##### 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: |  |  |  | March 31, 2009



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



|                               |  |        |  |    |  | 
|------------------------------ |  | ------ |  | -- |  | 
|For the transition period from |  |        |  | to |  | 
|                               | 
|Commission File Number:        |  | 1-9481

ARCHON CORPORATION



(Exact name of registrant as specified in its
charter)



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

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



(Address of principal executive office and zip
code)

(702) 732-9120



(Registrants telephone number, including
area code)







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

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

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

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

Large accelerated filer   ̈    Accelerated filer   ̈    Non-accelerated filer   ̈    Smaller Reporting Company  x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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



APPLICABLE ONLY TO CORPORATE ISSUERS:

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



|          |  |       |  |             
|--------- |  | ----- |  | ------------
|6,370,176 |  | as of |  | May 14, 2009









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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 March 31, 2009 (Unaudited) and September 30, 2008
(Audited)                                  |  | 1   
|        |  |                                                                                                                               
|        |  | Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2009 and 2008
(Unaudited)                   |  | 3   
|        |  |                                                                                                                               
|        |  | Consolidated Statements of Comprehensive Income (Loss) for the Three and Six 
Months Ended March 31, 2009 and 2008 (Unaudited) |  | 4   
|        |  |                                                                                                                               
|        |  | Consolidated Statement of Stockholders Equity for the Six Months Ended March 31, 2009
(Unaudited)                             |  | 5   
|        |  |                                                                                                                               
|        |  | Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2009 and 2008
(Unaudited)                             |  | 6   
|        |  |                                                                                                                               
|        |  | Notes to Unaudited Consolidated Financial Statements                                                                           |  | 7   
|        |  |                                                                                                                               
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                          |  | 16  
|        |  |                                                                                                                               
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                     |  | 26  
|        |  |                                                                                                                               
|Item 4  |  | Controls and Procedures                                                                                                        |  | 26  
|        |  |                                                                                                                               
|PART II |  | OTHER INFORMATION                                                                                                              |  |     
|        |  |                                                                                                                               
|Item 1  |  | Legal Proceedings                                                                                                              |  | 27  
|        |  |                                                                                                                               
|Item 2  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                               |  | 28  
|        |  |                                                                                                                               
|Item 3  |  | Defaults Upon Senior Securities                                                                                                |  | 28  
|        |  |                                                                                                                               
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                                            |  | 28  
|        |  |                                                                                                                               
|Item 5  |  | Other Information                                                                                                              |  | 28  
|        |  |                                                                                                                               
|Item 6  |  | Exhibits                                                                                                                       |  | 28  



i



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##### Table of Contents

PART I  FINANCIAL INFORMATION



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

Archon Corporation and Subsidiaries

Consolidated Balance Sheets



|                                         |  |                          |             |   |                            |   |             |  
|---------------------------------------- |  | ------------------------ | ----------- | - | -------------------------- | - | ----------- | -
|                                         |  | March 31,2009(Unaudited) |             |   | September 30,2008(Audited) |  
|ASSETS                                   |  |                          |             |   |                            |   |             |  
|Current assets:                          |  |                          |             |   |                            |   |             |  
|Cash and cash equivalents                |  | $                        | 35,103,044  |   |                            | $ | 37,973,564  |  
|Investment in marketable securities      |  |                          | 3,579,323   |   |                            |   | 5,731,337   |  
|Accounts receivable, net                 |  |                          | 86,369      |   |                            |   | 144,810     |  
|Inventories                              |  |                          | 269,281     |   |                            |   | 342,379     |  
|Prepaid expenses and other               |  |                          | 1,024,018   |   |                            |   | 1,371,281   |  
|                                         |  |                          |             |   |                            |   |             |  
|Total current assets                     |  |                          | 40,062,035  |   |                            |   | 45,563,371  |  
|                                         |  |                          |             |   |                            |   |             |  
|Property held for sale                   |  |                          | 21,504,400  |   |                            |   | 21,504,400  |  
|Property and equipment:                  |  |                          |             |   |                            |   |             |  
|Rental property held for investment, net |  |                          | 121,053,948 |   |                            |   | 122,354,178 |  
|Land used in operations                  |  |                          | 3,925,589   |   |                            |   | 3,925,589   |  
|Buildings and improvements               |  |                          | 7,951,201   |   |                            |   | 7,951,200   |  
|Machinery and equipment                  |  |                          | 3,003,699   |   |                            |   | 1,816,546   |  
|Accumulated depreciation                 |  |                          | (1,255,403  | ) |                            |   | (782,999    | )
|                                         |  |                          |             |   |                            |   |             |  
|Property and equipment, net              |  |                          | 134,679,034 |   |                            |   | 135,264,514 |  
|                                         |  |                          |             |   |                            |   |             |  
|Other assets                             |  |                          | 7,326,265   |   |                            |   | 7,641,889   |  
|                                         |  |                          |             |   |                            |   |             |  
|Total assets                             |  | $                        | 203,571,734 |   |                            | $ | 209,974,174 |  
|                                         |  |                          |             |   |                            |   |             |  

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



1



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets (continued)



|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ----------- | - | -------------------------- | - | ----------- | -
|                                                                                                                                                |  | March 31,2009(Unaudited) |             |   | September 30,2008(Audited) |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                            |  |                          |             |   |                            |   |             |  
|Current liabilities:                                                                                                                            |  |                          |             |   |                            |   |             |  
|Loans payable                                                                                                                                   |  | $                        | 9,843,690   |   |                            | $ | 9,843,691   |  
|Accounts payable                                                                                                                                |  |                          | 1,811,468   |   |                            |   | 2,848,701   |  
|Interest payable                                                                                                                                |  |                          | 218,903     |   |                            |   | 219,233     |  
|Other accrued expenses                                                                                                                          |  |                          | 3,497,894   |   |                            |   | 4,474,276   |  
|Exchangeable redeemable preferred stock  unredeemed                                                                                            |  |                          | 205,166     |   |                            |   | 214,972     |  
|Current portion of debt                                                                                                                         |  |                          | 36,037      |   |                            |   | 82,057      |  
|Current portion of non-recourse debt                                                                                                            |  |                          | 3,002,309   |   |                            |   | 2,828,304   |  
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Total current liabilities                                                                                                                       |  |                          | 18,615,467  |   |                            |   | 20,511,234  |  
|Debt  less current portion                                                                                                                     |  |                          | 0           |   |                            |   | 441         |  
|Non-recourse debt  less current portion                                                                                                        |  |                          | 69,954,788  |   |                            |   | 71,500,098  |  
|Deferred income taxes                                                                                                                           |  |                          | 22,792,210  |   |                            |   | 23,242,864  |  
|Deferred rent income and accrued expenses                                                                                                       |  |                          | 37,627,940  |   |                            |   | 39,112,665  |  
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Total liabilities                                                                                                                               |  |                          | 148,990,405 |   |                            |   | 154,367,302 |  
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Stockholders equity:                                                                                                                           |  |                          |             |   |                            |   |             |  
|Common stock , $.01 par value; authorized  100,000,000 shares; issued  6,390,787, and 6,329,177 shares                                        |  |                          | 63,908      |   |                            |   | 63,292      |  
|Preferred stock, exchangeable, redeemable 16.0% cumulative $2.14 liquidation value, authorized  10,000,000 shares; none issued and
outstanding |  |                          | 0           |   |                            |   | 0           |  
|Additional paid-in capital                                                                                                                      |  |                          | 63,377,682  |   |                            |   | 63,300,848  |  
|Accumulated deficit                                                                                                                             |  |                          | (5,620,873  | ) |                            |   | (6,582,794  | )
|Accumulated other comprehensive income                                                                                                          |  |                          | (2,732,183  | ) |                            |   | (974,978    | )
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Sub-total                                                                                                                                       |  |                          | 55,088,534  |   |                            |   | 55,806,368  |  
|Less: Notes receivable from stockholders                                                                                                        |  |                          | (111,721    | ) |                            |   | (111,722    | )
|Treasury stock  20,611 and 4,875 common shares, at cost                                                                                        |  |                          | (395,484    | ) |                            |   | (87,774     | )
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Total stockholders equity                                                                                                                      |  |                          | 54,581,329  |   |                            |   | 55,606,872  |  
|                                                                                                                                                |  |                          |             |   |                            |   |             |  
|Total liabilities and stockholders equity                                                                                                      |  | $                        | 203,571,734 |   |                            | $ | 209,974,174 |  
|                                                                                                                                                |  |                          |             |   |                            |   |             |  

