 31, 2011.



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Critical Accounting Policies and Estimates

The preparation of these condensed consolidated financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and judgments 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 information that is currently available to the Company 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 judgments or conditions.

Management believes the following critical accounting policies, among others, affects 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.

Property and Equipment.At December 31, 2010, the Company had net property and equipment of $96.7 million, representing 52.6% of total assets. Management depreciates property and equipment on a straight-line basis over their estimated useful lives. The
estimated useful lives are based on the nature of the assets as well as current operating strategy and legal considerations such as contractual life. Future events, such as property improvements, technological obsolescence, new competition, or new
regulations, could result in a change in the manner in which the Company uses certain assets requiring a change in the estimated useful lives of such assets.

For assets to be held and used, fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company first groups its assets with other
assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the asset group). Secondly, management estimates the undiscounted future cash flows
that are directly associated with and expected to arise from the use of and eventual disposition of such asset group. Management then estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group.
If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value
typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.

For assets to be held for sale, the fixed assets (the property held for sale) are measured at the lower of their carrying amount or fair value less cost to sell. Losses are recognized for any
initial or subsequent write-down to fair value less cost to sell, while gains are recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized. Any gains or losses not
previously recognized that result from the sale of the disposal group shall be recognized at the date of sale. Fixed assets are not depreciated while classified as held for sale.

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



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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.

Revenue Recognition. Casino revenue is recorded as the aggregate
of gaming wins and 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 FASB ASC 605-50 Revenue
Recognition, Customer Payments and Incentives. Accordingly, cash incentives to customers for gambling, and the cash value of points and coupons earned by the slot club members totaling approximately $0.1 million and $0.1 million for the quarters
ended December 31, 2010 and 2009, respectively, 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. Hotel, food and beverage revenues are recognized as services are performed.

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 deferred rental income in the liabilities section of the balance sheet, and conversely, when rents earned and recognized exceed rental payments received, the difference is
recorded as other assets.

Recent Accounting Pronouncements

See related disclosure at Item 1  Financial Statements  Notes to Unaudited Consolidated Financial Statements 
Note 1 Basis of Presentation and General Information  Recent Accounting Pronouncements.

Results of Operations  Three
Months Ended December 31, 2010 and 2009

General

During the quarter ended December 31, 2010, the Companys net operating revenues decreased $1.3 million and operating expenses
decreased $1.2 million, resulting in a decrease in operating income of $0.1 million from the quarter ended December 31, 2009. The decline in operating results was primarily due to unfavorable changes in general economic conditions including
recession and economic slowdown. Net operating revenues at the rental properties decreased $0.1 million from the quarter ended December 31, 2009. The decline in the revenue of the rental properties is substantially due to the decrease in rental
revenue associated with the Strip Property.

Consolidated

Net Operating Revenues. Consolidated net operating revenues for the quarter ended December 31, 2010 were
$5.1 million, a $1.3 million, or 20%, decrease from $6.4 million for the quarter ended December 31, 2009. Income from the rental properties in the quarter ended December 31, 2010 was $1.8 million, a $0.1 million, or 5%, decrease
from $1.9 million for the quarter ended December 31, 2009. Revenues at the Pioneer of $3.3 million for the quarter ended December 31, 2010, decreased $0.7 million or 18%, from $4.0 million for the quarter ended December 31, 2009.



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Operating Expenses. Total operating expenses decreased $1.2 million, or 19%,
to $5.2 million for the quarter ended December 31, 2010 from $6.4 million for the quarter ended December 31, 2009. Total operating expenses as a percentage of net revenue increased to 102% for the 2010 quarter from 100% for the 2009
quarter. Operating expenses at the Pioneer of $3.8 million for the quarter ended December 31, 2010 decreased $1.0 million or 21%, from $4.8 million for the quarter ended December 31, 2009.

Operating Income. Consolidated operating loss for the quarter ended December 31, 2010 was $0.1 million, a
decrease of $0.1 million from $0.0 million for the quarter ended December 31, 2009. This decrease was due to the aforementioned changes in net operating revenues and operating expenses. Operating income attributable to the rental
properties of $1.2 million for quarter ended December 31, 2010 decreased $0.1 million or 8%, from $1.3 million for the quarter ended December 31, 2009. Operating loss at the Pioneer of $0.5 million for the quarter ended December 31,
2010 decreased $0.4 million or 44%, from $0.9 million for the quarter ended December 31, 2009.

