##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



FORM 10-Q



---



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



For the quarterly period ended: December 31, 2003



| ̈ | 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)



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

(Address of principal executive office and zip code)



(702) 732-9120

(Registrants telephone number, including area code)



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



---



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 ̈NO  x



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



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:



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



APPLICABLE ONLY TO CORPORATE ISSUERS:



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



|          |  |       |  |               
|--------- |  | ----- |  | --------------
|6,221,431 |  | as of |  | March 11, 2004



---



---

##### Table of Contents

ARCHON CORPORATION



INDEX



|         |  |                                                                                       |  |                                                                                                                   |  |     
|-------- |  | ------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                       |  |                                                                                                                   |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                 |  |                                                                                                                  
|         |  |                                                                                      
|Item 1   |  | Consolidated Condensed Financial Statements                                           |  | 1                                                                                                                
|         |  |                                                                                       | 
|         |  |                                                                                       |  | Consolidated Condensed Balance Sheets (Unaudited) as of December 31, 2003 and September 30, 2003                  |  | 1   
|         |  |                                                                                       | 
|         |  |                                                                                       |  | Consolidated Condensed Statements of Operations (Unaudited) for the three months ended December 31, 2003 and 2002 |  | 3   
|         |  |                                                                                       | 
|         |  |                                                                                       |  | Consolidated Condensed Statement of Stockholders Equity (Unaudited) for the three months ended December 31, 2003 |  | 4   
|         |  |                                                                                       | 
|         |  |                                                                                       |  | Consolidated Condensed Statements of Cash Flows (Unaudited) for the three months ended December 31, 2003 and 2002 |  | 5   
|         |  |                                                                                       | 
|         |  |                                                                                       |  | Notes to Consolidated Condensed Financial Statements (Unaudited)                                                  |  | 6   
|         |  |                                                                                      
|Item 2   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13                                                                                                               
|         |  |                                                                                      
|Item 3   |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 21                                                                                                               
|         |  |                                                                                      
|Item 4   |  | Controls and Procedures                                                               |  | 22                                                                                                               
|         |  |                                                                                      
|PART II. |  | OTHER INFORMATION                                                                     |  | 23                                                                                                               
|         |  |                                                                                      
|Item 1   |  | Legal Proceedings                                                                     |  | 23                                                                                                               
|         |  |                                                                                      
|Item 2   |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      |  | 23                                                                                                               
|         |  |                                                                                      
|Item 3   |  | Defaults Upon Senior Securities                                                       |  | 23                                                                                                               
|         |  |                                                                                      
|Item 4   |  | Submission of Matters to a Vote of Security Holders                                   |  | 23                                                                                                               
|         |  |                                                                                      
|Item 5   |  | Other Information                                                                     |  | 23                                                                                                               
|         |  |                                                                                      
|Item 6   |  | Exhibits and Reports on Form 8-K                                                      |  | 24                                                                                                               



i



---

##### Table of Contents

ARCHON CORPORATION



PART I.  FINANCIAL INFORMATION



Item 1. Consolidated Condensed Financial Statements.



Archon Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited)



|                                    |  |                   |             |                    |   |            
|----------------------------------- |  | ----------------- | ----------- | ------------------ | - | -----------
|                                    |  | December 31, 2003 |             | September 30, 2003
|ASSETS                              |  |                   |             |                    |   |            
|Current assets:                     |  |                   |             |                    |   |            
|Cash and cash equivalents           |  | $                 | 4,880,502   |                    | $ | 5,852,354  
|Investment in marketable securities |  |                   | 4,530,568   |                    |   | 7,262,208  
|Accounts receivable, net            |  |                   | 135,423     |                    |   | 3,178,143  
|Inventories                         |  |                   | 339,881     |                    |   | 288,947    
|Prepaid expenses and other          |  |                   | 1,142,016   |                    |   | 755,537    
|                                    |  |                   |             |                    |   |            
|Total current assets                |  |                   | 11,028,390  |                    |   | 17,337,189 
|Land held for development           |  |                   | 23,109,400  |                    |   | 23,109,400 
|Property held for investment, net   |  |                   | 136,031,617 |                    |   | 136,824,589
|Property and equipment, net         |  |                   | 32,983,601  |                    |   | 34,693,525 
|Restricted cash                     |  |                   | 0           |                    |   | 13,898,971 
|Other assets                        |  |                   | 9,574,459   |                    |   | 11,526,516 
|                                    |  |                   |             |                    |   |            
|Total assets                        |  | $                 | 212,727,467 |                    | $ | 237,390,190
|                                    |  |                   |             |                    |   |            



See
the accompanying Notes to Consolidated Condensed Financial Statements (Unaudited).



1



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Condensed Balance Sheets

(Unaudited) (Continued)



|                                           |  |                   |             |                    |   |            
|------------------------------------------ |  | ----------------- | ----------- | ------------------ | - | -----------
|                                           |  | December 31, 2003 |             | September 30, 2003
|LIABILITIES and STOCKHOLDERS EQUITY       |  |                   |             |                    |   |            
|Current liabilities:                       |  |                   |             |                    |   |            
|Accounts payable                           |  | $                 | 2,917,140   |                    | $ | 2,668,187  
|Interest payable                           |  |                   | 213,492     |                    |   | 2,249,954  
|Accrued and other liabilities              |  |                   | 3,028,626   |                    |   | 3,071,866  
|Current portion of debt                    |  |                   | 3,391,125   |                    |   | 3,510,004  
|Current portion of non-recourse debt       |  |                   | 6,726,977   |                    |   | 6,414,730  
|                                           |  |                   |             |                    |   |            
|Total current liabilities                  |  |                   | 16,277,360  |                    |   | 17,914,741 
|Debt  less current portion                |  |                   | 18,523,766  |                    |   | 1,073,305  
|Non-recourse debt  less current portion   |  |                   | 107,899,906 |                    |   | 110,987,179
|Obligation under lease                     |  |                   | 0           |                    |   | 36,637,505 
|Deferred income taxes                      |  |                   | 29,348,157  |                    |   | 29,939,408 
|Other liabilities                          |  |                   | 17,915,277  |                    |   | 16,586,096 
|Stockholders equity                       |  |                   | 22,763,001  |                    |   | 24,251,956 
|                                           |  |                   |             |                    |   |            
|Total liabilities and stockholders equity |  | $                 | 212,727,467 |                    | $ | 237,390,190
|                                           |  |                   |             |                    |   |            



See
the accompanying Notes to Consolidated Condensed Financial Statements (Unaudited).