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



2



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Archon Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | Three Months EndedMarch 31, |            |   | Six Months EndedMarch 31, |  
|                                                        |  | 2009                        |            |   | 2008                      |   |            | 2009 |  |   | 2008       |  
|Revenues:                                               |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                  |  | $                           | 4,787,513  |   |                           | $ | 5,793,563  |      |  | $ | 8,944,610  |   |  | $ | 11,180,628 |  
|Hotel                                                   |  |                             | 441,022    |   |                           |   | 558,203    |      |  |   | 797,539    |   |  |   | 1,096,539  |  
|Food and beverage                                       |  |                             | 1,578,233  |   |                           |   | 1,995,111  |      |  |   | 2,956,904  |   |  |   | 3,731,422  |  
|Rental properties                                       |  |                             | 3,100,562  |   |                           |   | 3,100,562  |      |  |   | 6,201,124  |   |  |   | 6,201,124  |  
|Other                                                   |  |                             | 1,570,302  |   |                           |   | 1,670,338  |      |  |   | 3,073,157  |   |  |   | 3,763,187  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Gross revenues                                          |  |                             | 11,477,632 |   |                           |   | 13,117,777 |      |  |   | 21,973,334 |   |  |   | 25,972,900 |  
|Less casino promotional allowances                      |  |                             | (940,118   | ) |                           |   | (1,584,424 | )    |  |   | (2,067,133 | ) |  |   | (3,001,370 | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net operating revenues                                  |  |                             | 10,537,514 |   |                           |   | 11,533,353 |      |  |   | 19,906,201 |   |  |   | 22,971,530 |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating expenses:                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                  |  |                             | 2,773,973  |   |                           |   | 3,285,685  |      |  |   | 5,045,852  |   |  |   | 6,553,069  |  
|Hotel                                                   |  |                             | 181,131    |   |                           |   | 237,424    |      |  |   | 362,750    |   |  |   | 497,262    |  
|Food and beverage                                       |  |                             | 1,003,050  |   |                           |   | 1,095,016  |      |  |   | 1,960,838  |   |  |   | 2,176,696  |  
|Other                                                   |  |                             | 172,206    |   |                           |   | 249,175    |      |  |   | 383,499    |   |  |   | 585,396    |  
|Selling, general and administrative:                    |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Corporate expenses                                      |  |                             | 872,076    |   |                           |   | 3,476,687  |      |  |   | 1,778,834  |   |  |   | 4,844,222  |  
|Other                                                   |  |                             | 781,345    |   |                           |   | 875,807    |      |  |   | 1,532,840  |   |  |   | 1,790,575  |  
|Utilities and property expenses                         |  |                             | 973,073    |   |                           |   | 1,102,183  |      |  |   | 1,962,348  |   |  |   | 2,384,995  |  
|Depreciation and amortization                           |  |                             | 879,130    |   |                           |   | 1,071,053  |      |  |   | 1,772,634  |   |  |   | 2,141,440  |  
|(Gain) on disposal of assets                            |  |                             | 0          |   |                           |   | (1,441     | )    |  |   | 0          |   |  |   | (7,628     | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                                |  |                             | 7,635,984  |   |                           |   | 11,391,589 |      |  |   | 14,799,595 |   |  |   | 20,966,027 |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating income                                        |  |                             | 2,901,530  |   |                           |   | 141,764    |      |  |   | 5,106,606  |   |  |   | 2,005,503  |  
|Other income and (expense):                             |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Interest expense                                        |  |                             | (2,009,661 | ) |                           |   | (2,010,688 | )    |  |   | (3,954,316 | ) |  |   | (4,090,820 | )
|Interest and other income                               |  |                             | 95,635     |   |                           |   | 350,551    |      |  |   | 305,165    |   |  |   | 3,067,246  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Income (loss) before income tax (expense) benefit       |  |                             | 987,504    |   |                           |   | (1,518,373 | )    |  |   | 1,457,455  |   |  |   | 981,929    |  
|Federal income tax (expense) benefit                    |  |                             | (335,751   | ) |                           |   | 516,247    |      |  |   | (495,534   | ) |  |   | (333,855   | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net income (loss)                                       |  | $                           | 651,753    |   |                           | $ | (1,002,126 | )    |  | $ | 961,921    |   |  | $ | 648,074    |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Average common shares outstanding                       |  |                             | 6,370,176  |   |                           |   | 6,377,660  |      |  |   | 6,349,677  |   |  |   | 6,329,296  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Average common and common equivalent shares outstanding |  |                             | 6,370,176  |   |                           |   | 6,377,660  |      |  |   | 6,349,677  |   |  |   | 7,104,497  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Income (loss) per share:                                |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                   |  | $                           | 0.10       |   |                           | $ | (0.16      | )    |  | $ | 0.15       |   |  | $ | 0.10       |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Diluted                                                 |  | $                           | 0.10       |   |                           | $ | (0.16      | )    |  | $ | 0.15       |   |  | $ | 0.09       |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  

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



3



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)



|                                                                |  |                             |          |   |                           |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------------- |  | --------------------------- | -------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                |  | Three Months EndedMarch 31, |          |   | Six Months EndedMarch 31, |  
|                                                                |  | 2009                        |          |   | 2008                      |   |            | 2009 |  |   | 2008       |  
|Net income (loss)                                               |  | $                           | 651,753  |   |                           | $ | (1,002,126 | )    |  | $ | 961,921    |   |  | $ | 648,072    |  
|Unrealized (loss) on marketable securities, net of income taxes |  |                             | (392,141 | ) |                           |   | (1,111,852 | )    |  |   | (1,757,205 | ) |  |   | (3,595,206 | )
|                                                                |  |                             |          |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Comprehensive income (loss)                                     |  | $                           | 259,612  |   |                           | $ | (2,113,978 | )    |  | $ | (795,284   | ) |  | $ | (2,947,134 | )
|                                                                |  |                             |          |   |                           |   |            |      |  |   |            |   |  |   |            |  