Interest
Expense. Consolidated interest expense for the quarter ended December 31, 2010 was $1.0 million, a $0.1 million, or 9%, decrease from $1.1 million for the quarter ended December 31, 2009.

Interest and Other Income. Consolidated interest and other income for the quarter ended December 31, 2010, was $0.3
million, unchanged from the quarter ended December 31, 2009.

Gain (loss) on Sale of Marketable Securities.
The gain on the sale of marketable securities for the quarter ended December 31, 2010 was $0.1 million, a $0.2 million, or 200%, increase from the loss of $0.1 million for the quarter ended December 31, 2009.

Federal Income Tax. Federal income tax benefit for the quarter ended December 31, 2010 was $0.4 million, a less than
$0.1 million increase, or 33%, from the quarter ended December 31, 2009, based on federal statutory rates.

Discontinued Operations, Net of Tax. The gain on discontinued operations associated with the property held for sale during
the quarter ended December 31, 2010 was $0.5 million, a decrease of $0.4 million from $0.9 million for the quarter ended December 31, 2009.

Pioneer

Net Operating Revenues. Net operating
revenues at the Pioneer were approximately $3.3 million for the quarter ended December 31, 2010, a decrease of $0.7 million, or 18%, compared to $4.0 million in the quarter ended December 31, 2009.

Casino revenues for the quarter ended December 31, 2010 were $2.7 million, a decrease of $0.5 million, or 16%, compared to
$3.2 million in the quarter ended December 31, 2009. Slot and video poker revenues were $2.5 million, a decrease of $0.4 million, or 14%, compared to $2.9 million. Other gaming revenues, including table games, were $0.2 million, a
decrease of $0.1 million, or 33%, compared to $0.3 million. Casino promotional allowances were $0.7 million compared to $0.9 million, a decrease of approximately $0.2 million, or 22%.

Hotel revenues for the quarter ended December 31, 2010 were $0.3 million, relatively unchanged from the quarter ended
December 31, 2009. Hotel occupancy was 25% compared to 29%, a decrease of 4%, but was offset by an 8% increase in the average room rate. Competitive pressures continue in the Laughlin market. Food and beverage revenues decreased $0.3 million,
or 25%, to $0.9 million from $1.2 million. Other revenues were $0.1 million, unchanged from the quarter ended December 31, 2009.

Operating Expenses. Operating expenses were $3.8 million for the quarter ended December 31, 2010, a decrease of $1.0 million, or 21%, from $4.8 million in the quarter ended
December 31, 2009. Operating expenses as a percentage of net revenue decreased to 115% in the current quarter from 120% in the quarter ended December 31, 2009.



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Casino expenses were $1.6 million, a decrease of $0.6 million, or 27%, from
$2.2 million, primarily due to the decrease in casino revenues. Casino expenses as a percentage of casino revenues decreased to 59% from 69%.

Hotel expenses were $0.1 million, unchanged from the quarter ended December 31, 2009. Food and beverage expenses were $0.5 million, a decrease of $0.2 million or 29%, from approximately $0.7 million,
due to a decrease in the number of food and beverage covers sold. Food and beverage expenses as a percentage of food and beverage revenues decreased to 56% from 58%. Other expenses were $0.1 million, unchanged from the quarter ended
December 31, 2009. Other expenses as a percentage of other revenues was also unchanged at 100%.

Selling, general and
administrative expenses were $0.7 million, a decrease of $0.1 million, or 13%, compared to $0.8 million. Selling, general and administrative expenses as a percentage of revenues increased to 21% from 20%. 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 were $0.7 million, unchanged from the quarter ended December 31, 2009.
Utilities and property expenses as a percentage of operating revenues increased to 21% from 18%. Depreciation and amortization expenses were $0.1 million, unchanged from the quarter ended December 31, 2009. Depreciation and amortization as a
percentage of operating revenues remained at 3%.

