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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended: March 31, 2006



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

For the transition period from  to

Commission
File Number: 1-9481

ARCHON CORPORATION

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive office and zip code)

(702) 732-9120

(Registrants telephone number, including area code)

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

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

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

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date. 6,235,931 as of May 12, 2006



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##### Table of Contents

ARCHON CORPORATION

INDEX



|        |  |                                                                                                            |  |     
|------- |  | ---------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                            |  | Page
|        |  |                                                                                                           
|PART I  |  | FINANCIAL INFORMATION                                                                                      |  |     
|        |  |                                                                                                           
|Item 1  |  | Unaudited Condensed Consolidated Financial Statements:                                                     |  |     
|        |  |                                                                                                           
|        |  | Condensed Consolidated Balance Sheets as of March 31, 2006 and September 30, 2005                          |  | 1   
|        |  |                                                                                                           
|        |  | Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2006 and 2005 |  | 3   
|        |  |                                                                                                           
|        |  | Condensed Consolidated Statement of Stockholders Equity for the six months ended March 31, 2006           |  | 4   
|        |  |                                                                                                           
|        |  | Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2006 and 2005           |  | 5   
|        |  |                                                                                                           
|        |  | Notes to Condensed Consolidated Financial Statements                                                       |  | 6   
|        |  |                                                                                                           
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                      |  | 17  
|        |  |                                                                                                           
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                 |  | 27  
|        |  |                                                                                                           
|Item 4  |  | Controls and Procedures                                                                                    |  | 27  
|        |  |                                                                                                           
|PART II |  | OTHER INFORMATION                                                                                          |  |     
|        |  |                                                                                                           
|Item 1  |  | Legal Proceedings                                                                                          |  | 29  
|        |  |                                                                                                           
|Item 2  |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                |  | 29  
|        |  |                                                                                                           
|Item 3  |  | Defaults Upon Senior Securities                                                                            |  | 30  
|        |  |                                                                                                           
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                        |  | 30  
|        |  |                                                                                                           
|Item 5  |  | Other Information                                                                                          |  | 30  
|        |  |                                                                                                           
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                           |  | 31  



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##### Table of Contents

PART I  FINANCIAL INFORMATION



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

Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                    |  |               |             |                   |   |            
|----------------------------------- |  | ------------- | ----------- | ----------------- | - | -----------
|                                    |  | March 31,2006 |             | September 30,2005
|ASSETS                              |  |               |             |                   |   |            
|Current assets:                     |  |               |             |                   |   |            
|Cash and cash equivalents           |  | $             | 3,209,391   |                   | $ | 2,116,708  
|Investment in marketable securities |  |               | 7,051,650   |                   |   | 6,803,967  
|Accounts receivable, net            |  |               | 1,082,674   |                   |   | 1,051,998  
|Inventories                         |  |               | 392,416     |                   |   | 355,459    
|Prepaid expenses and other          |  |               | 1,187,309   |                   |   | 761,307    
|                                    |  |               |             |                   |   |            
|Total current assets                |  |               | 12,923,440  |                   |   | 11,089,439 
|Land held for development           |  |               | 21,504,400  |                   |   | 21,504,400 
|Property held for investment, net   |  |               | 128,950,569 |                   |   | 130,536,513
|Property and equipment, net         |  |               | 27,641,481  |                   |   | 28,713,752 
|Other assets                        |  |               | 8,282,638   |                   |   | 7,793,447  
|                                    |  |               |             |                   |   |            
|Total assets                        |  | $             | 199,302,528 |                   | $ | 199,637,551
|                                    |  |               |             |                   |   |            

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



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##### Table of Contents

Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (continued)



|                                           |  |               |             |                   |   |            
|------------------------------------------ |  | ------------- | ----------- | ----------------- | - | -----------
|                                           |  | March 31,2006 |             | September 30,2005
|LIABILITIES and STOCKHOLDERS EQUITY       |  |               |             |                   |   |            
|Current liabilities:                       |  |               |             |                   |   |            
|Accounts payable                           |  | $             | 2,275,538   |                   | $ | 2,096,606  
|Interest payable                           |  |               | 1,317,880   |                   |   | 1,255,096  
|Accrued and other liabilities              |  |               | 3,620,420   |                   |   | 3,197,668  
|Current portion of debt                    |  |               | 14,707,906  |                   |   | 14,915,525 
|Current portion of non-recourse debt       |  |               | 2,051,633   |                   |   | 1,915,478  
|                                           |  |               |             |                   |   |            
|Total current liabilities                  |  |               | 23,973,377  |                   |   | 23,380,373 
|Debt  less current portion                |  |               | 298,977     |                   |   | 484,856    
|Non-recourse debt  less current portion   |  |               | 77,950,611  |                   |   | 79,013,926 
|Deferred income taxes                      |  |               | 27,726,022  |                   |   | 27,353,693 
|Other liabilities                          |  |               | 47,133,222  |                   |   | 48,021,017 
|Stockholders equity                       |  |               | 22,220,319  |                   |   | 21,383,686 
|                                           |  |               |             |                   |   |            
|Total liabilities and stockholders equity |  | $             | 199,302,528 |                   | $ | 199,637,551
|                                           |  |               |             |                   |   |            

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



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##### Table of Contents

Archon Corporation and Subsidiaries

Condensed Consolidated Statements of Operations



|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                        |  | Three Months EndedMarch 31, |            |   | Six Months EndedMarch 31, |  
|                                                        |  | 2006                        |            |   | 2005                      |   |            | 2006 |  |   | 2005       |  
|Revenues:                                               |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                  |  | $                           | 7,388,010  |   |                           | $ | 6,797,877  |      |  | $ | 13,085,200 |   |  | $ | 12,569,705 |  
|Hotel                                                   |  |                             | 773,747    |   |                           |   | 705,397    |      |  |   | 1,332,129  |   |  |   | 1,235,529  |  
|Food and beverage                                       |  |                             | 2,061,936  |   |                           |   | 1,871,513  |      |  |   | 3,732,189  |   |  |   | 3,539,768  |  
|Investment properties                                   |  |                             | 3,100,561  |   |                           |   | 3,100,561  |      |  |   | 6,201,123  |   |  |   | 6,201,123  |  
|Other                                                   |  |                             | 877,930    |   |                           |   | 1,109,742  |      |  |   | 1,706,239  |   |  |   | 1,660,690  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Gross revenues                                          |  |                             | 14,202,184 |   |                           |   | 13,585,090 |      |  |   | 26,056,880 |   |  |   | 25,206,815 |  
|Less casino promotional allowances                      |  |                             | (1,753,594 | ) |                           |   | (1,542,888 | )    |  |   | (3,168,797 | ) |  |   | (2,989,249 | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net operating revenues                                  |  |                             | 12,448,590 |   |                           |   | 12,042,202 |      |  |   | 22,888,083 |   |  |   | 22,217,566 |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating expenses:                                     |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                  |  |                             | 3,631,031  |   |                           |   | 3,435,319  |      |  |   | 6,954,494  |   |  |   | 6,734,896  |  
|Hotel                                                   |  |                             | 259,032    |   |                           |   | 259,846    |      |  |   | 502,982    |   |  |   | 464,923    |  
|Food and beverage                                       |  |                             | 987,984    |   |                           |   | 1,026,691  |      |  |   | 1,920,655  |   |  |   | 2,055,905  |  
|Other                                                   |  |                             | 426,348    |   |                           |   | 253,976    |      |  |   | 821,273    |   |  |   | 505,108    |  
|Selling, general and administrative                     |  |                             | 866,280    |   |                           |   | 804,290    |      |  |   | 1,749,895  |   |  |   | 1,766,650  |  
|Corporate expenses                                      |  |                             | 920,781    |   |                           |   | 1,072,971  |      |  |   | 1,777,676  |   |  |   | 2,202,338  |  
|Utilities and property expenses                         |  |                             | 1,101,343  |   |                           |   | 1,117,396  |      |  |   | 2,230,119  |   |  |   | 2,297,988  |  
|Depreciation and amortization                           |  |                             | 1,380,824  |   |                           |   | 1,461,656  |      |  |   | 2,771,029  |   |  |   | 2,965,579  |  
|Loss (gain) on disposal of assets                       |  |                             | 0          |   |                           |   | (3,771     | )    |  |   | 0          |   |  |   | 244,648    |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                                |  |                             | 9,573,623  |   |                           |   | 9,428,374  |      |  |   | 18,728,123 |   |  |   | 19,238,035 |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Operating income                                        |  |                             | 2,874,967  |   |                           |   | 2,613,828  |      |  |   | 4,159,960  |   |  |   | 2,979,531  |  
|Interest expense                                        |  |                             | (2,193,311 | ) |                           |   | (2,837,911 | )    |  |   | (4,422,922 | ) |  |   | (5,742,330 | )
|Interest and other income                               |  |                             | 59,514     |   |                           |   | 626,070    |      |  |   | 189,073    |   |  |   | 810,109    |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Income (loss) before income taxes                       |  |                             | 741,170    |   |                           |   | 401,987    |      |  |   | (73,889    | ) |  |   | (1,952,690 | )
|Federal income tax (expense) benefit                    |  |                             | (259,410   | ) |                           |   | (140,695   | )    |  |   | 25,861     |   |  |   | 683,442    |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net income (loss)                                       |  |                             | 481,760    |   |                           |   | 261,292    |      |  |   | (48,028    | ) |  |   | (1,269,248 | )
|Dividends accrued on preferred shares                   |  |                             | (377,820   | ) |                           |   | (386,925   | )    |  |   | (755,639   | ) |  |   | (773,850   | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Net income (loss) applicable to common shares           |  | $                           | 103,940    |   |                           | $ | (125,633   | )    |  | $ | (803,667   | ) |  | $ | (2,043,098 | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Average common shares outstanding                       |  |                             | 6,235,931  |   |                           |   | 6,224,033  |      |  |   | 6,235,931  |   |  |   | 6,222,718  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Average common and common equivalent shares outstanding |  |                             | 6,772,605  |   |                           |   | 6,224,033  |      |  |   | 6,235,931  |   |  |   | 6,222,718  |  
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Income (loss) per common share:                         |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                   |  | $                           | 0.02       |   |                           | $ | (0.02      | )    |  | $ | (0.13      | ) |  | $ | (0.33      | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  
|Diluted                                                 |  | $                           | 0.02       |   |                           | $ | (0.02      | )    |  | $ | (0.13      | ) |  | $ | (0.33      | )
|                                                        |  |                             |            |   |                           |   |            |      |  |   |            |   |  |   |            |  