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



4



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##### Table of Contents

Corporation and Subsidiaries

Consolidated Statement of Stockholders Equity

For the Six Months Ended March 31, 2009

(Unaudited)



|                                         |  |             |        |                          |   |            |                    |  |   |                                     |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | ------------------------ | - | ---------- | ------------------ |  | - | ----------------------------------- | - |  | ------------------------------- | ---------- | - | ------------- | - | -------- | ----- |  | - | -------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | AdditionalPaid-InCapital |   |            | AccumulatedDeficit |  |   | AccumulatedOtherComprehensive(Loss) |   |  | NotesReceivablefromStockholders |            |   | TreasuryStock |   |          | Total | 
|Balances, October 1, 2008                |  | $           | 63,292 |                          | $ | 63,300,848 |                    |  | $ | (6,582,794                          | ) |  | $                               | (974,978   | ) |               | $ | (111,722 | )     |  | $ | (87,774  | ) |  | $ | 55,606,872 |  
|Net income                               |  |             |        |                          |   |            |                    |  |   | 961,921                             |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   | 961,921    |  
|Common stock adjustments                 |  |             | 616    |                          |   | (596       | )                  |  |   |                                     |   |  |                                 |            |   |               |   | 1        |       |  |   |          |   |  |   | 21         |  
|Treasury stock transactions              |  |             |        |                          |   | 77,430     |                    |  |   |                                     |   |  |                                 |            |   |               |   |          |       |  |   | (307,710 | ) |  |   | (230,280   | )
|Unrealized loss on marketable securities |  |             |        |                          |   |            |                    |  |   |                                     |   |  |                                 | (1,757,205 | ) |               |   |          |       |  |   |          |   |  |   | (1,757,205 | )
|                                         |  |             |        |                          |   |            |                    |  |   |                                     |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  
|Balances, March 31, 2009                 |  | $           | 63,908 |                          | $ | 63,377,682 |                    |  | $ | (5,620,873                          | ) |  | $                               | (2,732,183 | ) |               | $ | (111,721 | )     |  | $ | (395,484 | ) |  | $ | 54,581,329 |  
|                                         |  |             |        |                          |   |            |                    |  |   |                                     |   |  |                                 |            |   |               |   |          |       |  |   |          |   |  |   |            |  

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



5



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                  |  |                            |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Six Months Ended March 31, |           
|                                                                                  |  | 2009                       |            |   | 2008 |  
|Cash flows from operating activities:                                             |  |                            |            |   |      |   |            |  
|Net income                                                                        |  | $                          | 961,921    |   |      | $ | 648,074    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |            |   |      |   |            |  
|Depreciation and amortization                                                     |  |                            | 1,772,634  |   |      |   | 2,141,440  |  
|Stock-based compensation expense                                                  |  |                            | 0          |   |      |   | 2,406,315  |  
|Interest expense from amortization of debt issuance costs                         |  |                            | 245,039    |   |      |   | 150,984    |  
|Gain on sale of assets                                                            |  |                            | 0          |   |      |   | (7,628     | )
|(Gain) / loss on sale of marketable securities                                    |  |                            | (94,989    | ) |      |   | 2,283,082  |  
|Change in assets and liabilities:                                                 |  |                            |            |   |      |   |            |  
|Accounts receivable                                                               |  |                            | 58,441     |   |      |   | 977,412    |  
|Inventories                                                                       |  |                            | 73,098     |   |      |   | 84,982     |  
|Prepaid expenses and other                                                        |  |                            | 347,263    |   |      |   | 18,684     |  
|Deferred income taxes                                                             |  |                            | 495,534    |   |      |   | 133,855    |  
|Other assets                                                                      |  |                            | 70,585     |   |      |   | (50,311    | )
|Accounts payable                                                                  |  |                            | (1,037,233 | ) |      |   | (975,410   | )
|Interest payable                                                                  |  |                            | (330       | ) |      |   | (978,016   | )
|Accrued expenses and other current liabilities                                    |  |                            | (976,382   | ) |      |   | (31,444    | )
|Other liabilities                                                                 |  |                            | (1,484,725 | ) |      |   | (1,484,725 | )
|                                                                                  |  |                            |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                            | 430,856    |   |      |   | 5,317,294  |  
|                                                                                  |  |                            |            |   |      |   |            |  
|Cash flows from investing activities:                                             |  |                            |            |   |      |   |            |  
|Proceeds from sale of assets                                                      |  |                            | 0          |   |      |   | 33,035     |  
|Payments received on sale or extension of land purchase option                    |  |                            | 0          |   |      |   | 14,512,502 |  
|Capital expenditures                                                              |  |                            | (1,187,154 | ) |      |   | (182,041   | )
|Marketable securities purchased                                                   |  |                            | (2,779,199 | ) |      |   | (9,260,098 | )
|Marketable securities sold or redeemed                                            |  |                            | 2,322,809  |   |      |   | 6,265,100  |  
|                                                                                  |  |                            |            |   |      |   |            |  
|Net cash provided by (used in) investing activities                               |  |                            | (1,643,544 | ) |      |   | 11,368,498 |  
|                                                                                  |  |                            |            |   |      |   |            |  
|Cash flows from financing activities:                                             |  |                            |            |   |      |   |            |  
|Payments on debt and obligation under capital lease                               |  |                            | (1,417,767 | ) |      |   | (1,472,510 | )
|Debt issue costs                                                                  |  |                            | 0          |   |      |   | (98,453    | )
|Common stock purchased and retired                                                |  |                            | (230,259   | ) |      |   | 0          |  
|Preferred stock redeemed and retired                                              |  |                            | (9,806     | ) |      |   | (171,029   | )
|Stock options exercised                                                           |  |                            | 0          |   |      |   | 1,129      |  
|                                                                                  |  |                            |            |   |      |   |            |  
|Net cash used in financing activities                                             |  |                            | (1,657,832 | ) |      |   | (1,740,863 | )
|                                                                                  |  |                            |            |   |      |   |            |  
|Increase in cash and cash equivalents                                             |  |                            | (2,870,520 | ) |      |   | 14,944,929 |  
|Cash and cash equivalents, beginning of period                                    |  |                            | 37,973,564 |   |      |   | 27,484,222 |  
|                                                                                  |  |                            |            |   |      |   |            |  
|Cash and cash equivalents, end of period                                          |  | $                          | 35,103,044 |   |      | $ | 42,429,151 |  
|                                                                                  |  |                            |            |   |      |   |            |  

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



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##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



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

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

The consolidated financial statements included herein have been prepared by management of the
Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules under Regulation S-X of the SEC, although management believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, all adjustments necessary for a fair presentation of results for the interim periods have been made. The results for the current three and six month periods ended March 31, 2009 are not
necessarily indicative of results to be expected for the full fiscal year ended September 30, 2009. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in
the Companys Annual Report on Form 10-K for the year ended September 30, 2008, from which the balance sheet information as of that date is derived.

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

Income (Loss) Per Common Share. Dilutive stock options of
approximately 741,000 were not included in calculations of diluted income per common share for the six months ended March 31, 2009, as the options were out of the money therefore would be anti-dilutive. These options were not used to calculate
dilution in loss periods, which is not presented because losses result in anti-dilution.

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.

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 March 31, 2009 includes
investments in corporate bonds.

Equity securities available-for-sale are reported at fair value with unrealized gains or losses reported
as a component of accumulated other comprehensive income. Realized and unrealized gains and losses are determined by the specific identification method. At March 31, 2009, investments in equity securities available-for-sale included common and
preferred stocks.