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

Contractual Obligations and Commitments

The following tables summarize the Companys fiscal year contractual obligations and commitments and cash interest payments, respectively, as of December 31, 2010 (for the nine-month period
ending September 30, 2011 and for the fiscal years ending September 30, 2012, 2013, 2014, 2015, 2016 and thereafter) (amounts to nearest thousand):



|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|--------------------------- |  | -------------------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ------ |  | ------------------ | - | ----- | ----- |  | - | ------ |  |  | - | ------ | 
|                            |  | Payments Due by Period           |      
|                            |  | 2011                             |       |  | 2012 |   |       | 2013 |  |   | 2014  |  |  | 2015 |        |  | 2016 andThereafter |   |       | Total | 
|Continuing Operations       |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Nonrecourse debt:           |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Dorchester                  |  | $                                | 0     |  |      | $ | 0     |      |  | $ | 0     |  |  | $    | 0      |  |                    | $ | 0     |       |  | $ | 31,199 |  |  | $ | 31,199 | 
|                            |  |                                  |       |  |      |   |      
|Long-term debt:             |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Line of credit              |  |                                  | 6,813 |  |      |   | 0     |      |  |   | 0     |  |  |      | 0      |  |                    |   | 0     |       |  |   | 0      |  |  |   | 6,813  | 
|Stock margin loan           |  |                                  | 0     |  |      |   | 0     |      |  |   | 0     |  |  |      | 3,000  |  |                    |   | 0     |       |  |   | 0      |  |  |   | 3,000  | 
|                            |  |                                  |       |  |      |   |      
|Operating leases:           |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Ground lease                |  |                                  | 294   |  |      |   | 392   |      |  |   | 392   |  |  |      | 392    |  |                    |   | 392   |       |  |   | 24,698 |  |  |   | 26,560 | 
|Corporate warehouse         |  |                                  | 18    |  |      |   | 25    |      |  |   | 19    |  |  |      | 0      |  |                    |   | 0     |       |  |   | 0      |  |  |   | 62     | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Total Continuing Operations |  | $                                | 7,125 |  |      | $ | 417   |      |  | $ | 411   |  |  | $    | 3,392  |  |                    | $ | 392   |       |  | $ | 55,897 |  |  | $ | 67,634 | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Discontinued Operations     |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Gaithersburg                |  | $                                | 2,718 |  |      | $ | 3,987 |      |  | $ | 4,448 |  |  | $    | 25,107 |  |                    | $ | 0     |       |  | $ | 0      |  |  | $ | 36,260 | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|                            | 
|                            |  | Cash Interest Payments by Period |      
|                            |  | 2011                             |       |  | 2012 |   |       | 2013 |  |   | 2014  |  |  | 2015 |        |  | 2016 andThereafter |   |       | Total | 
|Continuing Operations       |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Nonrecourse debt:           |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Dorchester                  |  | $                                | 2,850 |  |      | $ | 3,800 |      |  | $ | 3,800 |  |  | $    | 3,800  |  |                    | $ | 3,800 |       |  | $ | 21,850 |  |  | $ | 39,900 | 
|                            |  |                                  |       |  |      |   |      
|Long-term debt:             |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Line of credit              |  |                                  | 307   |  |      |   | 0     |      |  |   | 0     |  |  |      | 0      |  |                    |   | 0     |       |  |   | 0      |  |  |   | 307    | 
|Stock margin loan           |  |                                  | 68    |  |      |   | 68    |      |  |   | 68    |  |  |      | 68     |  |                    |   | 0     |       |  |   | 0      |  |  |   | 272    | 
|                            |  |                                  |       |  |      |   |      
|Operating leases:           |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Ground lease                |  |                                  | 0     |  |      |   | 0     |      |  |   | 0     |  |  |      | 0      |  |                    |   | 0     |       |  |   | 0      |  |  |   | 0      | 
|Corporate warehouse         |  |                                  | 0     |  |      |   | 0     |      |  |   | 0     |  |  |      | 0      |  |                    |   | 0     |       |  |   | 0      |  |  |   | 0      | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Total Continuing Operations |  | $                                | 3,225 |  |      | $ | 3,868 |      |  | $ | 3,868 |  |  | $    | 3,868  |  |                    | $ | 3,800 |       |  | $ | 21,850 |  |  | $ | 40,479 | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Discontinued Operations     |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 
|Gaithersburg                |  | $                                | 1,871 |  |      | $ | 2,263 |      |  | $ | 1,958 |  |  | $    | 1,122  |  |                    | $ | 0     |       |  | $ | 0      |  |  | $ | 7,214  | 
|                            |  |                                  |       |  |      |   |       |      |  |   |       |  |  |      |        |  |                    |   |       |       |  |   |        |  |  |   |        | 