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



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Archon Corporation and Subsidiaries

Condensed Consolidated Statements of Stockholders Equity

For the Six Months Ended March 31, 2006



|                                         |  |             |        |                |   |                          |  |                    |            |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | -------------- | - | ------------------------ |  | ------------------ | ---------- |  | ----------------------------------- | ----------- | ------------- |  | - | --------- |  | - | ------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | PreferredStock |   | AdditionalPaid-InCapital |  | AccumulatedDeficit |            |  | AccumulatedOtherComprehensiveIncome |             | TreasuryStock |  |   | Total     | 
|Balances, October 1, 2005                |  | $           | 62,359 |                | $ | 9,445,483                |  | $                  | 58,342,933 |  | $                                   | (47,742,393 | )             |  | $ | 1,363,078 |  | $ | (87,774 | ) |  | $ | 21,383,686 |  
|Net loss                                 |  |             |        |                |   |                          |  |                    |            |  |                                     | (48,028     | )             |  |   |           |  |   |         |   |  |   | (48,028    | )
|Stock-based compensation                 |  |             |        |                |   |                          |  |                    | 145,168    |  |                                     |             |               |  |   |           |  |   |         |   |  |   | 145,168    |  
|Unrealized gain on marketable securities |  |             |        |                |   |                          |  |                    |            |  |                                     |             |               |  |   | 739,493   |  |   |         |   |  |   | 739,493    |  
|                                         |  |             |        |                |   |                          |  |                    |            |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  
|Balances, March 31, 2006                 |  | $           | 62,359 |                | $ | 9,445,483                |  | $                  | 58,488,101 |  | $                                   | (47,790,421 | )             |  | $ | 2,102,571 |  | $ | (87,774 | ) |  | $ | 22,220,319 |  
|                                         |  |             |        |                |   |                          |  |                    |            |  |                                     |             |               |  |   |           |  |   |         |   |  |   |            |  

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



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Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows



|                                                    |  |                            |            |   |      |   |             |  
|--------------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                    |  | Six Months Ended March 31, |           
|                                                    |  | 2006                       |            |   | 2005 |  
|Cash flows from operating activities:               |  |                            |            |   |      |   |             |  
|Cash and cash equivalents provided by operations    |  | $                          | 3,057,686  |   |      | $ | 2,313,008   |  
|Changes in assets and liabilities:                  |  |                            |            |   |      |   |             |  
|Accounts receivable, net                            |  |                            | (30,676    | ) |      |   | (11,290,320 | )
|Inventories                                         |  |                            | (36,957    | ) |      |   | 29,593      |  
|Prepaid expenses and other                          |  |                            | (426,004   | ) |      |   | (258,564    | )
|Deferred income taxes                               |  |                            | (25,861    | ) |      |   | (683,442    | )
|Other assets                                        |  |                            | (268,374   | ) |      |   | (209,395    | )
|Accounts payable                                    |  |                            | 178,932    |   |      |   | 364,873     |  
|Interest payable                                    |  |                            | 62,784     |   |      |   | (59,259     | )
|Accrued and other liabilities                       |  |                            | (465,043   | ) |      |   | 14,885,970  |  
|                                                    |  |                            |            |   |      |   |             |  
|Net cash provided by operating activities           |  |                            | 2,046,487  |   |      |   | 5,092,464   |  
|                                                    |  |                            |            |   |      |   |             |  
|Cash flows from investing activities:               |  |                            |            |   |      |   |             |  
|Capital expenditures                                |  |                            | (112,813   | ) |      |   | (299,164    | )
|Marketable securities purchased                     |  |                            | 0          |   |      |   | (851,177    | )
|Marketable securities sold                          |  |                            | 890,000    |   |      |   | 0           |  
|Investments in partnerships                         |  |                            | (410,333   | ) |      |   | (150,000    | )
|                                                    |  |                            |            |   |      |   |             |  
|Net cash provided by (used in) investing activities |  |                            | 366,854    |   |      |   | (1,300,341  | )
|                                                    |  |                            |            |   |      |   |             |  
|Cash flows from financing activities:               |  |                            |            |   |      |   |             |  
|Proceeds from debt                                  |  |                            | 683,069    |   |      |   | 793,526     |  
|Paid on debt and obligation under lease             |  |                            | (2,003,727 | ) |      |   | (4,659,798  | )
|Stock options exercised                             |  |                            | 0          |   |      |   | 13,120      |  
|Preferred stock acquired                            |  |                            | 0          |   |      |   | (534        | )
|                                                    |  |                            |            |   |      |   |             |  
|Net cash used in financing activities               |  |                            | (1,320,658 | ) |      |   | (3,853,686  | )
|                                                    |  |                            |            |   |      |   |             |  
|Increase (decrease) in cash and cash equivalents    |  |                            | 1,092,683  |   |      |   | (61,563     | )
|Cash and cash equivalents, beginning of period      |  |                            | 2,116,708  |   |      |   | 3,442,418   |  
|                                                    |  |                            |            |   |      |   |             |  
|Cash and cash equivalents, end of period            |  | $                          | 3,209,391  |   |      | $ | 3,380,855   |  
|                                                    |  |                            |            |   |      |   |             |  

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



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##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



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

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

The condensed consolidated financial statements included herein have
been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In
the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three and six-month periods are not necessarily
indicative of results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Companys Annual Report
on Form 10-K for the year ended September 30, 2005.

Reclassifications.Certain reclassifications have been made
in prior years condensed consolidated financial statements to conform to the presentations used in fiscal 2006.

Summary of Significant Accounting
Policies

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

Earnings Per
Share. The Company presents its per share results in accordance with Statement of Accounting Standards (SFAS) No. 128, Earnings Per Share (SFAS 128). SFAS 128 requires
the presentation of basic net loss per share and diluted net loss per share. Basic per share amounts are computed by dividing net loss by the weighted 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 830,000 and 500,000, respectively, were not included in diluted calculations during the six months ended March 31,
2006 and the three and six month periods ended March 31, 2005, as the Company incurred a net loss during these periods and the effect would be antidilutive. However, during the three months ended March 31, 2006, dilutive stock options of
approximately 830,000 were included in calculating diluted earnings per share.