2



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Operations

(Unaudited)



|                                                        |  |                                 |            |   |      |   |            |  
|------------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                        |  | Three Months Ended December 31, |           
|                                                        |  | 2003                            |            |   | 2002 |  
|Revenues:                                               |  |                                 |            |   |      |   |            |  
|Casino                                                  |  | $                               | 7,396,205  |   |      | $ | 6,772,329  |  
|Hotel                                                   |  |                                 | 644,206    |   |      |   | 557,582    |  
|Food and beverage                                       |  |                                 | 2,150,155  |   |      |   | 1,707,677  |  
|Investment properties                                   |  |                                 | 3,100,562  |   |      |   | 3,100,562  |  
|Other                                                   |  |                                 | 480,569    |   |      |   | 580,593    |  
|                                                        |  |                                 |            |   |      |   |            |  
|Gross revenues                                          |  |                                 | 13,771,697 |   |      |   | 12,718,743 |  
|Less casino promotional allowances                      |  |                                 | (2,088,254 | ) |      |   | (1,418,532 | )
|                                                        |  |                                 |            |   |      |   |            |  
|Net operating revenues                                  |  |                                 | 11,683,443 |   |      |   | 11,300,211 |  
|                                                        |  |                                 |            |   |      |   |            |  
|Operating expenses:                                     |  |                                 |            |   |      |   |            |  
|Casino                                                  |  |                                 | 4,211,083  |   |      |   | 3,875,754  |  
|Hotel                                                   |  |                                 | 144,231    |   |      |   | 178,338    |  
|Food and beverage                                       |  |                                 | 942,071    |   |      |   | 874,896    |  
|Other                                                   |  |                                 | 280,707    |   |      |   | 472,323    |  
|Selling, general and administrative                     |  |                                 | 1,190,915  |   |      |   | 1,262,924  |  
|Corporate expenses                                      |  |                                 | 751,515    |   |      |   | 620,278    |  
|Utilities and property expenses                         |  |                                 | 1,323,303  |   |      |   | 1,247,386  |  
|Depreciation and amortization                           |  |                                 | 1,616,791  |   |      |   | 1,557,538  |  
|                                                        |  |                                 |            |   |      |   |            |  
|Total operating expenses                                |  |                                 | 10,460,616 |   |      |   | 10,089,437 |  
|                                                        |  |                                 |            |   |      |   |            |  
|Operating income                                        |  |                                 | 1,222,827  |   |      |   | 1,210,774  |  
|Interest expense                                        |  |                                 | (3,776,683 | ) |      |   | (3,889,786 | )
|Interest income                                         |  |                                 | 261,973    |   |      |   | 433,146    |  
|                                                        |  |                                 |            |   |      |   |            |  
|Loss before income tax benefit                          |  |                                 | (2,291,883 | ) |      |   | (2,245,866 | )
|                                                        |  |                                
|Federal income tax benefit                              |  |                                 | 779,240    |   |      |   | 763,594    |  
|                                                        |  |                                 |            |   |      |   |            |  
|Net loss                                                |  |                                 | (1,512,643 | ) |      |   | (1,482,272 | )
|                                                        |  |                                
|Dividends on preferred shares                           |  |                                 | (394,144   | ) |      |   | (379,224   | )
|                                                        |  |                                 |            |   |      |   |            |  
|Net loss applicable to common shares                    |  | $                               | (1,906,787 | ) |      | $ | (1,861,496 | )
|                                                        |  |                                 |            |   |      |   |            |  
|Average common shares outstanding                       |  |                                 | 6,221,431  |   |      |   | 6,221,431  |  
|                                                        |  |                                 |            |   |      |   |            |  
|Average common and common equivalent shares outstanding |  |                                 | 6,221,431  |   |      |   | 6,221,431  |  
|                                                        |  |                                 |            |   |      |   |            |  
|Loss per common share:                                  |  |                                 |            |   |      |   |            |  
|Basic                                                   |  | $                               | (0.31      | ) |      | $ | (0.30      | )
|                                                        |  |                                 |            |   |      |   |            |  
|Diluted                                                 |  | $                               | (0.31      | ) |      | $ | (0.30      | )
|                                                        |  |                                 |            |   |      |   |            |  



See the accompanying Notes to
Consolidated Condensed Financial Statements (Unaudited).



3



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Stockholders Equity

(Unaudited)

For
the Three Months Ended December 31, 2003



|                                         |  |             |        |                |   |           |                          |  |                    |            |  |                                     |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | -------------- | - | --------- | ------------------------ |  | ------------------ | ---------- |  | ----------------------------------- | ----------- | ---------------------------- |  | - | ------------- |  | - | ------- | - |  | - | ------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | PreferredStock |   |           | AdditionalPaid-InCapital |  | AccumulatedDeficit |            |  | AccumulatedOtherComprehensiveIncome |             | StockSubscriptionsReceivable |  |   | TreasuryStock |  |   | Total   |  
|Balances, October 1, 2003                |  | $           | 62,214 |                | $ | 9,926,221 |                          |  | $                  | 54,529,070 |  | $                                   | (40,948,873 | )                            |  | $ | 844,841       |  | $ | (73,743 | ) |  | $ | (87,774 | ) |  | $ | 24,251,956 |  
|Net loss                                 |  |             |        |                |   |           |                          |  |                    |            |  |                                     | (1,512,643  | )                            |  |   |               |  |   |         |   |  |   |         |   |  |   | (1,512,643 | )
|Preferred stock purchased                |  |             |        |                |   | (72,632   | )                        |  |                    | 15,739     |  |                                     |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | (56,893    | )
|Unrealized gain on marketable securities |  |             |        |                |   |           |                          |  |                    |            |  |                                     |             |                              |  |   | 80,581        |  |   |         |   |  |   |         |   |  |   | 80,581     |  
|                                         |  |             |        |                |   |           |                          |  |                    |            |  |                                     |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |            |  
|Balances, December 31, 2003              |  | $           | 62,214 |                | $ | 9,853,589 |                          |  | $                  | 54,544,809 |  | $                                   | (42,461,516 | )                            |  | $ | 925,422       |  | $ | (73,743 | ) |  | $ | (87,774 | ) |  | $ | 22,763,001 |  
|                                         |  |             |        |                |   |           |                          |  |                    |            |  |                                     |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |            |  



See the accompanying Notes to
Consolidated Condensed Financial Statements (Unaudited).