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

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 factors 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 in the Dorchester section of Boston, 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 and Capital Resources

Line of Credit. The Companys wholly owned subsidiary, SLVC, secured and maintains a $15.0 million line of
credit loan granted by a Nevada bank. The loan and promissory note are secured by deed of trust on SLVCs approximate 27 acre parcel of land on Las Vegas Boulevard South (the Strip Property). The line of credit loan is revolving and
is subject to additional lending requirements. The line of credit loan balance in the amount of $6.8 million at the end of the quarter ended December 31, 2010 is reported as a current liability, and any outstanding balance under the line of
credit will become due in February 2011. The initial advance under the line of credit loan was used to pay in full the previous line of credit loan secured by the Strip Property. The SLVC line of credit loan is guaranteed by SLVC and the Company, as
well as, personally guaranteed by Paul W. Lowden, President of SLVC, and by Suzanne Lowden, Secretary/Treasurer of SLVC.

Stock Margin Loan Obligation. The Companys wholly owned subsidiary, SFHI, secured and maintains a $3.0 million
stock margin loan granted by Merrill Lynch. The stock margin loan is secured by marketable securities held by Merrill Lynch. The stock margin loan balance in the amount of $3.0 million at the end of the three months ended December 31, 2010 is
reported as a current liability and included in the line of credit balance.



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As of December 31, 2010, the Company held cash and cash equivalents of $9.6 million
compared to $9.6 million at September 30, 2010. The Company had $18.7 million in investment in marketable securities at December 31, 2010 compared to $17.8 million at September 30, 2010. 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.

Cash Flows from Operating Activities. The Companys cash used for operating activities was
$1.5 million for the quarter ended December 31, 2010, as compared to $1.6 million for the quarter ended December 31, 2009.

Cash Flows from Investing Activities. Cash used for investing activities was approximately $0.6 million for the quarter ended December 31, 2010, as compared to $1.2 million for
the quarter ended December 31, 2009. In the current year period, the Company used $0.5 million for the purchase of marketable securities net of sales. In the prior year period, the Company used $1.2 million for the purchase of marketable
securities net of purchases.

Cash Used in Financing Activities. Cash used in financing activities was
approximately $2.0 million for the quarter ended December 31, 2010, as compared to $0.0 for the quarter ended December 31, 2009. In the current year period, the Company received $5.8 million as proceeds from lines of credit, used $1.0
million to pay down the line of credit, and used $2.8 for the purchase of treasury stock. In the prior year period the cash used was relatively insignificant.

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 rental property and property held for sale 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 leased properties.

The Company owns, through its wholly owned subsidiary, Sahara Las Vegas Corp. (SLVC), an approximately 27-acre parcel of land
(the Property) located on the east side of Las Vegas Boulevard South, just south of Sahara Avenue. The Company presently leases portions of the Property to two different lessees for an aggregate amount of $9,500 per month. The leases may
be terminated in the event the property is sold or developed by the Company. In addition, the Company-short-term leased the balance of the property for $25,000 per month for the four month period commencing December 1, 2010 and ending
March 31, 2011.

Pioneer

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

Payments of rent were approximately $0.1 million for each of the quarter ended December 31, 2010 and 2009. Capital expenditures to maintain the facility in fiscal 2011 are expected to be less than
$1.0 million.