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##### Table of Contents

Accounting for Stock-Based Compensation. On October 1, 2005, the Company
adopted the fair value recognition provisions of Financial Accounting Standards Board (FASB) Statement No. 123(R), Share-Based Payment, (FAS 123R). Prior to October 1, 2005, it accounted for share-based
payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees(APB 25), and related Interpretations, as permitted by FASB Statement No. 123, Accounting for
Stock-Based Compensation(FAS 123). In accordance with APB 25, no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of
grant.

The Company adopted FAS 123R using the modified-prospective-transition method. Under that transition method, compensation cost
recognized in future interim and annual reporting periods includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of October 1, 2005, based on the grant-date fair value estimated in accordance with
the original provisions of Statement 123, and b) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of FAS 123R. The results for
the prior periods have not been restated. There was no impact on income or basic and diluted earning per share in applying the provisions of FAS 123R as compared to FAS 123 for the three and six months ended March 31, 2006.

Effective March 31, 2006, certain stock options were extended for an additional period of exercise and the Company recorded as part of corporate
expenses the stock-based compensation expensed of approximately $0.15 million during the three months ended March 31, 2006. We have not recognized, and do not expect to recognize in the near future, any tax benefit related to employee
stock-based compensation cost as a result of the full valuation allowance on our net deferred tax assets and our net operating loss carryforwards.

If the Company would have applied the fair value recognition provisions of FAS 123R for the three and six months ended March 31, 2005, stock-based compensation expense would have been $0.2 million as a result of the extension of
certain options to a board member.

As of March 31, 2006, the Company has the following share-based compensation plans:

Key Employee Stock Option Plan:The Companys Key Employee Stock Option Plan (the Stock Option Plan) provided for
the grant of up to 1.2 million shares of its common stock to key employees. The Stock Option Plan provided for both incentive stock options and non-qualified stock options. Stock option grants had generally vested over a three-year period from
the employees hire date. The Stock Option Plan ceased granting options as of September 30, 2003 as the plan had expired. However, in July 2005, the Stock Option Plan was reinstated for an additional 10-year period. During the three and
six months ended March 31, 2006, there were no stock options granted under the Stock Option Plan. As of March 31, 2006, there were approximately 804,860 options outstanding and exercisable under the Stock Option Plan. During the six months
ended March 31, 2006, no options were exercised.



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|                                                                                                                                            |  |                                 |       |   |                              |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ----- | - | ---------------------------- | - | ------ | -
|                                                                                                                                            |  | Three Months EndedMarch 31,2005 |       |   | Six MonthsEndedMarch 31,2005 |  
|Net loss applicable to common shares                                                                                                        |  | $                               | (126  | ) |                              | $ | (2,043 | )
|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                                                                                              |  | $                               | (126  | ) |                              | $ | (2,043 | )
|                                                                                                                                            |  |                                 |       |   |                              |   |        |  
|Loss per share:                                                                                                                             |  |                                 |       |   |                              |   |        |  
|Basic and diluted - as reported                                                                                                             |  | $                               | (0.02 | ) |                              | $ | (0.33  | )
|                                                                                                                                            |  |                                 |       |   |                              |   |        |  
|Basic and diluted - pro forma                                                                                                               |  | $                               | (0.02 | ) |                              | $ | (0.33  | )
|                                                                                                                                            |  |                                 |       |   |                              |   |        |  

1995 Non-Employee Director Stock Option Plan: In December 1995, the Company adopted
the 1995 Non-Employee Director Stock Option Plan (the Non-Employee Director Plan) that provided for the grant of up to 100,000 shares of its common stock to the directors. Under the Non-Employee Director Plan, directors were
automatically granted an option to purchase 12,500 shares of the common stock at an exercise price equal to the market value of such shares on the date of such election to the board. Stock option grants vested immediately. The Non-Employee Director
Plan ceased granting options in March 2002. As of March 31, 2006, there were 25,000 options outstanding and exercisable under this plan. During the six months ended March 31, 2006, no options were exercised.

Subsidiary Stock Option Plans:SFHI, Inc., Sahara Las Vegas Corp (SLVC) and PHI (collectively, the Subsidiaries),
have adopted subsidiary stock option plans (the Subsidiary Plans). The Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such
Subsidiarys Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries and the Company to attract, retain and motivate
their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As of March 31, 2006, no options had been granted under any of the Subsidiary
Plans.



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The following table summarizes all stock option activity during the second quarter of fiscal 2006 under
all plans:



|                                      |  |                        |  |                                       |      |                                          |           |                                 |   |       
|------------------------------------- |  | ---------------------- |  | ------------------------------------- | ---- | ---------------------------------------- | --------- | ------------------------------- | - | ------
|                                      |  | Number ofShares(000s) |  | WeightedAverageExercisePricePer Share |      | Weighted-AverageRemainingContractualTerm |           | AggregateIntrinsicValue($000s)
|Options outstanding at                |  |                        |  |                                       |      |                                          |           |                                 |   |       
|September 30, 2005:                   |  | 830                    |  | $                                     | 8.05 |                                          | 4.5 years |                                 | $ | 24,656
|Granted                               |  | 0                      |  |                                       | N/A  |                                          | N/A       |                                 |   | N/A   
|Exercised                             |  | 0                      |  |                                       | N/A  |                                          | N/A       |                                 |   | N/A   
|Canceled                              |  | 0                      |  |                                       | N/A  |                                          | N/A       |                                 |   | N/A   
|Expired                               |  | 0                      |  |                                       | N/A  |                                          | N/A       |                                 |   | N/A   
|Options outstanding at March 31, 2006 |  | 830                    |  | $                                     | 8.05 |                                          | 4.5 years |                                 | $ | 25,353
|Exercisable at March 31, 2006         |  | 830                    |  | $                                     | 8.05 |                                          | 4.5 years |                                 | $ | 25,353

As of March 31, 2006, there was no unrecognized compensation cost related to unvested stock
options. There were no options exercised in the first six months of fiscal 2006. There were no unvested shares at March 31, 2006.

The
fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option valuation model with the weighted average assumptions noted in the following table. The expected term of options granted is derived from
historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected
volatility is based on both the implied volatilities from traded options on our stock and historical volatility on our stock.

For options
granted prior to October 1, 2005, and valued in accordance with FAS 123, the expected volatility used to estimate the fair value of the options was based solely on the historical volatility on our stock; we used the graded vested method for
expense attribution.

For options granted after October 1, 2005, and valued in accordance with FAS 123R, we will use the straight-line
method for expense attribution, and we will estimate forfeitures and only recognize expense for those shares expected to vest.



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|                                                             |  |                  |      |   |               |   |       |  
|------------------------------------------------------------ |  | ---------------- | ---- | - | ------------- | - | ----- | -
|                                                             |  | Six months ended |     
|                                                             |  | March 31,2006    |      |   | March 31,2005 |  
|Weighted average assumptions:                                |  |                  |      |   |               |   |       |  
|Expected stock price volatility                              |  |                  | 80.0 | % |               |   | 80.0  | %
|Risk-free interest rate                                      |  |                  | 4.82 | % |               |   | 5.0   | %
|Expected option lives (in years)                             |  |                  | 2    |   |               |   | 2     |  
|Expected dividend yield                                      |  |                  | N/A  |   |               |   | N/A   |  
|Estimated fair value of options, net of tax effect (000s)   |  | $                | 94   |   |               | $ | 1,399 |  
|Estimated fair value of options per share, net of tax effect |  | $                | 0.02 |   |               | $ | 0.22  |  

The Black-Scholes-Merton option valuation model requires the input of highly subjective
assumptions, including the expected life of the stock-based award and stock price volatility. The assumptions listed above represent managements best estimates, but these estimates involve inherent uncertainties and the application of
management judgment. As a result, if other assumptions had been used, our recorded and pro forma stock-based compensation expense could have been materially different from that depicted above. In addition, we are required to estimate the expected
forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be materially different.

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.

SFAS 151.  The Financial Accounting Standards Boards (the FASBs) issued SFAS No. 151 (SFAS
151), Inventory Costs-an Amendment of ARB No. 43, Chapter 4. SFAS 151 amends ARB No 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs and wasted material (spoilage). SFAS 151 is effective for financial statements for fiscal years beginning after June 15, 2005. The Company adopted SFAS 151 without any material impact on the Companys financial position,
results of operation or cash flows.

EITF 04-5. In June 2005, the EITF reached a consensus on recently issued EITF
No. 04- 5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which addresses when a general partner, or general
partners as a group, control and should therefore, consolidate a limited partnership. Under EITF No. 04-5, a sole general partner is presumed to control a limited partnership when certain conditions are met.