4



---

##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

(Unaudited)



|                                                 |  |                                 |             |   |      |   |            |  
|------------------------------------------------ |  | ------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                 |  | Three Months Ended December 31, |            
|                                                 |  | 2003                            |             |   | 2002 |  
|Cash flows from operating activities:            |  |                                 |             |   |      |   |            |  
|Cash and cash equivalents provided by operations |  | $                               | 448,833     |   |      | $ | 378,014    |  
|Changes in assets and liabilities:               |  |                                 |             |   |      |   |            |  
|Accounts receivable, net                         |  |                                 | 3,042,720   |   |      |   | 1,937,007  |  
|Inventories                                      |  |                                 | (50,934     | ) |      |   | (80,022    | )
|Prepaid expenses and other                       |  |                                 | (386,479    | ) |      |   | 89,618     |  
|Deferred income taxes                            |  |                                 | (591,250    | ) |      |   | (763,594   | )
|Other assets                                     |  |                                 | (605,942    | ) |      |   | (455,061   | )
|Accounts payable                                 |  |                                 | 248,953     |   |      |   | (63,796    | )
|Interest payable                                 |  |                                 | (2,036,462  | ) |      |   | (2,073,053 | )
|Accrued and other liabilities                    |  |                                 | 1,285,941   |   |      |   | 1,083,799  |  
|                                                 |  |                                 |             |   |      |   |            |  
|Net cash provided by operating activities        |  |                                 | 1,355,380   |   |      |   | 52,912     |  
|                                                 |  |                                 |             |   |      |   |            |  
|Cash flows from investing activities:            |  |                                 |             |   |      |   |            |  
|Decrease in restricted cash                      |  |                                 | 13,898,971  |   |      |   | 724,896    |  
|Capital expenditures                             |  |                                 | (468,340    | ) |      |   | (99,956    | )
|Marketable securities purchased                  |  |                                 | (49,237     | ) |      |   | (1,924,240 | )
|Marketable securities sold                       |  |                                 | 2,861,458   |   |      |   | 1,494,231  |  
|                                                 |  |                                 |             |   |      |   |            |  
|Net cash provided by investing activities        |  |                                 | 16,242,852  |   |      |   | 194,931    |  
|                                                 |  |                                 |             |   |      |   |            |  
|Cash flows from financing activities:            |  |                                 |             |   |      |   |            |  
|Paid on debt and obligation under lease          |  |                                 | (39,013,191 | ) |      |   | (2,518,015 | )
|Note receivable                                  |  |                                 | 2,500,000   |   |      |   | 0          |  
|Proceeds from debt                               |  |                                 | 18,000,000  |   |      |   | 0          |  
|Preferred stock acquired                         |  |                                 | (56,893     | ) |      |   | (475,954   | )
|                                                 |  |                                 |             |   |      |   |            |  
|Net cash used in financing activities            |  |                                 | (18,570,084 | ) |      |   | (2,993,969 | )
|                                                 |  |                                 |             |   |      |   |            |  
|Decrease in cash and cash equivalents            |  |                                 | (971,852    | ) |      |   | (2,746,126 | )
|Cash and cash equivalents, beginning of period   |  |                                 | 5,852,354   |   |      |   | 8,615,412  |  
|                                                 |  |                                 |             |   |      |   |            |  
|Cash and cash equivalents, end of period         |  | $                               | 4,880,502   |   |      | $ | 5,869,286  |  
|                                                 |  |                                 |             |   |      |   |            |  



See the accompanying Notes to
Consolidated Condensed Financial Statements (Unaudited).



5



---

##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES



NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS



(Unaudited)



1. Basis of Presentation and General
Information



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



The consolidated condensed financial statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair
presentation of results for the interim periods have been made. The results for the three-month period are not necessarily indicative of results to be expected for the full fiscal year. These condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Reports on Forms 10-K and 10-K/A for the year ended September 30, 2003.



2. Summary of Significant Accounting Policies



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



Earnings Per Share. The Company presents its per share results in accordance with Statement of Financial Accounting Standards
(SFAS) No. 128, Earnings Per Share (SFAS 128). SFAS 128 requires the presentation of basic net income (loss) per share and diluted net income (loss) per share. Basic per share amounts are computed by
dividing net income (loss) by average shares outstanding during the period, while diluted per share amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options. Dilutive stock options of
approximately 540,000 were not included in diluted calculations during either quarter ended December 31, 2003 or 2002 since the Company incurred a net loss during both periods and the effect would be antidilutive.



6



---

##### Table of Contents

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



|                                                                                                                                            |  |                                            |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                            |  | Three Months Ended December 31,            |       
|                                                                                                                                            |  | 2003                                       |        |   | 2002 |  
|                                                                                                                                            |  | (amounts in thousandsexcept for per share) |       
|Net loss applicable to common shares                                                                                                        |  | $                                          | (1,907 | ) |      | $ | (1,861 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                            | 0      |   |      |   | 0      |  
|                                                                                                                                            |  |                                            |        |   |      |   |        |  
|Pro forma net loss applicable to common shares                                                                                              |  | $                                          | (1,907 | ) |      | $ | (1,861 | )
|                                                                                                                                            |  |                                            |        |   |      |   |        |  
|Loss per common share:                                                                                                                      |  |                                            |        |   |      |   |        |  
|Basic and diluted -as reported                                                                                                              |  | $                                          | (0.31  | ) |      | $ | (0.30  | )
|                                                                                                                                            |  |                                            |        |   |      |   |        |  
|Basic and diluted -pro forma                                                                                                                |  | $                                          | (0.31  | ) |      | $ | (0.30  | )
|                                                                                                                                            |  |                                            |        |   |      |   |        |  



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



Recently Issued Accounting Standards.  FIN 46. In January 2003, the Financial Accounting Standards Board
(the FASB) issued FASB Interpretation No. (FIN) FIN 46, Consolidation of Variable Interest Entities(VIEs). In December 2003, the FASB reissued Interpretation No. 46 (FIN 46R) with certain
modifications and clarifications. Application of FIN 46R will be effective for interests in certain variable interest entities for periods ending after March 15, 2004 unless FIN 46 was previously applied.



FIN 46 establishes standards for determining under what circumstances VIEs
should be consolidated with their primary beneficiary, including those in which the usual condition for consolidation does not apply. FIN 46 also requires disclosures about unconsolidated VIEs in which the Company has a significant variable
interest. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003 and are effective during the Companys second quarter of its 2004 fiscal year. The Company has evaluated its relationships and does not
believe it has any significant, consolidatable VIEs. As such, the Company does not believe the adoption of this interpretation will have a material impact on its results of operations or financial position.



7



---

##### Table of Contents

3. Cash and Cash Equivalents



At December 31, 2003, the Company held cash and cash equivalents of $4.9 million compared to $5.9 million at September 30,
2003. At December 31, 2003, approximately $1.6 million was held in escrow pursuant to the agreements related to the SFHI Asset Sale. The $1.6 million was released to the Company from the close of escrow in January 2004.



4. Restricted Cash



At December 31, 2003 and September 30, 2003, approximately $0 and $13.9 million, respectively, were held by Santa Fe Hotel
Inc. (SFHI) and was restricted in use and had been pledged to secure SFHIs guaranty of PHIs lease and license obligations. During the three months ended December 31, 2003, the Company satisfied PHIs lease and license
obligations by exercising an early purchase option. In exercising this option, the Company used approximately $12.6 million of restricted cash related to this exercised option. The remaining restricted cash was used to fund capital expenditures
during the three months ended December 31, 2003.



5. Other Assets



Included in Other Assets at December 31, 2003
and September 30, 2003 is a note receivable from PDS Gaming, Inc. with a rate of 10% and a maturity date of the earlier of November 1, 2004, or December 29, 2003 if the Company exercises the Early Purchase Option in accordance with Article 25 of the
lease between HAHF Pioneer, LLC (GE) and PHI (which the Company notified GE that it intends to exercise and in fact did exercise) of approximately $2.4 million and $4.9 million, respectively.