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Included in Other income on the consolidated statements of operations are approximately
$32,119 realized losses and $47,242 of realized gains for the three months ended March 31, 2009 and 2008, respectively. The Company recorded approximately $(0.4) million and $(1.8) million and $(1.1) million and $(3.6) million of other
comprehensive loss, net of tax effect, associated with unrealized losses on these investments during the three and six months ended March 31, 2009 and 2008, respectively. Through March 31, 2009, the Company experienced a year-to-date $2.7
million further decline in the value of these investments.

The following is a summary of available-for-sale marketable securities as of
March 31, 2009 (amounts in thousands):



|                  |  |      |       |                |   |                  |  |   |                     |   |  |  |  |   |      
|----------------- |  | ---- | ----- | -------------- | - | ---------------- |  | - | ------------------- | - |  |  |  | - | -----
|                  |  | Cost |       | UnrealizedGain |   | UnrealizedLosses |  |   | Market orFair Value
|Debt securities   |  | $    | 3,004 |                | $ | 33               |  | $ | (561                | ) |  |  |  | $ | 2,476
|Equity securities |  |      | 4,778 |                |   | 23               |  |   | (3,698              | ) |  |  |  |   | 1,103
|                  |  |      |       |                |   |                  |  |   |                     |   |  |  |  |   |      
|Total             |  | $    | 7,782 |                | $ | 56               |  | $ | (4,259              | ) |  |  |  | $ | 3,579
|                  |  |      |       |                |   |                  |  |   |                     |   |  |  |  |   |      

The Company recorded the combined total of unrealized gains and (losses) shown in the above table,
on the balance sheet as $2.7 million or 65% as retained earnings  other comprehensive income, and $1.5 million or 35% as deferred income taxes.

Revenue Recognition. Casino revenue is recorded as gaming wins less losses. Hotel, food and beverage, entertainment and other operating revenues are recognized as services are performed. Casino
revenues are recognized net of certain sales incentives in accordance with Emerging Issues Task Force (EITF) Issue 01-9 Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendors Products)(EITF
01-9). Accordingly, cash incentives to customers for gambling, and the cash value of points and coupons earned by the slot club members totaling $0.4 million and $0.2 million for the six months ended March 31, 2009 and 2008, have been
recognized as a direct reduction of casino revenue.

Advance deposits on rooms, if any, are recorded as deferred revenue until services are
provided to the customer. Revenues include the retail amount of room, food, beverage and other services provided gratuitously to customers totaling $2.1 million and $3.0 million for the six months ended March 31, 2009 and 2008. The estimated
cost of providing these promotional services has been reported in the accompanying consolidated statements of operations as an expense of each department granting complimentary services. The table below summarizes the departments costs of such
services (dollars in thousands):



|                  |  |      |       |      |   |      
|----------------- |  | ---- | ----- | ---- | - | -----
|                  |  | 2009 |       | 2008
|Food and beverage |  | $    | 1,920 |      | $ | 2,710
|Hotel             |  |      | 281   |      |   | 276  
|Other             |  |      | 4     |      |   | 17   
|                  |  |      |       |      |   |      
|Total             |  | $    | 2,205 |      | $ | 3,003
|                  |  |      |       |      |   |      

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



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##### Table of Contents

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



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

For the fiscal year ending
September 30, 2008, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (FIN 48). The adoption of FIN 48 did not have a material impact on the Companys financial statements.



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

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

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

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



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

The Company is subject to a Patent
Rights and Royalty Agreement with the brother of the Companys Chairman of the Board and CEO with respect to certain gaming technology for which he had been issued a patent. The Company agreed to pay certain royalty payments with respect to the
technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. The patentholder granted the Company an exclusive five-year license that expired in January 2007 in the United States with respect to
the technology, but which automatically renewed until 2009 and will renew for an additional two-year term unless the Company terminates the agreement. The Company also has an understanding with the related party patentholder that it will pay for the
costs of commercial development of the technology. Through September 30, 2006, the Company had expended approximately $0.4 million for commercial development of the technology, and no additional costs were expended during the three-month and
six-month periods ended March 31, 2009 or 2008. No royalties were paid to the patentholder during the periods presented.



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|5. | Expiration of Gaithersburg Property Contract
|-- | --------------------------------------------

On
December 10, 2008, Archon Corporation (the Company) filed a Form 8-K, to which the Amended and Restated Purchase and Sale Contract (the Contract), described on Page 9, Note 4 of the Companys Quarterly Report 10-Q
for the quarter ended June 30, 2008, was appended. The Contract was for the sale of the Companys property located in Gaithersburg, Maryland, to Avalon Bay Communities, Inc., a Maryland corporation (Avalon Bay). In addition to
other terms and conditions, the Contract provided for a deadline of December 31, 2008, for closing of the sale. The closing deadline could have been extended by Avalon Bay, up to a maximum of 180 days, by the payment of extension fees into
escrow of $50,000 per month, which fees would have been applicable to the purchase price, but would have been non-refundable in the event Avalon Bay did not complete the purchase. Avalon Bay did not exercise its right to extend the closing date
deadline, and, therefore, the Contract expired on December 31, 2008.



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

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

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

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

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

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

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



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The table below summarizes the Companys buy back of its common stock for the last 12-month period
ended March 31, 2009:



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



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

The Company called all outstanding shares of its Exchangeable Redeemable Preferred Stock for redemption on and as of August 31, 2007, at a redemption price of $5.241 per share, which sum included accrued and
unpaid dividends to the date of redemption. From and after August 31, 2007, all shares of the Exchangeable Redeemable Preferred Stock ceased to be outstanding and to accrue dividends. As of May 13, 2009, the holders of 4,259,502 shares of
the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of the redemption price; while 157,445 shares have yet to be surrendered and still have the right to receive their payment due.

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



11



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##### Table of Contents

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

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



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

The Companys Stock
Option Plan (Plan) provides for the grant of up to 1.2 million shares of its common stock to key employees. The Plan provides for both incentive stock options and non-qualified stock options. Stock option grants generally vest over
a three-year period from the employees hire date. During the six-month period ended March 31, 2009 and 2008, zero options were granted. As of March 31, 2009 and 2008, there were approximately 741,500 and 740,000 options,
respectively, outstanding and exercisable under the Plan. During the second quarter ended March 31, 2009 and 2008, none and 112,850 options, respectively, were exercised.

The outstanding options have expiration dates through 2018 and have an average remaining life of approximately 7.8 years. The average exercise price of
the outstanding options at March 31, 2009 is approximately $28.09.

In December 2008, the Companys Board of Directors
authorized, subject to shareholder approval at the next annual meeting, an increase of 250,000 shares in the number of shares available for grant under the Plan.

SFHI Inc., SLVC and PHI (collectively, the Subsidiaries), have adopted subsidiary stock option plans (the Subsidiary Plans). The Subsidiary Plans provide for the grant of options by each of the
Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such Subsidiarys Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary
Plans is to enable the Subsidiaries and the Company to attract, retain and motivate their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As
of March 31, 2009, no options had been granted under any of the Subsidiary Plans.