The Company currently accounts for its 50% ownership in SFMC using the equity method of accounting whereby its equity in SFMC is reflected in the caption
Other assets within its consolidated



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##### Table of Contents

balance sheets. After adopting this accounting guidance, the Company will consolidate all accounts of SFMC into its consolidated financial statements, and
the Company plans to adopt this guidance during its fiscal quarter ending December 31, 2006.



|2. | Comprehensive Income (Loss)
|-- | ---------------------------

Comprehensive income
(loss) is the total of net income (loss) and all other non-stockholder changes in stockholders equity. Comprehensive income (loss) for the three and six months ended March 31, 2006 and 2005 is as follows (in thousands):



|                                         |  |                             |       |                           |   |      |  |   |      |   |  |   |        |  
|---------------------------------------- |  | --------------------------- | ----- | ------------------------- | - | ---- |  | - | ---- | - |  | - | ------ | -
|                                         |  | Three Months EndedMarch 31, |       | Six Months EndedMarch 31, |  
|                                         |  | 2006                        |       | 2005                      |   | 2006 |  |   | 2005 |  
|Net income (loss)                        |  | $                           | 482   |                           | $ | 261  |  | $ | (48  | ) |  | $ | (1,269 | )
|Unrealized gain on marketable securities |  |                             | 640   |                           |   | 74   |  |   | 739  |   |  |   | 668    |  
|                                         |  |                             |       |                           |   |      |  |   |      |   |  |   |        |  
|Comprehensive income / (loss)            |  | $                           | 1,122 |                           | $ | 335  |  | $ | 691  |   |  | $ | (601   | )
|                                         |  |                             |       |                           |   |      |  |   |      |   |  |   |        |  



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|3. | Other Assets
|-- | ------------

Included in Other Assets
at March 31, 2006 and September 30, 2005 are unamortized loan issue costs and deferred rents of approximately $5.3 million and $4.7 million, respectively. The loan issue costs were incurred when the Company acquired certain rental property
and debt instruments. The unamortized loan issue costs are being amortized on a straight-line basis, which closely approximates the effective interest method, over the loan period, and the deferred rents are being amortized using the straight-line
method over the remaining lease periods.

Also included in Other Assets at March 31, 2006 and September 30, 2005 are
approximately $0.1 million and $0.3 million, 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 to J & J Mortgage
under a master loan agreement. The loans purchased by the Company were purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under the master loan arrangement bear interest at the prime rate plus 2%. J
& J Mortgage is owned by LICO, which in turn is wholly-owned by Paul W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W. Delaney, a director of the Company, is the president of J & J Mortgage.

Miscellaneous investments in key man life insurance policies are also included in Other Assets and total approximately $0.7 million at
March 31, 2006 and September 30, 2005.

Other assets also include investments in unconsolidated entities of approximately $1.9
million and $1.7 million on March 31, 2006 and September 30, 2005, respectively. One of the unconsolidated entities is a 50% owned LLC which has the following financial profile at and as of March 31, 2006: current and total assets of
approximately $0.2 million and $1.0 million, respectively; current and total liabilities of approximately $0.1 million and $0.4 million and total equity of approximately $0.6 million. The entity also had, during the three and six months ended
March 31, 2006, revenues of approximately $0.5 million and $1.0 million and pretax income of approximately $0.1 million and $0.2 million, respectively. In accordance with accounting literature, the Company plans to consolidate the entity into
its consolidated financial statements in fiscal 2007 because it is the general partner (controlling member) but presently accounts for this investment under the equity method.



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

The Company has entered into a
Patent Rights and Royalty Agreement with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect to the
technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect to the
technology, which will be automatically renewed for additional two-year terms unless Archon terminates the agreement within thirty days prior to the renewal or the agreement is otherwise earlier terminated in accordance with its terms. The Company
also has an understanding with David Lowden that it will pay for the costs of commercial development of the technology. Through March 31, 2006, the Company had expensed approximately $0.4 million for commercial development of the technology,
including approximately $30,000 which has been expensed in the six months ended March 31, 2006.



12



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##### Table of Contents

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



|5. | Debt
|-- | ----

The Company has a financial covenant related
to its outstanding debt, due December 2006, of approximately $11.8 million with a certain lender. This covenant requires the Company to maintain a minimum ratio of earnings before interest, taxes, depreciation and amortization, net of investment
properties, compared to current portions of long-term debt, excluding investment properties. At March 31, 2006, the Company was not in compliance with this covenant and, as such, was technically in default under the debt agreement classified as
current as a result of the default. Management believes it is not the intention of the lender to declare a default relative to this covenant. Management believes the Company has sufficient assets to meet any unforeseen demands on current operations
or significant debt obligations.



|6. | Federal Income Tax
|-- | ------------------

The Company recorded federal
income tax provisions, based on statutory rates, of $0.3 million and $0.1 million for the quarters ended March 31, 2006 and March 31, 2005, respectively. The Company recorded a federal income tax benefit, based on statutory rates, of
approximately $26,000 for the six months ended March 31, 2006 and $0.7 million for the six months ended March 31, 2005.

The
Company has recorded deferred tax assets related to net operating losses, as the Company believes it is more likely than not that the Company will realize these deferred tax assets. 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, which would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will generate
profits from operations or sell those assets or will generate profits from sales if they were to occur in the future. In the event the Company does not generate profits from the sale of long-lived assets in the future, a valuation allowance would
need to be recorded, which would impact the Companys future results of operations.



|7. | Supplemental Statement of Cash Flows Information
|-- | ------------------------------------------------

Supplemental statement of cash flows information for the six-month periods ended March 31, 2006 and 2005 is presented below:



|                                             |  |                        |       |      |   |      
|-------------------------------------------- |  | ---------------------- | ----- | ---- | - | -----
|                                             |  | 2006                   |       | 2005
|                                             |  | (amounts in thousands)
|Operating activities:                        |  |                        |       |      |   |      
|Cash paid during the period for interest     |  | $                      | 4,137 |      | $ | 5,612
|                                             |  |                        |       |      |   |      
|Cash paid during the period for income taxes |  | $                      | 0     |      | $ | 0    
|                                             |  |                        |       |      |   |      
|Investing and financing activities:          |  |                        |       |      |   |      
|Unrealized gain on marketable securities     |  | $                      | 739   |      | $ | 668  
|                                             |  |                        |       |      |   |      



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##### Table of Contents

|8. | Segment Information
|-- | -------------------

The Companys operations
are in the hotel/casino industry and investment properties. The Companys hotel/casino operations are conducted at the Pioneer in Laughlin, Nevada. The Company owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland.
Other and Eliminations below includes principally financial information for the Companys corporate operations, 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 and six-month periods ended
March 31, 2006 and 2005:



|                                      |  |                              |       |   |      |   |       |  
|------------------------------------- |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                                      |  | Three Months Ended March 31, |      
|                                      |  | 2006                         |       |   | 2005 |  
|                                      |  | (dollars in thousands)       |      
|Pioneer Hotel:                        |  |                              |       |   |      |   |       |  
|Net operating revenues                |  | $                            | 8,940 |   |      | $ | 8,157 |  
|                                      |  |                              |       |   |      |   |       |  
|Operating income                      |  | $                            | 1,114 |   |      | $ | 606   |  
|                                      |  |                              |       |   |      |   |       |  
|Depreciation and amortization         |  | $                            | 553   |   |      | $ | 616   |  
|                                      |  |                              |       |   |      |   |       |  
|Interest expense                      |  | $                            | 339   |   |      | $ | 318   |  
|                                      |  |                              |       |   |      |   |       |  
|Interest and other income             |  | $                            | 3     |   |      | $ | 3     |  
|                                      |  |                              |       |   |      |   |       |  
|Net income before income taxes        |  | $                            | 778   |   |      | $ | 291   |  
|                                      |  |                              |       |   |      |   |       |  
|Capital expenditures / transfers      |  | $                            | 72    |   |      | $ | 43    |  
|                                      |  |                              |       |   |      |   |       |  
|Investment Properties:                |  |                              |       |   |      |   |       |  
|Net operating revenues                |  | $                            | 3,101 |   |      | $ | 3,101 |  
|                                      |  |                              |       |   |      |   |       |  
|Operating income                      |  | $                            | 2,308 |   |      | $ | 2,308 |  
|                                      |  |                              |       |   |      |   |       |  
|Depreciation and amortization         |  | $                            | 793   |   |      | $ | 793   |  
|                                      |  |                              |       |   |      |   |       |  
|Interest expense                      |  | $                            | 1,866 |   |      | $ | 2,553 |  
|                                      |  |                              |       |   |      |   |       |  
|Interest and other income             |  | $                            | 1     |   |      | $ | 0     |  
|                                      |  |                              |       |   |      |   |       |  
|Net income (loss) before income taxes |  | $                            | 442   |   |      | $ | (245  | )
|                                      |  |                              |       |   |      |   |       |  
|Capital expenditures / transfers      |  | $                            | 0     |   |      | $ | 0     |  
|                                      |  |                              |       |   |      |   |       |  
|Other and Eliminations:               |  |                              |       |   |      |   |       |  
|Net operating revenues                |  | $                            | 408   |   |      | $ | 784   |  
|                                      |  |                              |       |   |      |   |       |  
|Operating loss                        |  | $                            | (547  | ) |      | $ | (300  | )
|                                      |  |                              |       |   |      |   |       |  
|Depreciation and amortization         |  | $                            | 35    |   |      | $ | 53    |  
|                                      |  |                              |       |   |      |   |       |  
|Interest expense                      |  | $                            | (12   | ) |      | $ | (33   | )
|                                      |  |                              |       |   |      |   |       |  
|Interest and other income             |  | $                            | 56    |   |      | $ | 623   |  
|                                      |  |                              |       |   |      |   |       |  