Also included in Other Assets at December 31, 2003 and September
30, 2003 are unamortized loan issue costs, which were incurred when the Company acquired certain rental property and deferred rents of approximately $2.5 million and $2.6 million, respectively. The unamortized loan issue costs are being amortized on
the straight-line basis over the loan period.



Also included in
Other Assets at December 31, 2003 and September 30, 2003 is approximately $700,000 and $700,000, respectively, of commercial and residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third
parties as well as loans made directly by Archon to J & J Mortgage under a master loan agreement. The loans purchased by the Company were purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under
the master loan arrangement bear interest at the prime rate plus 2%. J & J Mortgage is owned by LICO, which in turn is wholly-owned by Paul W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W.
Delaney, a director of the Company, is the president of J & J Mortgage.



8



---

##### Table of Contents

6. Comprehensive Loss



Comprehensive loss is the total of net loss and all other non-stockholder changes in stockholders equity. Comprehensive loss for the three months
ended December 31, 2003 and 2002 is as follows:



|                                         |  |                                |        |   |      |   |        |  
|---------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------ | -
|                                         |  | Three Months EndedDecember 31, |       
|                                         |  | 2003                           |        |   | 2002 |  
|                                         |  | (amounts in thousands)         |       
|Net loss                                 |  | $                              | (1,513 | ) |      | $ | (1,482 | )
|Unrealized gain on marketable securities |  |                                | 81     |   |      |   | 168    |  
|                                         |  |                                |        |   |      |   |        |  
|Comprehensive loss                       |  | $                              | (1,432 | ) |      | $ | (1,314 | )
|                                         |  |                                |        |   |      |   |        |  



7. Related Parties



The Company has entered into a Patent Rights and Royalty Agreement (the
Agreement) with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect to the technology
incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect to the technology,
which will be automatically renewed for additional two-year terms unless Archon terminates the Agreement within thirty days prior to the renewal or the Agreement is otherwise earlier terminated in accordance with its terms. The Company also has an
understanding with David Lowden that it will pay for the costs of commercial development of the technology. At December 31, 2003, the Company has previously expensed approximately $250,000 for commercial development of the technology.



The Company, had previously loaned approximately $1.4 million to Dukes
 Sparks (Dukes), a Nevada limited liability company. The Company, through its wholly-owned subsidiary Archon Sparks Management Company (ASMC), operated Dukes casino. Chris Lowden, son of Paul W. Lowden, is a
limited partner in the company which is a managing member of Dukes. The Company also acquired a $100,000 Class B member interest in Dukes.



In December 2003, Dukes closed its casino operations. The Company has written-off its investment in Dukes and has recorded a reserve for its
receivable from Dukes of approximately $1.4 million during its fiscal year ended September 30, 2003 and has no further asset exposure from Dukes.



See Note 5 for information regarding transactions between the Company and J & J Mortgage.



8. Federal Income Tax



The Company recorded federal income tax benefits based on statutory rates of $779,000 and $764,000, respectively, for the
quarters ended December 31, 2003 and 2002.



9



---

##### Table of Contents

9. Lease Retirement



On December 29, 2003, the Company exercised an early purchase option to acquire leases related to PHI from a third party. The Company paid approximately
$35.6 million in exercising its option to retire certain lease obligations of approximately $18.0 million. Proceeds from debt of approximately $18.0 million as well as a use of marketable securities, cash and collections on certain receivables,
financed this acquisition. Previous agreements, covenants and restrictions on the use of cash related to the lease agreements are no longer applicable. The debt of $18.0 million is secured by land held for investment by the Company, as well as a
personal guaranty from the Companys Chief Executive Office and Chairman of the Board and requires monthly principal and interest payments of approximately $120,000 with a balloon payment of approximately $16.3 million in December 2006. The
debt bears interest at a variable rate (approximately 5% at December 31, 2003).



As part of the early purchase option exercise, whereby the Company paid approximately $1.4 million less than its recorded book value of capital lease obligations, the Company reduced its carrying value of property and
equipment by $1.4 million in accordance with Financial Interpretation No. 26, Accounting for Purchase of a Leased Asset By the Lessee During the Term of the Lease, An Interpretation of FASB Statement No. 13.



10. Supplemental Statement of Cash Flows Information



Supplemental statement of cash flows information for the quarters ended
December 31, 2003 and 2002 is presented below:



|                                                                       |  |                                |       |      |   |      
|---------------------------------------------------------------------- |  | ------------------------------ | ----- | ---- | - | -----
|                                                                       |  | Three Months EndedDecember 31,
|                                                                       |  | 2003                           |       | 2002
|                                                                       |  | (amounts in thousands)        
|Operating activities:                                                  |  |                                |       |      |   |      
|Cash paid during the period for interest                               |  | $                              | 5,468 |      | $ | 5,460
|                                                                       |  |                                |       |      |   |      
|Cash paid during the period for income taxes                           |  | $                              | 0     |      | $ | 0    
|                                                                       |  |                                |       |      |   |      
|Investing and financing non-cash activities:                           |  |                                |       |      |   |      
|Negative amortization of obligation under lease                        |  | $                              | 345   |      | $ | 303  
|                                                                       |  |                                |       |      |   |      
|Reduction of property and equipment from acquisition of capital leases |  | $                              | 1,412 |      | $ | 0    
|                                                                       |  |                                |       |      |   |      
|Unrealized gain on marketable securities                               |  | $                              | 81    |      | $ | 168  
|                                                                       |  |                                |       |      |   |      



10



---

##### Table of Contents

11. Segment Information



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



Set forth below is the financial information for the segments in which the Company operates for the three-month periods ended December 31, 2003 and 2002:



|                              |  |                                 |         |   |      |   |         |  
|----------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -
|                              |  | Three Months Ended December 31, |        
|                              |  | 2003                            |         |   | 2002 |  
|                              |  | (dollars in thousands)          |        
|Pioneer Hotel:                |  |                                 |         |   |      |   |         |  
|Net operating revenues        |  | $                               | 8,037   |   |      | $ | 8,124   |  
|                              |  |                                 |         |   |      |   |         |  
|Operating loss                |  | $                               | (42     | ) |      | $ | (389    | )
|Depreciation and amortization |  |                                 | 606     |   |      |   | 636     |  
|                              |  |                                 |         |   |      |   |         |  
|EBITDA(1)                     |  | $                               | 564     |   |      | $ | 247     |  
|                              |  |                                 |         |   |      |   |         |  
|Interest expense              |  | $                               | 1,252   |   |      | $ | 1,211   |  
|                              |  |                                 |         |   |      |   |         |  
|Interest income               |  | $                               | 7       |   |      | $ | 6       |  
|                              |  |                                 |         |   |      |   |         |  
|Capital expenditures          |  | $                               | 468     |   |      | $ | 100     |  
|                              |  |                                 |         |   |      |   |         |  
|Identifiable assets(2)        |  | $                               | 35,569  |   |      | $ | 36,290  |  
|                              |  |                                 |         |   |      |   |         |  
|Investment Properties:        |  |                                 |         |   |      |   |         |  
|Operating revenues            |  | $                               | 3,101   |   |      | $ | 3,101   |  
|                              |  |                                 |         |   |      |   |         |  
|Operating income              |  | $                               | 2,250   |   |      | $ | 2,250   |  
|Depreciation and amortization |  |                                 | 851     |   |      |   | 851     |  
|                              |  |                                 |         |   |      |   |         |  
|EBITDA(1)                     |  | $                               | 3,101   |   |      | $ | 3,101   |  
|                              |  |                                 |         |   |      |   |         |  
|Interest expense              |  | $                               | 2,501   |   |      | $ | 2,717   |  
|                              |  |                                 |         |   |      |   |         |  
|Interest income               |  | $                               | 0       |   |      | $ | 0       |  
|                              |  |                                 |         |   |      |   |         |  
|Capital expenditures          |  | $                               | 0       |   |      | $ | 0       |  
|                              |  |                                 |         |   |      |   |         |  
|Identifiable assets(2)        |  | $                               | 140,568 |   |      | $ | 143,374 |  
|                              |  |                                 |         |   |      |   |         |  
|Other and Eliminations:       |  |                                 |         |   |      |   |         |  
|Operating revenues            |  | $                               | 545     |   |      | $ | 75      |  
|                              |  |                                 |         |   |      |   |         |  
|Operating loss                |  | $                               | (986    | ) |      | $ | (650    | )
|Depreciation and amortization |  |                                 | 160     |   |      |   | 71      |  
|                              |  |                                 |         |   |      |   |         |  
|EBITDA(1)                     |  | $                               | (826    | ) |      | $ | (579    | )
|                              |  |                                 |         |   |      |   |         |  
|Interest expense              |  | $                               | 24      |   |      | $ | (38     | )
|                              |  |                                 |         |   |      |   |         |  
|Interest income               |  | $                               | 255     |   |      | $ | 427     |  
|                              |  |                                 |         |   |      |   |         |  



11



---

##### Table of Contents

|                              |  |                                |         |      |   |        
|----------------------------- |  | ------------------------------ | ------- | ---- | - | -------
|                              |  | Three Months EndedDecember 31,
|                              |  | 2003                           |         | 2002
|                              |  | (dollars in thousands)        
|Capital expenditures          |  | $                              | 0       |      | $ | 0      
|                              |  |                                |         |      |   |        
|Identifiable assets(2)        |  | $                              | 36,590  |      | $ | 56,599 
|                              |  |                                |         |      |   |        
|Total:                        |  |                                |         |      |   |        
|Operating revenues            |  | $                              | 11,683  |      | $ | 11,300 
|                              |  |                                |         |      |   |        
|Operating income              |  | $                              | 1,222   |      | $ | 1,211  
|Depreciation and amortization |  |                                | 1,617   |      |   | 1,558  
|                              |  |                                |         |      |   |        
|EBITDA(1)                     |  | $                              | 2,839   |      | $ | 2,769  
|                              |  |                                |         |      |   |        
|Interest expense              |  | $                              | 3,777   |      | $ | 3,890  
|                              |  |                                |         |      |   |        
|Interest income               |  | $                              | 262     |      | $ | 433    
|                              |  |                                |         |      |   |        
|Capital expenditures          |  | $                              | 468     |      | $ | 100    
|                              |  |                                |         |      |   |        
|Identifiable assets(2)        |  | $                              | 212,727 |      | $ | 236,263
|                              |  |                                |         |      |   |        

---

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

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



12



---

##### Table of Contents

ARCHON CORPORATION



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



This discussion is intended to further the readers understanding of the consolidated financial condition and results of operations of the Company. 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 Forms 10-K and 10-K/A for the year ended September 30, 2003. These historical financial statements may not be indicative of the Companys future performance.



General



Overview of Business Operations and Trends



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



The Companys
property in Laughlin, Nevada has experienced a flattening of its revenues over the last few years after experiencing strong revenue and profit growth in the early 1990s. Management believes the growth 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. Management believes Laughlin has now
become a mature market with marginal growth forecasted for the next few years based on its current plans.



The Company also owns investment properties on the east coast but these investment properties neither contribute significant profitability or net cash
flow to the Company.



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



Critical Accounting Policies and Estimates



Managements Discussion and Analysis of Financial Condition and
Results of Operations discusses Archons unaudited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial
statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the



13



---

##### Table of Contents

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, among others, affects its more significant judgments and estimates used in the preparation of its unaudited consolidated financial statements:



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



Long-Lived Assets. We have a significant investment in long-lived property and equipment. We estimate that the undiscounted future cash flows expected to result from the use of these assets exceeds the current carrying value
of these assets. Any adverse change in the estimate of these undiscounted future cash flows could necessitate an impairment charge that would adversely affect operating results. We estimate useful lives for our 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, we would record an impairment charge. We review useful lives and
obsolescence and we assess the commercial viability of these assets periodically.



Income Taxes. The Company has recorded a valuation allowance to reduce its deferred tax assets to the balance it believes can be recovered based on forecasted taxable income. 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. 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, an adjustment to decrease the valuation allowance would increase income in the period in
which the profit is realized.



Results of Operations  Three Months
Ended December 31, 2003 and 2002



Consolidated



Net Operating Revenues. Consolidated net operating revenues
for the three months ended December 31, 2003 were $11.7 million, an approximate $400,000, or 3.4%, increase from $11.3 million for the three months ended December 31, 2002. Income from investment properties was $3.1 million in each of the quarters
ended December 31, 2003 and 2002. Net operating revenues decreased by $100,000 to $8.0 million at the Pioneer Hotel and Gambling Hall (the Pioneer) compared to the three months ended December 31, 2002. Archon Sparks Management Company
(ASMC), which began operating Dukes Casino in February 2003 and closed on December 31, 2003, had revenues of $400,000.



14



---

##### Table of Contents

Operating Expenses. Total operating expenses for the three months ended December 31,
2003 were $10.5 million, a $400,000, or 3.7%, increase from $10.1 million for the three months ended December 31, 2002. Total operating expenses as a percentage of net revenue increased to 89.5% for the three months ended December 31, 2003 from
89.3% for the three months ended December 31, 2002. Operating expenses decreased by $400,000, or 5.1%, at the Pioneer due principally to headcount reductions throughout 2003. ASMC had operating expenses of $700,000 during the 2003 quarter as
compared to $0 in the 2002 quarter.