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Assets Held for Sale

The Gaithersburg Property in Gaithersburg, Maryland is located on 51.57 acres and includes one building with approximately 342,000 square feet of commercial office space. The Gaithersburg Property was
acquired for $62.6 million, plus debt issuance costs of $2.7 million. The Company paid $9.9 million in cash and issued $55.4 million in nonrecourse first mortgage indebtedness. The Gaithersburg Property is under a net lease through 2014 with a
single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to the Gaithersburg Property. The Gaithersburg Property is under contract to be sold. See Note 4, Purchase
and Sale Agreement of Gaithersburg Property

Rental Properties

The Company acquired commercial rental property in the Dorchester section of Boston, Massachusetts in March 2001. The Dorchester Property
is located on 12 acres and includes several buildings with approximately 425,000 square feet of commercial office space. The Dorchester Property was acquired for approximately $82.4 million plus $0.5 million in debt issuance costs. The Company paid
$5.6 million in cash and assumed $77.3 million in nonrecourse debt associated with the Dorchester Property. The Dorchester Property is under a net lease through 2020 with a single tenant with an investment grade credit rating. Under the lease, the
tenant is responsible for substantially all obligations related to the Dorchester Property.

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 February 11, 2011, the holders of 4.3 million shares of the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of
the redemption price; while 0.2 million shares have yet to be surrendered and still have the right to receive their payment due without interest. As of December 31, 2010 and September 30, 2010, exchangeable redeemable preferred stock
 unredeemed was $0.8 million and $0.8 million, respectively.

On August 27, 2007, a group of institutional
investors filed an action against the Company in the United States District Court, entitled DE Shaw Laminar Portfolios et al. v. Archon Corporation, District of Nevada, Case No. 2:07-cv-1146. 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 not less than $7.2 million 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, seeking a ruling from the court that the Company breached its obligations under the Certificate by calculating the redemption price as it did. The Court granted that motion on August 8, 2008, finding
the language of the Certificate to be unambiguous and that the redemption price should have been calculated differently. Subsequent to the



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Courts ruling on the motion for partial summary judgment, Plaintiffs filed a motion for entry of final judgment, seeking entry of judgment that the redemption price for the preferred shares
should have been $8.69 per share. On December 22, 2010, the District Court granted that motion and entered judgment against the Company in the amount of $9.5 million. The District Court based its decision primarily on its order from August of
2008. The Company has filed a motion for reconsideration of the District Courts December 22, 2010 order. That motion has been fully briefed and is pending before the District Court. In the event the motion for reconsideration is denied,
the Company intends to appeal the District Courts decision to the Ninth Circuit Court of Appeals.

The Company has
initiated proceedings against a third-party law 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 defendant law firm to
Federal Court in April, 2009 and is at an early stage of resolution. The defendant law firm has moved to compel arbitration of the dispute. The Magistrate Judge issued an order that the matter be referred to arbitration and the District Court
confirmed that order. The Company intends to pursue its claims against the defendant law firm in arbitration. 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.

Also, two other
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. The two other lawsuits brought by former holders of the
Exchangeable Redeemable Preferred Stock are entitled Rainero v. Archon Corporation, District of Nevada, Case No. 2:07-cv-01553, and Leeward Capital, L.P. v. Archon Corporation, District of Nevada Case No. 2:08-cv-00007. 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.

In the Leeward Capital matter, both the Leeward Plaintiffs and the Company have filed motions for summary judgment. The
Leeward Plaintiffs made arguments similar to the Laminar Plaintiffs in their motion. On December 22, 2010, the District Court issued an order granting the Leeward Plaintiffs motion for summary judgment on the same grounds as
the Laminar order and denying Archons motion without analysis. Contemporaneous with the filing of the December 22, 2010 order, the District Court entered judgment in favor of the Leeward Plaintiffs and against the Company in
the amount of $0.3 million. The Company has filed a motion for reconsideration of the District Courts December 22, 2010 order. That motion has been fully briefed and is pending before the District Court. In the event the motion for
reconsideration is denied, the Company intends to appeal the District Courts decision to the Ninth Circuit Court of Appeals.

The Rainero action is purported to be brought on behalf of David Rainero individually as well as a class of all former preferred shareholders, although a class has not yet been certified by the
District Court. Plaintiff Rainero filed a motion for class certification in December of 2010 which the Company intends to oppose. The Companys opposition brief to the motion for class certification is due February 15, 2011.
Mr. Rainero was deposed in early January of 2011.