The following table summarizes stock option
activity during the six months ended March 31, 2009 under all plans:



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##### Table of Contents

|                                           |  |                       |  |                                         |       |                                          |          |                                 |   |         |  
|------------------------------------------ |  | --------------------- |  | --------------------------------------- | ----- | ---------------------------------------- | -------- | ------------------------------- | - | ------- | -
|                                           |  | NumberofShares(000s) |  | Weighted-AverageExercise PricePer Share |       | Weighted-AverageRemainingContractualTerm |          | AggregateIntrinsicValue($000s) |  
|Options outstanding at September 30, 2008: |  | 742                   |  | $                                       | 28.09 |                                          | 8.3 yrs. |                                 | $ | (5,829  | )
|Granted                                    |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Exercised                                  |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Canceled                                   |  | 0                     |  |                                         | N/A   |                                          | N/A      |                                 |   | N/A     |  
|Options outstanding at March 31, 2009      |  | 742                   |  | $                                       | 28.09 |                                          | 7.8 yrs. |                                 | $ | (12,272 | )
|Exercisable at March 31, 2009              |  | 742                   |  | $                                       | 28.09 |                                          | 7.8 yrs. |                                 | $ | (12,272 | )

As of March 31, 2009, there was no unrecognized compensation cost related to unvested stock
options.



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

Supplemental statement of cash flows information for the six-month periods ended March 31, 2009 and 2008 is presented below (amounts in thousands).



|                                         |  |      |       |      |   |      
|---------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                         |  | 2009 |       | 2008
|Operating activities:                    |  |      |       |      |   |      
|Cash paid during the period for interest |  | $    | 3,903 |      | $ | 4,062
|                                         |  |      |       |      |   |      



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

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

Set forth below is the unaudited financial information for the segments in which the Company operates for the three-month and six-month periods ended
March 31, 2009 and 2008 (amounts in thousands).



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|                                  |  |                             |        |   |      |   |        |  
|--------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                  |  | Three Months EndedMarch 31, |       
|                                  |  | 2009                        |        |   | 2008 |  
|Pioneer Hotel:                    |  |                             |        |   |      |   |        |  
|Net operating revenues            |  | $                           | 6,151  |   |      | $ | 7,044  |  
|Operating income (loss)           |  |                             | 59     |   |      |   | (208   | )
|Depreciation and amortization     |  |                             | 192    |   |      |   | 385    |  
|Interest expense                  |  |                             | 313    |   |      |   | 259    |  
|Interest and other income         |  |                             | 2      |   |      |   | 3      |  
|Loss before income taxes          |  |                             | (252   | ) |      |   | (464   | )
|Capital expenditures / transfers  |  |                             | 427    |   |      |   | 19     |  
|                                  |  |                            
|Rental Properties:                |  |                             |        |   |      |   |        |  
|Net operating revenues            |  | $                           | 3,101  |   |      | $ | 3,101  |  
|Operating income                  |  |                             | 2,450  |   |      |   | 2,450  |  
|Depreciation and amortization     |  |                             | 650    |   |      |   | 650    |  
|Interest expense                  |  |                             | 1,744  |   |      |   | 1,799  |  
|Interest and other income         |  |                             | 3      |   |      |   | 1      |  
|Income before income taxes        |  |                             | 709    |   |      |   | 652    |  
|Capital expenditures / transfers  |  |                             | 0      |   |      |   | 0      |  
|                                  |  |                            
|Other and Eliminations:           |  |                             |        |   |      |   |        |  
|Net operating revenues            |  | $                           | 1,286  |   |      | $ | 1,388  |  
|Operating income (loss)           |  |                             | 393    |   |      |   | (2100  | )
|Depreciation and amortization     |  |                             | 37     |   |      |   | 36     |  
|Interest expense                  |  |                             | (47    | ) |      |   | (47    | )
|Interest and other income         |  |                             | 91     |   |      |   | 347    |  
|Income (loss) before income taxes |  |                             | 531    |   |      |   | (1,706 | )
|Capital expenditures / transfers  |  |                             | 0      |   |      |   | 20     |  
|                                  |  |                            
|Total:                            |  |                             |        |   |      |   |        |  
|Net operating revenues            |  | $                           | 10,538 |   |      | $ | 11,533 |  
|Operating income                  |  |                             | 2,902  |   |      |   | 142    |  
|Depreciation and amortization     |  |                             | 879    |   |      |   | 1,071  |  
|Interest expense                  |  |                             | 2,010  |   |      |   | 2,011  |  
|Interest and other income         |  |                             | 96     |   |      |   | 351    |  
|Income (loss) before income taxes |  |                             | 988    |   |      |   | (1,518 | )
|Capital expenditures / transfers  |  |                             | 427    |   |      |   | 39     |  



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|                                 |  |                           |         |   |      |   |         |  
|-------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                 |  | Six Months EndedMarch 31, |        
|                                 |  | 2009                      |         |   | 2008 |  
|Pioneer Hotel:                   |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 11,089  |   |      | $ | 13,656  |  
|Operating loss                   |  |                           | (591    | ) |      |   | (1,150  | )
|Depreciation and amortization    |  |                           | 398     |   |      |   | 771     |  
|Interest expense                 |  |                           | 519     |   |      |   | 571     |  
|Interest and other income        |  |                           | 4       |   |      |   | 6       |  
|Loss before income taxes         |  |                           | (1,105  | ) |      |   | (1,715  | )
|Capital expenditures / transfers |  |                           | 1,172   |   |      |   | 35      |  
|Identifiable assets(1)           |  |                           | 16,809  |   |      |   | 28,032  |  
|                                 |  |                          
|Rental Properties:               |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 6,201   |   |      | $ | 6,201   |  
|Operating income                 |  |                           | 4,901   |   |      |   | 4,901   |  
|Depreciation and amortization    |  |                           | 1,300   |   |      |   | 1,300   |  
|Interest expense                 |  |                           | 3,515   |   |      |   | 3,614   |  
|Interest and other income        |  |                           | 3       |   |      |   | 2       |  
|Income before income taxes       |  |                           | 1,389   |   |      |   | 1,289   |  
|Capital expenditures / transfers |  |                           | 0       |   |      |   | 0       |  
|Identifiable assets(1)           |  |                           | 125,167 |   |      |   | 128,039 |  
|                                 |  |                          
|Other and Eliminations:          |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 2,616   |   |      | $ | 3,115   |  
|Operating income (loss)          |  |                           | 797     |   |      |   | (1,745  | )
|Depreciation and amortization    |  |                           | 75      |   |      |   | 70      |  
|Interest expense                 |  |                           | (80     | ) |      |   | (94     | )
|Interest and other income        |  |                           | 298     |   |      |   | 3,059   |  
|Income before income taxes       |  |                           | 1,173   |   |      |   | 1,408   |  
|Capital expenditures / transfers |  |                           | 15      |   |      |   | 129     |  
|Identifiable assets(1)           |  |                           | 61,596  |   |      |   | 70,968  |  
|                                 |  |                          
|Total:                           |  |                           |         |   |      |   |         |  
|Net operating revenues           |  | $                         | 19,906  |   |      | $ | 22,972  |  
|Operating income                 |  |                           | 5,107   |   |      |   | 2,006   |  
|Depreciation and amortization    |  |                           | 1,773   |   |      |   | 2,141   |  
|Interest expense                 |  |                           | 3,954   |   |      |   | 4,091   |  
|Interest and other income        |  |                           | 305     |   |      |   | 3,067   |  
|Income before income taxes       |  |                           | 1,457   |   |      |   | 982     |  
|Capital expenditures / transfers |  |                           | 1,187   |   |      |   | 164     |  
|Identifiable assets(1)           |  |                           | 203,572 |   |      |   | 227,039 |  



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



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##### Table of Contents

ARCHON CORPORATION



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

This discussion is intended to further the readers understanding of the condensed consolidated financial condition and results of operations of
Archon Corporation (the Company or Archon). It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and the Companys annual report on Form 10-K for the year ended
September 30, 2008. These historical financial statements may not be indicative of the Companys future performance.