Operating
Income. Consolidated operating income for the three months ended December 31, 2003 was $1.2 million, unchanged from $1.2 million for the three months ended December 31, 2002. Operating income of $2.3 million for the three months ended
December 31, 2003 and 2002, respectively, is attributable to the investment properties. Operating loss decreased by $340,000 to $40,000 at the Pioneer. ASMC had an operating loss of $300,000.



Interest Expense. Consolidated interest expense for the
three months ended December 31, 2003 was $3.8 million, a $100,000 decrease compared to $3.9 million for the three months ended December 31, 2002.



Interest Income. Consolidated interest income for the three months ended December 31, 2003 was $300,000, a $100,000 decrease compared to
$400,000 for the three months ended December 31, 2002, primarily due to a decrease in investment in marketable securities.



Loss Before Income Tax. Consolidated loss before income tax for the three months ended December 31, 2003 was $2.3 million, a $100,000
increase compared to a loss of $2.2 million for the three months ended December 31, 2002.



Federal Income Tax. The Company recorded a federal income tax benefit of approximately $800,000 for the three months ended December 31, 2003 and 2002 based on statutory income tax rates.



Preferred Share Dividends. Undeclared preferred
share dividends are not recorded in the stockholders equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred stock. However, dividends of approximately $400,000 for each of the three
months ended December 31, 2003 and 2002, respectively, accrued on the preferred stock for purposes of calculating net loss applicable to common shares.



Net Loss. Consolidated net loss attributable to common shares was $1.9 million, or $0.31 per common share, for the three months ended
December 31, 2003 similar to the net loss attributable to common shares of $1.9 million, or $0.30 per common share, for the three months ended December 31, 2002.



Pioneer



General. Casino, hotel and food / beverage revenues and expenses at the Pioneer comprise the majority of consolidated casino, hotel and food
/ beverage revenues and expenses included in the Companys unaudited consolidated condensed statements of operations and are discussed separately below. There are other insignificant casino and food / beverage revenues and expenses in the 2003
quarterly period from ASMC which are not discussed in similar detail below.



Net Operating Revenues. Net operating revenues at the Pioneer decreased $100,000, or 1.1%, to $8.0 million for the three months ended December 31, 2003 from $8.1 million for the three months ended
December 31, 2002 due to a decrease in the number of casino patrons.



15



---

##### Table of Contents

Casino revenues increased $300,000, or 3.9%, to $7.0 million for the three months ended December 31, 2003
from $6.8 million for the three months ended December 31, 2002. Slot and video poker revenues increased $400,000, or 6.5%, to $6.1 million for the three months ended December 31, 2003 from $5.8 million for the three months ended December 31, 2002.
Management believes this increase was a result of the utilization of newer slot equipment in the 2003 quarter which had a slightly higher hold percentage. Other gaming revenues, including table games, decreased $100,000, or 11.2%, to $900,000 for
the three months ended December 31, 2003 from $1.0 million for the three months ended December 31, 2002. Casino promotional allowances increased, $600,000, or 44.5%, to $2.0 million for the three months ended December 31, 2003 from $1.4 million for
the three months ended December 31, 2002 primarily due to enhancements made to the Pioneers players club program.



Net hotel revenues remained unchanged at approximately $600,000 for the three month periods ended December 31, 2003 and 2002, as a decrease in occupancy
rate to 60.8% from 65.8% for the three months ended December 31, 2003 was offset by an increase in average daily room rate. Food and beverage revenues increased $400,000, or 21.6%, to $2.1 million for the three months ended December 31, 2003
compared to $1.7 million for the three months ended December 31, 2002 primarily due to the increase in casino promotional allowances. Other revenues decreased $200,000, or 34.3%, to $300,000 for the three months ended December 31, 2003 from $500,000
for the three months ended December 31, 2002 due to decreased sales in the Pioneers retail outlets caused by competition from retail sales in other casinos in Laughlin.



Operating Expenses. Operating expenses decreased $400,000, or 5.1%, to $8.1 million for the three
months ended December 31, 2003 from $8.5 million for the three months ended December 31, 2002, as discussed below. Operating expenses as a percentage of revenue decreased to 100.5% for the three months ended December 31, 2003 from 104.8% for the
three months ended December 31, 2002 principally as a result of the aforementioned reduction in headcount during 2003.



Casino expenses were unchanged at $3.9 million for the three months ended December 31, 2003 and 2002. The increase in casino promotional allowances was
offset by reductions in other casino expenses. Casino expenses as a percentage of casino revenues decreased to 55.4% for the three months ended December 31, 2003 from 57.2% for the three months ended December 31, 2002. Hotel expenses were relatively
unchanged at $100,000 for the three months ended December 31, 2003 compared to $200,000 for the three months ended December 31, 2002. Food and beverage expenses were unchanged at $900,000 for the three months ended December 31, 2003 and 2002. An
increase in cost of sales was offset by reductions in other food and beverage expenses. Food and beverage expenses as a percentage of food and beverage revenues decreased to 41.4% for the three months ended December 31, 2003 from 51.2% for the three
months ended December 31, 2002. Other expenses decreased $200,000, or 41.9%, to $300,000 for the three months ended December 31, 2003 compared to $500,000 for the three months ended December 31, 2002. The decrease was related to the lower volume of
retail sales. Other expenses as a percentage of other revenues decreased to 81.6% for the three months ended December 31, 2003 from 92.1% for the three months ended December 31, 2002.



Selling, general and administrative expenses decreased $200,000, or $15.6%, to $1.2 million for the three months ended
December 31, 2003 from $1.4 million for the three months ended December 31, 2002 primarily due to decreased advertising and payroll expenses. Selling, general and administrative expenses as a percentage of revenues decreased to 15.0% for the three
months ended December 31, 2003 from 17.6% for the three months ended December 31, 2002. Utilities and property expenses were unchanged at $1.1 million for the three months ended December 31, 2003 and 2002. Utilities and property expenses as a
percentage of revenues increased to 13.6% for the three months ended December 31, 2003 from 12.9% for the three months ended December 31, 2002. Depreciation and amortization expenses were unchanged at $600,000 for the three months ended December 31,
2003 and 2002.