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|                                      |  |                              |         |   |      |   |         |  
|------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                                      |  | Three Months Ended March 31, |        
|                                      |  | 2006                         |         |   | 2005 |  
|                                      |  | (dollars in thousands)       |        
|Net income (loss) before income taxes |  | $                            | (479    | ) |      | $ | 356     |  
|                                      |  |                              |         |   |      |   |         |  
|Capital expenditures / transfers      |  | $                            | 10      |   |      | $ | 1       |  
|                                      |  |                              |         |   |      |   |         |  
|Total:                                |  |                              |         |   |      |   |         |  
|Net operating revenues                |  | $                            | 12,449  |   |      | $ | 12,042  |  
|                                      |  |                              |         |   |      |   |         |  
|Operating income                      |  | $                            | 2,875   |   |      | $ | 2,614   |  
|                                      |  |                              |         |   |      |   |         |  
|Depreciation and amortization         |  | $                            | 1,381   |   |      | $ | 1,462   |  
|                                      |  |                              |         |   |      |   |         |  
|Interest expense                      |  | $                            | 2,193   |   |      | $ | 2,838   |  
|                                      |  |                              |         |   |      |   |         |  
|Interest and other income             |  | $                            | 60      |   |      | $ | 626     |  
|                                      |  |                              |         |   |      |   |         |  
|Net income (loss) before income taxes |  | $                            | 741     |   |      | $ | 402     |  
|                                      |  |                              |         |   |      |   |         |  
|Capital expenditures / transfers      |  | $                            | 82      |   |      | $ | 44      |  
|                                      |  |                              |         |   |      |   |         |  
|                                      | 
|                                      |  | Six Months Ended March 31,   |        
|                                      |  | 2006                         |         |   | 2005 |  
|                                      |  | (dollars in thousands)       |        
|Pioneer Hotel:                        |  |                              |         |   |      |   |         |  
|Net operating revenues                |  | $                            | 15,876  |   |      | $ | 15,032  |  
|                                      |  |                              |         |   |      |   |         |  
|Operating income (loss)               |  | $                            | 572     |   |      | $ | (400    | )
|                                      |  |                              |         |   |      |   |         |  
|Depreciation and amortization         |  | $                            | 1,115   |   |      | $ | 1,276   |  
|                                      |  |                              |         |   |      |   |         |  
|Interest expense                      |  | $                            | 695     |   |      | $ | 617     |  
|                                      |  |                              |         |   |      |   |         |  
|Interest and other income             |  | $                            | 6       |   |      | $ | 5       |  
|                                      |  |                              |         |   |      |   |         |  
|Net loss before income taxes          |  | $                            | (117    | ) |      | $ | (1,012  | )
|                                      |  |                              |         |   |      |   |         |  
|Capital expenditures / transfers      |  | $                            | 103     |   |      | $ | 97      |  
|                                      |  |                              |         |   |      |   |         |  
|Identifiable assets(1)                |  | $                            | 31,971  |   |      | $ | 34,104  |  
|                                      |  |                              |         |   |      |   |         |  
|Investment Properties:                |  |                              |         |   |      |   |         |  
|Net operating revenues                |  | $                            | 6,201   |   |      | $ | 6,201   |  
|                                      |  |                              |         |   |      |   |         |  
|Operating income (loss)               |  | $                            | 4,615   |   |      | $ | 4,615   |  
|                                      |  |                              |         |   |      |   |         |  
|Depreciation and amortization         |  | $                            | 1,586   |   |      | $ | 1,586   |  
|                                      |  |                              |         |   |      |   |         |  
|Interest expense                      |  | $                            | 3,756   |   |      | $ | 5,199   |  
|                                      |  |                              |         |   |      |   |         |  
|Interest and other income             |  | $                            | 1       |   |      | $ | 0       |  
|                                      |  |                              |         |   |      |   |         |  
|Net loss before income taxes          |  | $                            | 860     |   |      | $ | (584    | )
|                                      |  |                              |         |   |      |   |         |  
|Capital expenditures / transfers      |  | $                            | 0       |   |      | $ | 0       |  
|                                      |  |                              |         |   |      |   |         |  
|Identifiable assets(1)                |  | $                            | 135,113 |   |      | $ | 151,351 |  
|                                      |  |                              |         |   |      |   |         |  
|Other and Eliminations:               |  |                              |         |   |      |   |         |  
|Net operating revenues                |  | $                            | 811     |   |      | $ | 985     |  
|                                      |  |                              |         |   |      |   |         |  
|Operating income (loss)               |  | $                            | (1,027  | ) |      | $ | (1,235  | )
|                                      |  |                              |         |   |      |   |         |  
|Depreciation and amortization         |  | $                            | 70      |   |      | $ | 104     |  
|                                      |  |                              |         |   |      |   |         |  



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##### Table of Contents

|                                 |  |                            |         |   |      |   |         |  
|-------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                 |  | Six Months Ended March 31, |        
|                                 |  | 2006                       |         |   | 2005 |  
|                                 |  | (dollars in thousands)     |        
|Interest expense                 |  | $                          | (28     | ) |      | $ | (74     | )
|                                 |  |                            |         |   |      |   |         |  
|Interest and other income        |  | $                          | 182     |   |      | $ | 805     |  
|                                 |  |                            |         |   |      |   |         |  
|Net loss before income taxes     |  | $                          | (817    | ) |      | $ | (356    | )
|                                 |  |                            |         |   |      |   |         |  
|Capital expenditures / transfers |  | $                          | 10      |   |      | $ | 202     |  
|                                 |  |                            |         |   |      |   |         |  
|Identifiable assets(1)           |  | $                          | 32,219  |   |      | $ | 32,073  |  
|                                 |  |                            |         |   |      |   |         |  
|Total:                           |  |                            |         |   |      |   |         |  
|Net operating revenues           |  | $                          | 22,888  |   |      | $ | 22,218  |  
|                                 |  |                            |         |   |      |   |         |  
|Operating income (loss)          |  | $                          | 4,160   |   |      | $ | 2,980   |  
|                                 |  |                            |         |   |      |   |         |  
|Depreciation and amortization    |  | $                          | 2,771   |   |      | $ | 2,966   |  
|                                 |  |                            |         |   |      |   |         |  
|Interest expense                 |  | $                          | 4,423   |   |      | $ | 5,742   |  
|                                 |  |                            |         |   |      |   |         |  
|Interest and other income        |  | $                          | 189     |   |      | $ | 810     |  
|                                 |  |                            |         |   |      |   |         |  
|Net loss before income taxes     |  | $                          | (74     | ) |      | $ | (1,952  | )
|                                 |  |                            |         |   |      |   |         |  
|Capital expenditures / transfers |  | $                          | 113     |   |      | $ | 299     |  
|                                 |  |                            |         |   |      |   |         |  
|Identifiable assets(1)           |  | $                          | 199,303 |   |      | $ | 217,528 |  
|                                 |  |                            |         |   |      |   |         |  

---

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



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ARCHON CORPORATION



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

This discussion is intended to further the readers understanding of the consolidated financial condition and results of operations of Archon
Corporation (the Company or Archon). It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and the Companys annual report on Form 10-K for the year ended
September 30, 2005. 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 Gambling Hall (the Pioneer). It also owns land in Las Vegas, Nevada on the Las Vegas Strip that it may develop in the future (the Strip Property). Management may develop the
Strip Property, as it believes that the trend of continued development in Las Vegas, Nevada of themed resorts, which attract visitors, will continue in the foreseeable future.