The Company plans to appeal the District Courts decisions to the
Ninth Circuit Court of Appeals. The Company believes that it has valid bases in law and fact to overturn or appeal these verdicts. As a result, the Company believes that the likelihood that affirmation of the judgments is possible but not probable,
and, accordingly, that the amount of any loss cannot be reasonably estimated at this time. Because the Company believes that this potential loss is not probable or estimable, it has not recorded any reserves or contingencies related to this legal
matter. In the event that the Companys assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it will be required to record a liability for an adverse outcome, which may include post-judgment
interest.

Effects of Inflation

The Company has been generally successful in recovering costs associated with inflation through price adjustments in its hotel room rates. Expenses of operating the Companys rental properties are
generally borne by the tenants. Primarily due to competitive market and other economic pressures any such future increases in costs associated with casino operations and maintenance of properties may not be completely recovered by the Company.



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Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

Certain statements in this Quarterly Report on Form 10-Q which are not historical facts may be considered forward-looking statements,
including, without limitation, 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 are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate and that may 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, without limitation, 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 December 31, 2010 of approximately $9.8 million, which bears interest at a variable rate (approximately 6.25% at December 31, 2010). Therefore, the Company maintains certain market rate risk related to
this debt. A change in the interest rates of 1% per annum 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.



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##### Table of Contents

|Item 4. | Controls and Procedures
|------- | -----------------------

Disclosure Controls and Procedures

Our management, with the participation of the Companys Principal Executive Officer and Principal Accounting Officer, has evaluated the effectiveness of the Companys disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period covered by this report. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and management is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Companys Principal Executive Officer and Principal Accounting Officer have concluded that as of December 31, 2010, the
Companys disclosure controls and procedures were not effective, at the reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that
it files or submits under the Exchange Act and in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Companys management,
including the Principal Executive Officer and Principal Accounting Officer, as appropriate to allow timely discussions regarding required disclosure; due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure that
our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition,
results of operations, changes in stockholders equity and cash flows for the periods presented.

Management Report on Internal
Control Over Financial Reporting

The Companys management is responsible for establishing and maintaining
adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over financial reporting includes those policies
and procedures that:



| | 1. | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a
material effect on our financial statements.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

All internal control systems, no matter how well designed, have
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and reporting. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



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A material weakness is a control deficiency (within the meaning of Public Company Accounting
Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented
or detected on a timely basis.

Under the supervision and with the participation of our management, including our Principal
Executive Officer and Principal Accounting Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of the period covered by this report based on the framework in Internal Control 
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the results of managements assessment and evaluation, our Principal Executive Officer and Principal Accounting
Officer concluded that our internal control over financial reporting was not effective due to the material weaknesses described below.

Material Weaknesses



| | 1. | The Companys management assessed the effectiveness of the Companys internal control over financial reporting as of December 31, 2010. In making this
assessment, the Companys management used the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control  Integrated Framework. Based on this assessment, management
concluded that, as of December 31, 2010, the Companys internal control over financial reporting was not effective based on this framework.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management evaluated the impact of ineffective control over financial reporting and concluded that the control deficiency represented a material weakness.



| | 2. | In connection with the audit of our consolidated financial statements for the year ended September 30, 2010, our independent registered accounting firm, DeJoya
Griffith & Company, LLC, reported to the audit committee of the Companys Board of Directors that they observed inadequate review and approval of certain aspects of the accounting process that they considered to be a material weakness
in internal control.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

After a review of the Companys current review and approval of certain aspects of the
accounting process, management concluded that the inadequate review and approval process represented a material weakness.

Remediation of Material Weaknesses

To remediate the material weaknesses identified above, we have done the following subsequent to September 30, 2010, which correspond to the two material weaknesses identified above.



| | 1. | In connection with the ineffective assessment of the Companys internal control over financial reporting, management plans to hire an additional independent public
accounting firm to perform our internal audit and assist with SEC compliance for purposes of all future reporting.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management believes this remediation will remediate the corresponding material weakness described in Item 1, immediately above.



| | 2. | In connection with the reported inadequate review and approval of certain aspects of the accounting process, management has reiterated the Companys current review
and approval processes, to insure that all accounting reconciliations and journal entries are reviewed and approved on a timely basis.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management believes this remediation has remediated the corresponding material weakness described in Item 2, immediately above.