16



---

##### Table of Contents

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



Contractual Obligations and Commitments: The following table
summarizes the Companys fiscal year contractual obligations and commitments as of December 31, 2003 (for the nine month period ending September 30, 2004 and for the fiscal years ending September 30, 2005, 2006, 2007, 2008, 2009, 2010 and
thereafter.)



|                    |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        
|------------------- |  | --------------------------- | ----- | ---- | - | ------ |  | ---- | ----- | ---- | - | ------ |  | ------------------ | ----- | ----- | - | ----- |  | - | ------- |  | - | -------
|                    |  | Payments Due By Periods (1)
|                    |  | 2004                        |       | 2005 |   | 2006   |  | 2007 |       | 2008 |   | 2009   |  | 2010 andThereafter |       | Total
|                    |  | (dollars in thousands)     
|Non-recourse debt:  |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        
|Gaithersburg        |  | $                           | 1,076 |      | $ | 1,658  |  | $    | 1,915 |      | $ | 2,195  |  | $                  | 2,490 |       | $ | 2,828 |  | $ | 40,302  |  | $ | 52,464 
|Sovereign           |  |                             | 2,565 |      |   | 28,400 |  |      | 0     |      |   | 0      |  |                    | 0     |       |   | 0     |  |   | 31,199  |  |   | 62,164 
|Debt:               |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        
|Building            |  |                             | 46    |      |   | 70     |  |      | 80    |      |   | 14     |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 210    
|Equipment           |  |                             | 547   |      |   | 589    |  |      | 317   |      |   | 0      |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 1,453  
|Mortgage obligation |  |                             | 390   |      |   | 565    |  |      | 594   |      |   | 16,451 |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 18,000 
|Other               |  |                             | 2,246 |      |   | 6      |  |      | 0     |      |   | 0      |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 2,252  
|Operating leases:   |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        
|Ground lease        |  |                             | 608   |      |   | 807    |  |      | 807   |      |   | 807    |  |                    | 807   |       |   | 807   |  |   | 55,915  |  |   | 60,558 
|Corporate offices   |  |                             | 89    |      |   | 108    |  |      | 54    |      |   | 0      |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 251    
|                    |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        
|Total               |  | $                           | 7,567 |      | $ | 32,203 |  | $    | 3,767 |      | $ | 19,467 |  | $                  | 3,297 |       | $ | 3,635 |  | $ | 127,416 |  | $ | 197,352
|                    |  |                             |       |      |   |        |  |      |       |      |   |        |  |                    |       |       |   |       |  |   |         |  |   |        

---

|(1) | Expected cash interest payments are $7.0 million, $11.1 million, $8.2 million, $7.4 million, $7.0 million, $6.8 million and $52.8 million for the nine months ending September 30,
2004, the fiscal years ending September 30, 2005, 2006, 2007, 2008, 2009, 2010 and thereafter, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our ability to service our contractual obligations and commitments 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 our
control. In addition, we will be dependent on the continued ability of the tenants in the investment properties in Gaithersburg, Maryland and Dorchester, Massachusetts to make payments pursuant to the leases with the Company. The payments under the
leases are contractually committed to be used to make payments on the Companys non-recourse debt obligations related to the properties.



Liquidity. As of December 31, 2003, the Company held cash and cash equivalents of $4.9 million compared to $5.9 million at September
30, 2003. Approximately $1.6 million at December 31, 2003 was held in escrow pursuant to the agreements related to the sale of the Santa Fe assets. The $1.6 million was released to the Company from the close of escrow in January 2004. In addition,
the Company had $4.5 million in investment in marketable securities at December 31, 2003. The investment properties were structured such that future tenants payments cover future required mortgage payments. Management believes that the Company will
have sufficient available cash and cash resources to meet its cash requirements through the twelve month period ending December 31, 2004.



17



---

##### Table of Contents

Cash Flows from Operating Activities. The Companys cash provided by operating
activities was $1.4 million for the three months ended December 31, 2003 as compared to $100,000 for the three months ended December 31, 2002. The increase was primarily due to a decrease in accounts receivable, net.



Cash Flows from Investing Activities. Cash provided by
investing activities was $16.2 million for the three months ended December 31, 2003, as compared to cash provided by investing activities of $200,000 for the three months ended December 31, 2002 due to a reduction in restricted cash and marketable
securities. The restricted cash and marketable securities were used to fund, in part, the purchase of certain lease obligations as described below.



Cash Used in Financing Activities. Cash used in financing activities was $18.6 million for the three months ended December 31, 2003
as compared to $3.0 million for the three months ended December 31, 2002. For the three months ended December 31, 2003 and 2002, the Company repaid $39.0 million and $2.5 million of debt and obligations under lease, respectively. For the three
months ended December 31, 2003, the Company received a $2.5 million payment on a note receivable and $18.0 million proceeds from a loan, as described below. For the three months ended December 31, 2002, the Company used $500,000 to acquire shares of
its preferred stock.



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



The Companys primary use of funds is for operations of Archon, which includes costs of executive and administrative personnel, administrative functions and costs to explore development opportunities. The Company had the option to
acquire the Pioneer during the period from December 29, 2003 to December 31, 2007. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company
would exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO was exercised on December 29, 2003 in the amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS
Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.5 million from marketable securities. Obligations under lease of $37.0 million were retired under this
option. Accordingly, the Company recorded a reduction of its carrying value of property and equipment at the Pioneer of approximately $1.4 million in connection with this transaction.



Pioneer



Pioneers principal uses of cash are for payments of obligations under lease, rent and capital expenditures to maintain the facility. The Company has
implemented changes in personnel, promotional programs and slot equipment to address the decreases in revenues and operating income. One of managements main focuses is to recapture market share that has been lost in the Laughlin market.
Additionally, capital improvements to the Pioneers food and beverage and other retail outlets were completed in October 2003. The capital expenditures totaled approximately $900,000 and were mainly



18



---

##### Table of Contents

funded with cash from Pioneers restricted cash accounts. As a result of the Companys exercise of its early
purchase option to retire the leases, there are no longer any restrictions on the use of Pioneers cash nor are there any other operational restrictions or requirements which otherwise existed prior to the exercise.



Payments of obligations under lease were $900,000, for each of the three
months ended December 31, 2003 and 2002 and rent expense was approximately $200,000 for each of the three months ended December 31, 2003 and 2002. Capital expenditures to maintain the facility in fiscal 2004 are expected to be approximately $1.5
million.



As a consequence of the exercise of the EPO, payments
of obligations under lease, which would have increased in January 2004 from $280,000 per month to $340,000 per month, ceased after December 2003. Instead, the Company will be making principal and interest payments of $120,000 per month on a new
mortgage loan, which is secured by land held for investment in Las Vegas and by a personal guaranty from the Companys Chief Executive Officer.



Dukes Casino



The Company, had previously loaned approximately $1.4 million to Dukes  Sparks (Dukes), a Nevada limited liability company.
The Company, through its wholly-owned subsidiary ASMC, operated Dukes casino. Chris Lowden, son of Paul W. Lowden, is a limited partner in the company which is a managing member of Dukes. The Company also acquired a $100,000 Class B
member interest in Dukes.



In December 2003, Dukes
closed its casino operations. The Company has written-off its investment in Dukes and has recorded a reserve for its receivable from Dukes of approximately $1.4 million during its fiscal year ended September 30, 2003 and has no further
asset exposure from Dukes.



Preferred Stock



The Companys preferred stock provides that
dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company has not declared the
semiannual preferred stock dividends since October 1, 1996. The dividend rate per annum was equal to 8% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11%; the dividend rate
continued to increase by an additional 50 basis points on each succeeding semiannual dividend payment date up to a maximum of 16% per annum. In October 2003, the dividend rate increased to 16.0%. As of December 31, 2003, the aggregate liquidation
preference of the preferred stock was $18.4 million, or $3.99 per share.