The Companys property in Laughlin, Nevada has experienced a flattening, to a certain extent, 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, if any, growth forecasted for the next few years based on its
current plans.

Management believes the recent revenue and expense trends in its Laughlin hotel/casino property may not change
significantly over the next few years.

During the six-month periods ended March 31, 2006 and 2005, the Company incurred a net loss
applicable to common shareholders of approximately $0.8 million and $2.0 million, respectively. The $1.2 million improvement in results of the 2006 period was due to reduced interest costs associated with its investment properties and improved
operating results at the Pioneer. Management continues to pursue additional strategies to regain or increase market share at the Pioneer but can give no assurance that this will occur.



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Investment Properties:

During fiscal year 2001, the Company acquired certain investment properties as part of a Section 1031 exchange. The investment properties are located in Gaithersburg, MD and Dorchester, MA. The Company acquired
the properties and nonrecourse debt associated with the properties which are subject to long-term leases. Tenants remit payments to banks according to the terms of the leases and notes. The payments are used to liquidate the nonrecourse debt
obligations. Rental income is recorded by the Company on a straight-line basis and totals approximately $12.4 million annually and will remain at this level until approximately 2020. The buildings are also being depreciated on a straight-line basis
and the depreciation expense is approximately $3.2 million annually and will remain at this level until approximately 2020 or until the assets are sold, otherwise disposed of or become impaired. Interest expense is also recorded based on the
outstanding nonrecourse debt remaining to be paid based on unamortized loan issue costs and remaining debt amortization timetables. At any time during the life of the leases and debt amortization, the fair market values of the properties may be
different than its book values. Interest is presently being expensed at approximately $7.5 million annually and will decrease in relation to debt principal reductions through 2020.

Critical Accounting Policies and Estimates

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

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

Allowance for Doubtful Accounts. The Company allows for an estimated amount of receivables that may not be collected. The Company estimates
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. The Company has a significant investment in long-lived property and equipment. We estimate that the
undiscounted future cash flows expected to result from the use of these assets exceeds the current carrying value of these assets. Any adverse change in the estimate of these undiscounted future cash flows could necessitate an impairment charge that
would adversely affect operating results. The Company estimates useful lives for its assets based on historical experience, estimates of assets commercial lives, and the likelihood of technological obsolescence. Should the actual



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useful life of a class of assets differ from the estimated useful life, the Company would record an impairment charge. The Company reviews useful lives and
obsolescence and assesses commercial viability of these assets periodically.

Income Taxes. The Company has recorded deferred
tax assets related to net operating losses, as the Company believes it is more likely than not that the Company will realize these deferred tax assets. Realization of the net deferred tax assets is dependent on the Companys ability to generate
profits from operations or from the sale of long-lived assets that would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will generate profits from operations or sell those
assets or will generate profits from sales if they were to occur in the future. In the event the Company does not generate profits from the sale of long-lived assets in the future, a valuation allowance would need to be recorded, which would impact
the Companys future results of operations.

Results of Operations  Six Months Ended March 31, 2006 and 2005

Consolidated

Net Operating Revenues.
Consolidated net operating revenues for the six months ended March 31, 2006 were $22.9 million, a $0.7 million, or 3.0%, increase from $22.2 million for the six months ended March 31, 2005. Income from the investment properties
was $6.2 million in each of the six months ended March 31, 2006 and 2005. Net revenues increased approximately $0.9 million, or 5.6%, to $15.9 million at the Pioneer for the six months ended March 31, 2006 compared to the six months
ended March 31, 2005. Management believes improved marketing strategies contributed significantly to the increased revenues. Sahara Las Vegas Corp. (SLVC) had net revenues of $0.6 million and $0.8 million during the six months ended
March 31, 2006 and 2005, respectively.

Operating Expenses. Total operating expenses decreased $0.5 million, or 2.7%, to
$18.7 million for the six months ended March 31, 2006 from $19.2 million for the six months ended March 31, 2005. Total operating expenses as a percentage of revenue decreased to 81.8% in the current year period from 86.6% in the
prior year period. Operating expenses decreased by $0.1 million, or 0.8%, to $15.3 million at the Pioneer. In the prior year period, the Pioneer recorded a loss of $0.2 million on the disposal of older slot machines. No such charge was recorded in
the current year period. Operating expenses decreased by approximately $0.4 million in general corporate expenses, primarily due to decreased legal and other outside services.

Operating Income. Consolidated operating income for the six months ended March 31, 2006 was $4.2 million, an increase of $1.2
million, or 39.6%, from $3.0 million for the six months ended March 31, 2005. The increase was due to the aforementioned change in net operating revenues and operating expenses. Operating income of $4.6 million for each of the six-month
periods ended March 31, 2006 and 2005 is attributable to the investment properties. Operating income improved by $1.0 million to $0.6 million at the Pioneer. The operating losses at corporate and SLVC improved by $0.2 million to $1.0 million.

Interest Expense. Consolidated interest expense for the six months ended March 31, 2006 was $4.4 million, a $1.3
million, or 24.0%, decrease compared to $5.7 million for the six months ended March 31, 2005. The decrease was primarily due to the reduction of non-recourse debt associated with the investment properties.



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Interest and Other Income. Consolidated interest and other income for the six months ended
March 31, 2006, decreased $0.6 million to $0.2 million compared to approximately $0.8 million for the six months ended March 31, 2005, due principally to a sale of certain utility rights and proceeds from a legal settlement in the 2005
period.

Loss Before Income Tax. Consolidated loss before income tax for the six months ended March 31, 2006 was
approximately $74,000, a $1.9 million improvement compared to a loss of $2.0 million for the six months ended March 31, 2005.

Federal Income Tax. The Company recorded a federal income tax benefit of approximately $26,000 for the six months ended March 31, 2006, compared to an approximately $0.7 million benefit for the six months ended
March 31, 2005 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 $0.8 million for each of the six-month periods
ended March 31, 2006 and 2005 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 approximately $0.8 million, or $0.13 per common share, for the six months ended March 31, 2006 compared to net loss attributable to common shares
of approximately $2.0 million, or $0.33 per common share, for the six months ended March 31, 2005.

Pioneer

Net Operating Revenues. Net operating revenues at the Pioneer increased approximately $0.9 million, or 5.6%, to approximately
$15.9 million in the six months ended March 31, 2006 from approximately $15.0 million in the six months ended March 31, 2005.

Casino revenues increased approximately $0.5 million, or 4.1%, to approximately $13.1 million in the six months ended March 31, 2006 from approximately $12.6 million in the six months ended March 31, 2005. Slot and video
poker revenues increased approximately $0.5 million, or 4.7%, to approximately $11.9 million in the six months ended March 31, 2006 from approximately $11.4 million in the six months ended March 31, 2005. Management believes this
increase was a result of improved marketing strategies to attract local customers. Other gaming revenues, including table games, were unchanged at approximately $1.2 million in the six months ended March 31, 2006 and 2005. Casino promotional
allowances increased approximately $0.2 million, or 6.0%, to approximately $3.2 million in the six months ended March 31, 2006 from approximately $3.0 million in the six months ended March 31, 2005 primarily due to the
aforementioned increase in slot revenues.

Hotel revenues increased approximately $0.1 million, or 7.8%, to approximately $1.3 million for
the six months ended March 31, 2006 from approximately $1.2 million for the six months ended March 31, 2005 caused by an increase in occupancy rate. Food and beverage revenues increased approximately $0.2 million, or 5.4%, to
approximately $3.7 million for the six months ended March 31, 2006 compared to approximately $3.5 million in the six months ended March 31, 2005, primarily due to the increase in casino promotional allowances. Other revenues
increased approximately $0.2 million, or 32.3%, to approximately $0.9 million for the six months ended March 31, 2006 compared to approximately $0.7 million for the six months ended March 31, 2005, due to increased retail sales.