General

Overview of Business Operations and Trends

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

The Pioneer has experienced a flattening and, to a certain extent, a decline of its revenues over the last
few years after experiencing strong revenue and profit growth in the early 1990s. Management believes the growth of casino properties on Native American lands in such locations as California and Arizona within the last several years caused
revenue declines and caused the Company to focus on market definition and development in Laughlin to maintain profitability. Harsh economic conditions impacting customers, including high fuel costs, has significantly reduced disposable income, and
limited their travel and gaming practices. Management believes Laughlin is a mature market with marginal growth forecasted for the next few years based on its current plans. Management believes the recent revenue and expense trends in its Laughlin
hotel/casino property may not change significantly over the next few years, or until the current economic conditions and trends begin to reverse.

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

Rental Properties

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



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##### Table of Contents

annually and will decrease in relation to debt principal reductions through 2020. The Gaithersburg, Maryland, property was under contract to be sold if
certain conditions precedent were satisfied by December 31, 2008, or by a later date if the deadline had been extended pursuant to the terms of the contract. The buyers right to extend the deadline was not exercised, and the contract
expired on December 31, 2008.

Critical Accounting Policies and Estimates

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its
estimates and judgments, including those related to customer incentives, bad debts, inventories, investments, estimated useful lives for depreciable and amortizable assets, valuation reserves and estimated cash flows in assessing the recoverability
of long-lived assets, estimated liabilities for slot club bonus point programs, income taxes, contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.

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

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

Income Taxes. The Company has recorded deferred tax assets related to net operating losses as the Company is able to offset these
assets with deferred tax liabilities. Realization of the net deferred tax assets is dependent on the Companys ability to generate profits from operations or from the sale of long-lived assets that would reverse the temporary differences which
established the deferred tax liabilities. There can be no assurance that the Company will generate profits from operations or sell those assets or will generate profits from sales if they were to occur in the future. In the event the Company does
generate profits from sales of long-lived assets in the future a valuation allowance may need to be recorded, which would impact the Companys future results of operations. Annualized effective income tax rates for calculating interim period
provisions and benefits have been estimated to be not significantly different than the estimated annual effective rate and the statutory rate. Although Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting
for Uncertainty in Income TaxesAn Interpretation of FASB Statement No. 109, became effective for the year ending September 30, 2008, based on its evaluation, management determined that FIN 48 did not have a material effect on the
financial statements or the net operating loss carryovers or the related deferred tax assets or valuation allowance.



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Recently Issued Accounting Standards

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

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

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

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

EITF No. 07-3. In June 2007, the FASB issued EITF No. 07-3, Accounting for Nonrefundable Advance Payments for
Goods or Services to Be Used in Future Research and Development Activities, or EITF 07-3. EITF 07-3 requires that nonrefundable advance payments for goods or services to be received in the future for use in research and development activities
should be deferred and capitalized. The capitalized amounts should be expensed as the related goods are delivered or the services are performed. EITF 07-3 is effective for new contracts entered into during fiscal years beginning after
December 15, 2007. The Company is currently analyzing the effect, if any, EITF 07-3 will have on its consolidated financial position and results of operations.

SAB 108. In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108), which addresses how to quantify the effect of financial statement errors. The provisions of SAB 108 became effective as of the end of the Companys 2007
fiscal year. The Company does not expect the adoption of SAB 108 to have a significant impact on its financial statements.



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##### Table of Contents

Results of Operations  Six Months Ended March 31, 2009 and 2008

General

During the six months ended March 31,
2009, the Companys net operating revenues decreased by $3.1 million and operating expenses decreased $6.2 million, resulting in an increase in operating income of $3.1 million from the six months ended March 31, 2008. The change in
operating results was primarily due to a decrease in corporate expenses of $3.1 million, with a similar $3.1 million decrease in operating expenses at the Pioneer. Operating results at the investment properties were substantially unchanged.

Consolidated

Net Operating
Revenues. Consolidated net operating revenues of $19.9 million for the six months ended March 31, 2009 decreased $3.1 million, or 13%, from $23.0 million for the six months ended March 31, 2008. Revenues at the Pioneer of
$11.1 million for the six months ended March 31, 2009 decreased $2.6 million, or 19%, from $13.7 million for the six months ended March 31, 2008. Revenues from the investment properties were $6.2 million in each of the six months
ended March 31, 2009 and 2008. Revenues at corporate decreased $0.5 million in the six months ended March 31, 2009 from the six months period ended March 31, 2008.

Operating Expenses. Total operating expenses decreased $6.2 million, or 29%, to $14.8 million for the six months ended March 31,
2009 from $21.0 million for the six months ended March 31, 2008. Total operating expenses as a percentage of revenue decreased to 74% in the current year period from 91% in the prior year period. Operating expenses at the Pioneer of $11.7
million for the six months ended March 31, 2009 decreased by $3.1 million, or 21% from $14.8 million for the six months ended March 31, 2008.

Operating Income. Consolidated operating income for the six months ended March 31, 2009 was $5.1 million, an increase of $3.1 million, or 155%, from $2.0 million for the six months ended
March 31, 2008. This increase was due to the aforementioned change in net operating revenues and operating expenses. Operating income at the investment properties was unchanged at $4.9 million for each of the six months ended March 31,
2009 and 2008. Operating income increased by approximately $0.5 million at the Pioneer to an operating loss of $0.6 million. The operating income at corporate increased by approximately $2.5 million to an operating income of $0.8 million.

Interest Expense. Consolidated interest expense for the six months ended March 31, 2009 was $4.0 million,
approximately a $0.1 million, or 3%, decrease compared to $4.1 million for the six months ended March 31, 2008. The decrease was primarily due to the reduction of non-recourse debt associated with the investment properties.

Interest and Other Income. Consolidated interest and other income for the six months ended March 31, 2009 was $0.3 million, an
approximate $2.8 million, or 90% decrease compared to $3.1 million for the six months ended March 31, 2008. This decrease was primarily a result of a $2.4 million realized loss from the sale of marketable securities, combined with an decrease
in interest income of $0.4 million.

Federal Income Tax. The Company recorded a federal income tax expense of $0.5 million
for the six months ended March 31, 2009, a $0.2 million, or 48% increase compared to $0.3 million for the six months ended March 31, 2008.



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Pioneer

Net Operating Revenues. Net operating revenues at the Pioneer decreased $2.6 million, or 19%, to approximately $11.1 million in the six months ended March 31, 2009 from $13.7 million in the six months ended
March 31, 2008.

Casino revenues for the six months ended March 31, 2009 were $8.9 million, a decrease of $2.2 million, or 20%,
compared to approximately $11.1 million in the six months ended March 31, 2008. Slot and video poker revenues were $8.1 million, a decrease of $2.1 million, or 20%, compared to $10.2 million in the six months ended March 31,
2008. Other gaming revenues, including table games, decreased $0.2 million, or 15%, to $0.8 million in the six months ended March 31, 2009 from $1.0 million in the six months ended March 31, 2008. Casino promotional allowances were
approximately $2.1 million compared to approximately $3.0 million, a decrease of approximately $0.9 million.