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Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or
detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial
reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of
a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control over Financial Reporting

There
have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

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 February 9, 2011, the holders of 4.3 million shares of the Exchangeable Redeemable Preferred
Stock have surrendered their shares and received payment of the redemption price; while 0.2 million shares have yet to be surrendered and still have the right to receive their payment due without interest. As of December 31, 2010 and
September 30, 2010, exchangeable redeemable preferred stock  unredeemed was $0.8 million and $0.8 million, respectively.

On August 27, 2007, a group of institutional investors filed an action against the Company in the United States District Court, entitled DE Shaw Laminar Portfolios et al. v. Archon Corporation,
District of Nevada, Case No. 2:07-cv-1146. 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 not less than $7.2 million 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, seeking a ruling from the court that the Company breached its
obligations under the Certificate by calculating the redemption price as it did. The Court granted that motion on August 8, 2008, finding the language of the Certificate to be unambiguous and that the redemption price should have been
calculated differently. Subsequent to the Courts ruling on the motion for partial summary judgment, Plaintiffs filed a motion for entry of final judgment, seeking entry of judgment that the redemption price for the preferred shares should have
been $8.69 per share. On December 22, 2010, the District Court granted that motion and entered judgment against the Company in the amount of $9.5 million. The District Court based its decision primarily on its order from August of 2008. The
Company has filed a motion for reconsideration of the District Courts December 22, 2010 order. That motion has been fully briefed and is pending before the District Court. In the event the motion for reconsideration is denied, the Company
intends to appeal the District Courts decision to the Ninth Circuit Court of Appeals.

The Company has initiated
proceedings against a third-party law 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 defendant law firm to Federal Court in
April, 2009 and is at an early stage of resolution. The defendant law firm has moved to compel arbitration of the dispute. The Magistrate Judge issued an order that the matter be referred to arbitration and the District Court confirmed that order.
The



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##### Table of Contents

Company intends to pursue its claims against the defendant law firm in arbitration. 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.

Also, two other 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. The two other lawsuits brought by former holders of the Exchangeable Redeemable Preferred Stock are entitled Rainero v. Archon Corporation, District of Nevada, Case
No. 2:07-cv-01553, and Leeward Capital, L.P. v. Archon Corporation, District of Nevada Case No. 2:08-cv-00007. 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.

In the
Leeward Capital matter, both the Leeward Plaintiffs and the Company have filed motions for summary judgment. The Leeward Plaintiffs made arguments similar to the Laminar Plaintiffs in their motion. On December 22, 2010, the
District Court issued an order granting the Leeward Plaintiffs motion for summary judgment on the same grounds as the Laminar order and denying Archons motion without analysis. Contemporaneous with the filing of the
December 22, 2010 order, the District Court entered judgment in favor of the Leeward Plaintiffs and against the Company in the amount of $0.3 million. The Company has filed a motion for reconsideration of the District Courts
December 22, 2010 order. That motion has been fully briefed and is pending before the District Court. In the event the motion for reconsideration is denied, the Company intends to appeal the District Courts decision to the Ninth Circuit
Court of Appeals.

The Rainero action is purported to be brought on behalf of David Rainero individually as well as a
class of all former preferred shareholders, although a class has not yet been certified by the District Court. Plaintiff Rainero filed a motion for class certification in December of 2010 which the Company intends to oppose. The Companys
opposition brief to the motion for class certification is due February 15, 2011. Mr. Rainero was deposed in early January of 2011.

The Company plans to appeal the District Courts decisions to the Ninth Circuit Court of Appeals. The Company believes that it has valid bases in law and fact to overturn or appeal these verdicts. As
a result, the Company believes that affirmation of the judgments is possible but not probable, and, accordingly, that the amount of any loss cannot be reasonably estimated at this time. Because the Company believes that this potential loss is not
probable or estimable, it has not recorded any reserves or contingencies related to this legal matter. In the event that the Companys assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it will
be required to record a liability for an adverse outcome, which may include post-judgment interest.



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|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
|------- | ---------------------------------------------------

None



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

None



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##### Table of Contents

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



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



|               |  |                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | 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.                                



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SIGNATURES

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



ARCHON CORPORATION, RegistrantBy:

/s/    Paul W. LowdenPaul W. Lowden Chairman of the Board, President and Principal Executive
Officer


Date: February 18, 2011



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