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Operating Expenses. Operating expenses decreased approximately $0.1 million, or 0.8%, to
approximately $15.3 million in the six months ended March 31, 2006 from approximately $15.4 million in the six months ended March 31, 2005. Operating expenses as a percentage of revenue decreased to 96.4% in the current year
period from 102.7% in the prior year period.

Casino expenses increased approximately $0.3 million, or 3.3%, to approximately
$7.0 million in the six months ended March 31, 2006 from approximately $6.7 million in the six months ended March 31, 2005, primarily due to the increase in casino promotional allowances. Casino expenses as a percentage of casino
revenues decreased to 53.1% in the current year period from 53.6% in the prior year period.

Hotel expenses were unchanged at approximately
$0.5 million in the six months ended March 31, 2006 and 2005. Food and beverage expenses decreased approximately $0.2 million, or 6.6%, to approximately $1.9 million in the six months ended March 31, 2006 from approximately
$2.1 million in the six months ended March 31, 2005, primarily due to a decrease in the cost of food sales. Food and beverage expenses as a percentage of food and beverage revenues decreased to 51.5% in the current year period from 58.1%
in the prior year period. Other expenses increased approximately $0.3 million, or 69.2% to approximately $0.8 million for the six months ended March 31, 2006 compared to approximately $0.5 million for the six months ended March 31,
2005, due to the increase in retail sales. Other expenses as a percentage of other revenues increased to 90.4% in the current year period from 70.7% in the prior year period.

Selling, general and administrative expenses decreased $0.1 million, or 2.4%, to $2.2 million for the six months ended March 31, 2006 from
$2.3 million for the six months ended March 31, 2005. Selling, general and administrative expenses as a percentage of revenues decreased to 13.9% in the current year period from 15.1% in the prior year period. Utilities and property
expenses decreased $0.1 million, or 6.1%, to $1.8 million in the six months ended March 31, 2006 from $1.9 million in the six months ended March 31, 2005, due to a decrease in rent expense. Utilities and property expenses as a
percentage of revenues decreased to 11.3% in the current year period from 12.7% in the prior year period. Depreciation and amortization expenses decreased $0.2 million, or 12.6%, to $1.1 million in the six months ended March 31, 2006 from
$1.3 million in the six months ended March 31, 2005. In the prior year period, the Pioneer recorded a loss of $0.2 million on the disposal of older slot machines. No such charge was recorded in the current year period.

Results of Operations  Three Months Ended March 31, 2006 and 2005

Consolidated

Net Operating Revenues. Consolidated net operating revenues for the
quarter ended March 31, 2006 were approximately $12.4 million, a $0.4 million, or 3.4%, increase from approximately $12.0 million for the quarter ended March 31, 2005. Income from the investment properties was approximately $3.1
million in each of the quarters ended March 31, 2006 and 2005. Net revenues increased approximately $0.7 million, or 9.6%, to approximately $8.9 million at the Pioneer for the three months ended March 31, 2006 compared to the three months
ended March 31, 2005. SLVC had net revenues of approximately $0.3 million and $0.7 million during the three months ended March 31, 2006 and 2005, respectively.

Operating Expenses. Total operating expenses were $9.6 million for the quarter ended March 31, 2006, an increase of approximately $0.2 million, or 1.5%, from $9.4 million for the quarter ended



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March 31, 2005. Total operating expenses as a percentage of revenue decreased to 76.9% for the current year quarter from 78.3% for the prior year
quarter. Operating expenses increased by approximately $0.2 million, or 3.6%, to approximately $7.8 million at the Pioneer. Operating expenses decreased by approximately $0.2 million in general corporate expenses, primarily due to decreased legal
and other outside services.

Operating Income. Consolidated operating income for the quarter ended March 31, 2006 was
approximately $2.9 million, an increase of $0.3 million, or 10.0%, from approximately $2.6 million for the quarter ended March 31, 2005. The increase was due to the aforementioned change in net operating revenues and operating
expenses. Operating income of approximately $2.3 million for each of the three-month periods ended March 31, 2006 and 2005 is attributable to the investment properties. Operating income increased by approximately $0.5 million, or 83.7%, to $1.1
million at the Pioneer. The operating losses at corporate and SLVC increased by approximately $0.2 million to $0.5 million.

Interest
Expense. Consolidated interest expense for the three months ended March 31, 2006 was approximately $2.2 million, a $0.6 million, or 22.7%, decrease compared to approximately $2.8 million for the six months ended March 31,
2005. The decrease was primarily due to the reduction of non-recourse debt associated with the investment properties.

Interest and
Other Income. Consolidated interest and other income for the three months ended March 31, 2006, was approximately $0.1 million, an approximately $0.5 million decrease compared to $0.6 million for the three months ended March 31,
2005, due principally to a sale of certain utility rights and a legal settlement in the 2005 period.

Income (Loss) Before Income
Tax. Consolidated income before income tax for the quarter ended March 31, 2006 was approximately $0.7 million, a $0.3 million improvement compared to approximately $0.4 million for the quarter ended March 31, 2005.

Federal Income Tax. The Company recorded a federal income tax expense of approximately $0.3 million for the quarter ended March 31,
2006 compared to approximately $0.1 million for the quarter ended March 31, 2005 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 $0.4 million for each of the three-month periods ended March 31, 2006 and 2005 accrued on the preferred stock for purposes of calculating net loss applicable to common shares.

Net Income (Loss). Consolidated net income attributable to common shares was approximately $0.1 million, or $0.02 per
common share, for the quarter ended March 31, 2006 compared to net loss attributable to common shares of approximately $0.1 million, or $0.02 per common share, for the quarter ended March 31, 2005.

Pioneer

Net Operating Revenues. Net
operating revenues at the Pioneer increased approximately $0.7 million, or 9.6%, to approximately $8.9 million in the three months ended March 31, 2006 from approximately $8.2 million in the three months ended March 31, 2005.

Casino revenues increased approximately $0.6 million, or 8.7%, to $7.4 million in the three months ended March 31, 2006 from
$6.8 million in the three months ended March 31, 2005. Slot and



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video poker revenues increased approximately $0.6 million, or 8.6%, to $6.7 million in the three months ended March 31, 2006 from $6.1 million
in the three months ended March 31, 2005. Management believes this increase was a result of new marketing strategies implemented to attract local customers. Other gaming revenues, including table games, increased approximately $0.1 million, or
9.6%, to $0.7 million in the three months ended March 31, 2006 from $0.6 million in the three months ended March 31, 2005. Casino promotional allowances increased approximately $0.3 million, or 13.7%, to $1.8 million in the three
months ended March 31, 2006 from $1.5 million in the three months ended March 31, 2005 primarily due to the aforementioned increase in slot revenues.

Hotel revenues increased $0.1 million, or 9.7%, to $0.8 million for the three months ended March 31, 2006 from $0.7 million for the three months ended March 31, 2005. An increase in occupancy rate to
71% from 49% was partially offset by a decrease in the average room rate. Food and beverage revenues increased $0.2 million, or 10.2%, to $2.1 million for the three months ended March 31, 2006 compared to $1.9 million in the three
months ended March 31, 2005, primarily due to the increase in casino promotional allowances. Other revenues increased approximately $0.2 million, or 44.6%, to $0.5 million for the three months ended March 31, 2006 from $0.3 million for the
three months ended March 31, 2005, due to increased retail sales.

Operating Expenses. Operating expenses increased by
approximately $0.2 million, or 3.6%, to $7.8 million in the three months ended March 31, 2006 from $7.6 million in the three months ended March 31, 2005. Operating expenses as a percentage of revenue decreased to 87.5% in the current
year period from 92.6% in the prior year period.

Casino expenses increased $0.2 million, or 5.7%, to $3.6 million in the three months
ended March 31, 2006 from $3.4 million in the three months ended March 31, 2005, primarily due to the increase in casino promotional allowances. Casino expenses as a percentage of casino revenues decreased to 49.1% in the current year
period from 50.5% in the prior year period.

Hotel expenses were unchanged at $0.3 million in the three months ended March 31, 2006
and 2005. Food and beverage expenses were unchanged at $1.0 million in the three months ended March 31, 2006 and 2005. Food and beverage expenses as a percentage of food and beverage revenues decreased to 47.9% in the current year period from
54.9% in the prior year period. Other expenses increased $0.2 million, or 69.7% to $0.4 million for the six months ended March 31, 2006 compared to $0.2 million for the three months ended March 31, 2005, due to the increase in retail
sales. Other expenses as a percentage of other revenues increased to 89.6% in the current year period from 76.3% in the prior year period.