Hotel revenues for the six
months ended March 31, 2009 were $0.8 million, a decrease of $0.3 million or 27%, compared to $1.1 million for the six months ended March 31, 2008. A decrease in hotel occupancy was compounded by a decrease in the average room rate.
Continued competitive pressures in the Laughlin market in the 2009 period caused the decline in average room rate. Food and beverage revenues for the six months ended March 31, 2009 were approximately $2.9 million, a decrease of approximately
$0.8 million or 21%, compared to $3.7 million for the six months ended March 31, 2008. Other revenues were approximately $0.4 million compared to $0.6 million, a decrease of $0.2 million.

Operating Expenses. Operating expenses decreased $3.1 million, or 21%, to $11.7 million in the six months ended March 31, 2009
from approximately $14.8 million in the six months ended March 31, 2008. Operating expenses as a percentage of net revenue decreased to 105% in the current six months from 108% in the prior year period.

Casino expenses were $5.0 million, a decrease of $1.5 million, or 23%, from approximately $6.5 million, primarily due to the decrease in casino
revenues. Casino expenses as a percentage of casino revenues decreased to 56% from 59%.

Hotel expenses were $0.4 million, a decrease of
$0.1 million, or 27%, from $0.5 million, primarily due to the decrease in hotel revenues. Hotel expenses as a percentage of hotel revenues were unchanged at 45%. Food and beverage expenses decreased $0.2 million, or 10%, to $2.0 million compared to
approximately $2.2 million, primarily due to lower food and beverage revenues. Food and beverage expenses as a percentage of food and beverage revenues increased to 66% from 58%. Other expenses were approximately $0.4 million compared to
approximately $0.6 million, a decrease of $0.2 million. Other expenses as a percentage of other revenues decreased to 77% from 86%.

Selling, general and administrative expenses were $2.0 million, a decrease of $0.2 million, or 11%, compared to approximately $2.2 million. Selling, general and administrative expenses as a percentage of revenues increased to 18% in the
current year period from 17% in the prior year period. Pioneers selling, general and administrative expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property
expenses were $1.5 million, a decrease of approximately $0.5 million, or 22%, from $2.0 million. Utilities and property expenses as a percentage of revenues decreased to 14% from 15%. Depreciation and amortization expenses were approximately $0.4
million, a decrease of approximately $0.4 million, or 48%, from $0.8 million.



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##### Table of Contents

Results of Operations  Three Months Ended March 31, 2009 and 2008

General

During the quarter ended March 31, 2009,
the Companys net operating revenues decreased $1.0 million and operating expenses decreased $3.8 million, resulting in an increase in operating income of $2.8 million from the quarter ended March 31, 2008. The change in operating results
was primarily due to a decrease in operating expenses of $2.6 million at corporate and $1.2 million at the Pioneer, which more than offset the decrease in operating revenues. The operating results at the investment properties were unchanged.

Consolidated

Net Operating
Revenues. Consolidated net operating revenues were $10.5 million for the quarter ended March 31, 2009, a $1.0 million, or 9%, decrease from $11.5 million for the quarter ended March 31, 2008. Revenues at the Pioneer of
approximately $6.1 million for the three months ended March 31, 2009 decreased $0.9 million, or 13%, from $7.0 million for the three months ended March 31, 2008. Income from the investment properties was approximately $3.1 million in each
of the quarters ended March 31, 2009 and 2008. Revenues at corporate decreased $0.1 million in the quarter ended March 31, 2009 from the quarter ended March 31, 2008.

Operating Expenses. Total operating expenses decreased $3.8 million, or 33%, to $7.6 million for the quarter ended March 31, 2009 from
$11.4 million for the quarter ended March 31, 2008. Total operating expenses as a percentage of revenue decreased to 72% for the current year quarter from 99% for the prior year quarter. Operating expenses at the Pioneer of approximately
$6.1 million decreased by $1.2 million, or 16%, from $7.3 million.

Operating Income. Consolidated operating income for the
quarter ended March 31, 2009 was $2.9 million, an increase of $2.8 million, or 1,947%, from $0.1 million for the quarter ended March 31, 2008. The increase was due to the aforementioned changes in net operating revenues and
operating expenses. Operating income at the investment properties was unchanged at approximately $2.4 million in each of the quarters ended March 31, 2009 and 2008. Operating income increased by $0.3 million, to approximately $0.1 million at
the Pioneer. The operating income at corporate increased by $2.5 million to $0.4 million from an operating loss of $2.1 million in the prior year.

Interest Expense. Consolidated interest expense was relatively unchanged at $2.0 million for the quarter ended March 31, 2009 and 2008.

Interest and Other Income. Consolidated interest and other income for the quarter ended March 31, 2009 was $0.1 million, an approximate $0.3 million, or 73% decrease compared to $0.4 million for the
quarter ended March 31, 2008.

Federal Income Tax. The Company recorded a federal income tax expense of $0.3 million for
the quarter ended March 31, 2009 compared to an income tax benefit of $0.5 million for the quarter ended March 31, 2008 based on statutory income tax rates.

Pioneer

Net Operating Revenues. Net operating revenues at the Pioneer decreased $0.9
million, or 13%, to approximately $6.1 million in the quarter ended March 31, 2009 from $7.0 million in the quarter ended March 31, 2008.



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Casino revenues for the quarter ended March 31, 2009 were $4.8 million, a decrease of $1.0 million,
or 17%, compared to $5.8 million in the quarter ended March 31, 2008. Slot and video poker revenues were $4.3 million, a decrease of $1.0 million, or 19%, compared to $5.3 million in the quarter ended March 31, 2008. Management
believes this decrease was a result of increased competition from other local casinos and the economic climate. Other gaming revenues, including table games was approximately $0.5 million in each of the quarters ended March 31, 2009 and 2008.

Hotel revenues for the quarter ended March 31, 2009 were $0.4 million, a decrease of $0.1 million or 21% compared to approximately
$0.5 million for the quarter ended March 31, 2008. Food and beverage revenues for the quarter ended March 31, 2009 were approximately $1.6 million, a decrease of $0.4 million or 21% compared to $2.0 million for the quarter ended
March 31, 2008. Other revenues were $0.3 million in each of the quarters ended March 31, 2009 and 2008.

Operating
Expenses. Operating expenses decreased by $1.2 million, or 16%, to $6.1 million in the quarter ended March 31, 2009 from $7.3 million in the quarter ended March 31, 2008. Operating expenses as a percentage of revenue decreased
to 99% from 103%.

Casino expenses were $2.8 million, a decrease of $0.5 million, or 16% from $3.3 million, primarily due to the decrease
in casino revenues. Casino expenses as a percentage of casino revenues increased to 58% from 57%.

Hotel expenses were approximately $0.1
million, a decrease of approximately $0.1 million, or 24% from approximately $0.2 million in the quarter ended March 31, 2008. Hotel expenses as a percentage of revenues decreased to 41% from 43%. Food and beverage expenses were $1.0 million, a
decrease of $0.1 million, or 8% from $1.0 million in prior year quarter. Food and beverage expenses as a percentage of food and beverage revenues increased to 64% from 55%. Other expenses were approximately $0.1 million, a decrease of approximately
$0.1 million, or 29%, from approximately $0.2 million. Other expenses as a percentage of other revenues decreased to 57% from 81%.