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



19



---

##### Table of Contents

The Board of Directors of the Company authorized an increase in the amount of cash that may be used to
purchase preferred stock to $2.5 million. As of March 11, 2004, the Company had purchased 795,228 shares of preferred stock for $1,213,382 under this program. During the three months ended December 31, 2003, the Company purchased 33,940 shares for
$56,892.



Recently Issued Accounting Standards



FIN 46. In January 2003, the Financial Accounting
Standards Board (the FASB) issued FASB Interpretation No. (FIN) FIN 46, Consolidation of Variable Interest Entities(VIEs). In December 2003, the FASB reissued Interpretation No. 46 (FIN 46R)
with certain modifications and clarifications. Application of FIN 46R will be effective for interests in certain variable interest entities for periods ending after March 15, 2004 unless FIN 46 was previously applied.



FIN 46 establishes standards for determining under what circumstances VIEs
should be consolidated with their primary beneficiary, including those in which the usual condition for consolidation does not apply. FIN 46 also requires disclosures about unconsolidated VIEs in which the Company has a significant variable
interest. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003 and is effective during the Companys second quarter of its 2004 fiscal year. The Company has evaluated its relationships and does not
believe it has any significant, consolidatable VIEs. As such, the Company does not believe the adoption of this interpretation will have a material impact on its results of operations or financial position.



Effects of Inflation



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



Private Securities Litigation Reform Act



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



20



---

##### Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk



Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity
process. Excluding its non-recourse debt, the Company has total interest-bearing debt at December 31, 2003 of approximately $21.9 million, of which approximately $20.2 million bears interest at a variable rate (approximately 5% at December 31,
2003). Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would cause an approximate $202,000 change in the amount of interest the Company would incur based on the amount of
variable-interest rate debt outstanding for any current or future year in which this debt is outstanding. Future borrowings related to this debt will be exposed to this same market rate risk.



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.



21



---

##### Table of Contents

Item 4. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



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



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



However, our audit committee has recently reviewed our internal disclosure controls and procedures in light of our mistaken belief, in connection with our original filing of our annual report on Form 10-K filed on December 29, 2003, that
our independent auditors, Deloitte & Touche LLP, had delivered its audit report and consent. The audit committee has concluded that our new Chief Financial Officer should further evaluate our disclosure controls and procedures to determine if,
in fact, any changes would provide more assurance of achieving the desired control objectives.



No change in our internal control over financial reporting occurred during the quarter just ended that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.



Changes in Internal Controls



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. There were no significant deficiencies or material weaknesses, and therefore no corrective actions were taken.



22



---

##### Table of Contents

ARCHON CORPORATION



PART II
 OTHER INFORMATION



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



None



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



The table below sets forth information regarding repurchases of Archon preferred stock during the three months ended
December 31, 2003.



|                                           |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|------------------------------------------ |  | ----------------------------- |  | ------------------------ | ---- | ------------------------------------------------------------------------- | ------- | ---------------------------------------------------------------------------- | - | ---------
|Period                                     |  | TotalNumberof SharesPurchased |  | AveragePricePaidPerShare |      | TotalNumber ofSharesPurchasedas Part of PubliclyAnnouncedPlans orPrograms |         | MaximumDollar Valueof Sharesthat MayYet BePurchasedUnder thePlans orPrograms
|October 2003:                              |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|October 1, 2003 through October 31, 2003   |  | 12,894                        |  | $                        | 1.75 |                                                                           | 774,182 |                                                                              | $ | 1,320,908
|                                           |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|                                           |  |                               |  |                         
|November 2003:                             |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|November 1, 2003 through November 30, 2003 |  | 3,500                         |  | $                        | 1.71 |                                                                           | 777,682 |                                                                              | $ | 1,314,925
|                                           |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|                                           |  |                               |  |                         
|December 2003:                             |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          
|December 1, 2003 through December 31, 2003 |  | 17,546                        |  | $                        | 1.61 |                                                                           | 795,228 |                                                                              | $ | 1,286,618
|                                           |  |                               |  |                          |      |                                                                           |         |                                                                              |   |          



All shares of
preferred stock were purchased pursuant to a $2,500,000 stock repurchase program which was previously approved by our Board of Directors. Funds are available until expended or until the program is suspended by the Chief Executive Officer or by the
Board of Directors.



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



The Company has outstanding redeemable exchangeable cumulative preferred stock (Preferred Stock). Prior to fiscal 1997, the Company satisfied
the semi-annual dividend payments on its Preferred Stock through the issuance of paid in kind dividends. Commencing in fiscal 1997, dividends paid on the Preferred Stock, to the extent declared, must be paid in cash. No dividends have been declared
on the Preferred Stock since October 1, 1996. Pursuant to the terms of the Certificate of Designation with respect to the Preferred Stock, dividends that are not declared are cumulative and accrue. The dividend rate per annum was equal to 8% of
$2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11% and the dividend continued to increase by an additional 50 basis points on each succeeding semi-annual dividend payment date up to a
maximum of 16% per annum. The dividend rate is 16% effective October 1, 2003. The accrued stock dividends have not been recorded as an increase to the Preferred Stock account. As of December 31, 2003, the aggregate liquidation preference of the
Preferred Stock was approximately $18.4 million, or $3.99 per share.



|Item 4. |  | Submission of Matters to aVote of Security Holders
|------- |  | --------------------------------------------------



None



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



None



23



---

##### Table of Contents

Item 6. Exhibits and Reports on Form 8-K



|   |  |                      |  |                                                                                                                                                                                                
|-- |  | -------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|a. |  | Exhibits.           
|   |  |                     
|   |  | ExhibitNumber        |  | Description of Exhibit                                                                                                                                                                         
|   |  |                     
|   |  | 31.1                 |  | Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.                                                                                                
|   |  |                     
|   |  | 31.2                 |  | Certification of Chief Financial 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.                                                                                                                       
|   | 
|b. |  | Reports on Form 8-K.
|   |  |                     
|   |  |                      |  | Current Report on Form 8-K filed with the SEC on December 15, 2003 clarifying the Companys development plans previously made in a press release dated December 5, 2003.                       
|   |  |                     
|   |  |                      |  | Current Report on Form 8-K filed with the SEC on January 13, 2004 announcing the acquisition of the Pioneer and the closing of the Dukes Casino.                                              
|   |  |                     
|   |  |                      |  | Current Report on Form 8-K filed with the SEC on February 11, 2004 regarding the appointment of John M. Garner as Chief Financial Officer, Secretary and Treasurer.                            
|   |  |                     
|   |  |                      |  | Current Report on Form 8-K filed with the SEC on March 2, 2004 publicly announcing that the Company restated its consolidated financial statements for the fiscal year ended September 30,
2003



24



---

##### Table of Contents

SIGNATURES



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



ARCHON CORPORATION, RegistrantBy:

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

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




Date: March 15,
2004



25