Selling, general and administrative expenses were $1.0 million, a decrease of $0.1 million, or 9%, compared to $1.1 million. Selling, general and administrative expenses as a percentage of revenues increased to 17% from 16%. 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 $0.8 million, a decrease of $0.1 million, or 16%,
compared to $0.9 million. Utilities and property expenses were $0.8 million, a decrease of $0.1 million, or 16%, compared to $0.9 million. Utilities and property expenses as a percentage of revenues decreased to 12% from 13%. Depreciation and
amortization expenses were approximately $0.2 million, a decrease of $0.2 million or 50%, from $0.4 million.



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

Contractual Obligations and Commitments: The following table summarizes the Companys fiscal year contractual obligations and commitments as
of March 31, 2009 (for the six-month period ending September 30, 2009 and for the fiscal years ending September 30, 2010 2011, 2012, 2013, 2014, 2015 and thereafter.) (amounts in thousands):



|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|------------------- |  | -------------------------- | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ----- |  | ------------------ | ----- | ----- | - | ------ |  | - | ------ |  | - | -------
|                    |  | Payments Due By Periods(1)
|                    |  | 2009                       |        | 2010 |   | 2011  |  | 2012 |       | 2013 |   | 2014  |  | 2015 andthereafter |       | Total
|Non-recourse debt:  |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Gaithersburg        |  | $                          | 1,458  |      | $ | 3,186 |  | $    | 3,573 |      | $ | 3,987 |  | $                  | 4,448 |       | $ | 25,107 |  | $ | 0      |  | $ | 41,759 
|Dorchester          |  |                            | 0      |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 31,199 |  |   | 31,199 
|Debt:               |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Equipment           |  |                            | 36     |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 36     
|Mortgage obligation |  |                            | 9,844  |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 9,844  
|Operating leases:   |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Ground lease        |  |                            | 193    |      |   | 386   |  |      | 386   |      |   | 386   |  |                    | 386   |       |   | 386    |  |   | 24,750 |  |   | 26,873 
|Corporate offices   |  |                            | 28     |      |   | 0     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0      |  |   | 0      |  |   | 28     
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        
|Total               |  | $                          | 11,559 |      | $ | 3,572 |  | $    | 3,959 |      | $ | 4,373 |  | $                  | 4,834 |       | $ | 25,493 |  | $ | 55,949 |  | $ | 109,739
|                    |  |                            |        |      |   |       |  |      |       |      |   |       |  |                    |       |       |   |        |  |   |        |  |   |        



|(1) | The Company is required to make the following cash interest payments related to the foregoing debt obligations:
(i) Non-recourse debt  $3.4 million (2009), $6.6 million (2010), $6.3 million (2011), $6.1 million (2012), $5.8 million (2013), $4.8 million (2014) and $23.8 million (2015 and thereafter)), and (ii) Long-term debt  $0.3
million (2009), $0 million (2010), $0 million (2011), $0 million (2012), $0 million (2013), $0 million (2014) and $0 million (2015 and thereafter).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company has no significant purchase commitments or obligations other than those included in the 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 are beyond the Companys control. In
addition, the Company will be dependent on the continued ability of the tenants in the rental properties in Gaithersburg, Maryland and Dorchester, Massachusetts to make payments pursuant to the leases with the Company. The payments under the leases
are contractually committed to be used to make payments on the Companys nonrecourse debt obligations related to the properties.

Liquidity. As of March 31, 2009, the Company held cash and cash equivalents of approximately $35.1 million compared to $38.0 million at September 30, 2008. The Company had $3.6 million in investment in marketable
securities at March 31, 2009 compared to $5.7 million at September 30, 2008. The rental properties are structured such that future tenants payments cover future required mortgage payments including any balloon payments. Management
believes that the Company will have sufficient available cash and cash resources to meet its cash requirements for a reasonable period of time.

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



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Cash Flows from Operating Activities. The Companys cash provided by operating
activities was $0.4 million for the six months ended March 31, 2009 as compared to $5.3 million for the six months ended March 31, 2008.

Cash Flows from Investing Activities. Cash used in investing activities was $1.6 million for the six months ended March 31, 2009, as compared to $11.4 million provided by investing activities in the six months ended
March 31, 2008. In the current year period, the Company received 2.3 million from the sale of marketable securities offset by $1.2 million in capital expenditures and $2.8 million from the purchase of marketable securities. In the prior
year period, the Company received $6.3 million from the sale of marketable securities and $14.5 million from land sale option payments offset by $0.2 million in capital expenditures and $9.2 million from the purchase of marketable securities.

Cash Used in Financing Activities. Cash used in financing activities was $1.7 million for the six months ended
March 31, 2009 as compared to $1.7 million for the six months ended March 31, 2008, all of which was used to make debt payments.

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

Pioneer

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

Payments of rent were
approximately $0.2 million for each of the six-month periods ended March 31, 2009 and 2008. Capital expenditures to maintain the facility in fiscal 2009 are expected to be approximately $1.2 million.

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 May 13, 2009, the holders of 4,259,502 shares of
the Exchangeable Redeemable Preferred Stock have surrendered their shares and received payment of the redemption price; while 157,445 shares have yet to be surrendered and still have the right to receive their payment due.

On August 27, 2007, a group of institutional investors filed an action, in Nevada, against the registrant. The Complaint was subsequently amended to
add an additional party plaintiff (collectively, the



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

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

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

Effects of Inflation

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

Private Securities Litigation Reform Act

Certain statements in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements, such as statements relating to future operating results, existing and expected competition, financing and refinancing
sources and availability and plans for future development or expansion activities, capital expenditures and expansion of business operations into new areas. Such forward-looking statements involve a number of risks and uncertainties that may
significantly affect the Companys liquidity and results in the future and, accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not



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limited to, those related to effects of competition, leverage and debt service, general economic conditions, changes in gaming laws or regulations (including
the legalization of gaming in various jurisdictions) and risks related to development activities and the startup of non-gaming operations.



|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity
process. Excluding its nonrecourse debt, the Company has total interest-bearing debt at March 31, 2009 of approximately $9.9 million, of which approximately $9.8 million bears interest at a variable rate (approximately 6% at March 31,
2009). Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would cause an approximate $0.1 million change in the amount of interest the Company would incur based on the amount of
variable-interest rate debt outstanding for any current or future year in which this debt is outstanding. Future borrowings related to this debt will be exposed to this same market rate risk.

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



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

Evaluation of Disclosure Controls and Procedures:

We maintain disclosure controls and procedures that are designed to
ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this
report, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures. Based on the foregoing, our Chief Executive Officer and Principal Accounting Officer concluded that Archons disclosure controls and procedures are effective.

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



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ARCHON CORPORATION

PART II  OTHER INFORMATION



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

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

The Company called all outstanding shares
of its Exchangeable Redeemable Preferred Stock for redemption on and as of August 31, 2007, at a redemption price of $5.241 per share, which sum included accrued and unpaid dividends to the date of redemption. From and after August 31,
2007, all shares of the Exchangeable Redeemable Preferred Stock ceased to be outstanding and to accrue dividends. As of May 13, 2009, the holders of 4,259,502 shares of the Exchangeable Redeemable Preferred Stock have surrendered their shares
and received payment of the redemption price; while 157,445 shares have yet to be surrendered and still have the right to receive their payment due.

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

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



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



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

None



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

None



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

None



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

None



|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 Chief Executive Officer


Date:    May 14, 2009



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