Selling, general and administrative expenses increased $0.1 million, or 5.1%, to $1.1 million for the three months ended March 31, 2006 from $1.0 million for the three months ended March 31, 2005. Selling, general and
administrative expenses as a percentage of revenues decreased to 12.2% in the current year period from 12.8% in the prior year period. Utilities and property expenses were unchanged at $0.9 million in the three months ended March 31, 2006 and
2005. A decrease in rent expense was offset by increases in other property expenses. Utilities and property expenses as a percentage of revenues decreased to 9.9% in the current year period from 11.3% in the prior year period. Depreciation and
amortization expenses were unchanged at $0.6 million in the three months ended March 31, 2006 and 2005.



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

Contractual Obligations and Commitments: The following table summarizes the Companys fiscal year
contractual obligations and commitments as of March 31, 2006 (for the six-month period ending September 30, 2006 and for the fiscal years ending September 30, 2007, 2008, 2009, 2010, 2011, and 2012 and thereafter.)



|                    |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|------------------- |  | ---------------------- | ----- | --------------------------- | - | ------ |  | ---- | ----- | ---- | - | ----- |  | ------------------ | ----- | ----- | - | ----- |  | - | ------ |  | - | -------
|                    |  |                        |       | Payments Due By Periods (1) |   |        |  |      |       |     
|                    |  | 2006                   |       | 2007                        |   | 2008   |  | 2009 |       | 2010 |   | 2011  |  | 2012 andThereafter |       | Total
|                    |  | (dollars in thousands)
|Non-recourse debt:  |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Gaithersburg        |  | $                      | 990   |                             | $ | 2,195  |  | $    | 2,490 |      | $ | 2,828 |  | $                  | 3,186 |       | $ | 3,573 |  | $ | 33,541 |  | $ | 48,803 
|Sovereign           |  |                        | 0     |                             |   | 0      |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 31,199 |  |   | 31,199 
|Debt:               |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Building            |  |                        | 42    |                             |   | 14     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 56     
|Equipment           |  |                        | 789   |                             |   | 413    |  |      | 89    |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 1,291  
|Mortgage obligation |  |                        | 214   |                             |   | 11,618 |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 11,832 
|Other               |  |                        | 1,828 |                             |   | 0      |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 1,828  
|Operating leases:   |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Ground lease        |  |                        | 153   |                             |   | 364    |  |      | 364   |      |   | 364   |  |                    | 364   |       |   | 364   |  |   | 24,460 |  |   | 26,433 
|Corp. offices       |  |                        | 22    |                             |   | 22     |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0      |  |   | 44     
|                    |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        
|Total               |  | $                      | 4,038 |                             | $ | 14,626 |  | $    | 2,943 |      | $ | 3,192 |  | $                  | 3,550 |       | $ | 3,937 |  | $ | 89,200 |  | $ | 121,486
|                    |  |                        |       |                             |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |        |  |   |        



---

|(1) | The Company is required to make the following cash interest payments related to the above debt obligations: (i) Non-recourse debt  $3.6 million (2006), $7.1 million
(2007), $7.0 million (2008), $6.8 million (2009), $6.6 million (2010), $6.3 million (2011) and $39.9 million (2012 and thereafter)), and (ii) Long-term debt - $0.6 million (2006), $0.3 million (2007), $0 (2008), $0 (2009), $0 (2010), $0
(2011) and $0 (2012 and thereafter).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

Under an existing debt agreement with a bank, the Company is obligated to make a balloon payment of approximately $11.5 million in December 2006. The
Company will either have to sell certain assets or will have to refinance this debt as current cash balances and projected cash flow from operations is not expected to be sufficient to satisfy this debt obligation. Although the Company believes one
of



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these alternatives will occur, the Company can give no assurance that assets can be sold or that the debt can be refinanced at terms acceptable to the
Company. The debt is guaranteed by the Companys primary shareholder, who is also the CEO and Chairman of the Board.

Liquidity. As of March 31, 2006 and September 30, 2005, the Company held cash and cash equivalents of approximately $3.2 million and $2.1 million, respectively. The Company had $7.1 million in investment in
marketable securities at March 31, 2006 compared to $6.8 million at September 30, 2005. Approximately $0.8 million of additional marketable securities were acquired during the six months ended March 31, 2005 by incurring new debt of
approximately $0.8 million. The investment properties are structured such that future tenants payments cover future required mortgage payments including balloon payments. Management believes that the Company will have sufficient available cash
and cash resources to meet its cash requirements for a reasonable period of time.

Cash Flows from Operating Activities. The
Companys cash provided by operating activities was $2.0 million for the six months ended March 31, 2006 as compared to $5.1 million for the six months ended March 31, 2005. The decrease was primarily due to changes in operating
assets and liabilities related to the investment properties offset by improved financial performance in the 2006 period.

Cash Flows
from Investing Activities. Cash provided by investing activities was approximately $0.4 million for the six months ended March 31, 2006, as compared to cash used in investing activities of $1.3 million for the six months ended
March 31, 2005. In the current year period, the Company sold $0.9 million of marketable securities, which was offset by investments of $0.4 million in a partnership and $0.1 million in capital equipment. In the prior year period, the Company
invested $0.9 million in marketable securities, $0.1 million in a partnership and approximately $0.3 million in capital equipment.

Cash Used in Financing Activities. Cash used in financing activities was $1.3 million for the six months ended March 31, 2006 as compared to $3.9 million for the six months ended March 31, 2005. For the six months
ended March 31, 2006 and 2005, the Company repaid $2.0 million and $4.7 million, respectively, of debt and obligations under lease and borrowed $0.7 million and $0.8 million, respectively.

The Companys primary source of operating cash is from Pioneer operations and from interest income on available cash and cash equivalents and
investments in marketable securities. Rental income from the Companys two investment properties is contractually committed to reducing the non-recourse indebtedness issued or assumed in connection with the acquisition of the investment
properties. Under the two leases, the tenants are responsible for substantially all obligations related to the property. SLVC, an indirect wholly-owned subsidiary of the Company, owns an approximately 27-acre parcel of real property on Las Vegas
Boulevard South, which is subject to a lease with a condominium developer. SLVC generates approximately $0.5 million of cash from the lease agreement after payment of property taxes.

Pioneer

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



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There were no payments of obligations under lease for the six months ended March 31, 2006 and 2005,
and rent expense was approximately $0.0 million and $0.2 million for the six months ended March 31, 2006 and 2005, respectively. Capital expenditures to maintain the facility in fiscal 2006 are expected to be less than $1.0 million.

Preferred Stock

The Companys
preferred stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends.
The Company has not declared the semiannual preferred stock dividends since October 1, 1996. The dividend rate per annum was equal to 8% 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
March 31, 2006, the aggregate liquidation preference of the preferred stock was approximately $21.0 million, or $4.76 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 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 May 12, 2006, the Company had purchased 709,305 shares of preferred stock for approximately $1.4 million under this program. Previously, the
Company had purchased 276,627 shares for $452,232. During the six months ended March 31, 2006, the Company has not purchased any additional shares.

Recently Issued Accounting Standards

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

Effects of Inflation

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



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Private Securities Litigation Reform Act

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



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

Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity process. Excluding its non-recourse debt, the Company has total
interest-bearing debt at March 31, 2006 of approximately $15.0 million, of which approximately $13.7 million bears interest at a variable rate (approximately 8.5% at March 31, 2006). Therefore, the Company maintains certain market rate
risk related to this debt. A change in the interest rates of 1% would cause an approximate $137,000 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.



|It
em 4. | Controls and Procedures
|-------- | -----------------------

Evaluation of Disclosure
Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to
be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and 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



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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.

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



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ARCHON CORPORATION

PART II  OTHER INFORMATION



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

None



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

The table below sets forth information regarding repurchases of Archon preferred stock during the six months ended March 31, 2006.



|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|------------------------------------------ |  | ----------------------------- |  | -------------------------- | ---- | ------------------------------------------------------------------------ | ------- | ---------------------------------------------------------------------------- | - | ---------
|Period                                     |  | TotalNumberof SharesPurchased |  | AveragePrice PaidPer Share |      | TotalNumber ofSharesPurchasedas Part ofPubliclyAnnouncedPlans orPrograms |         | MaximumDollar Valueof Sharesthat MayYet BePurchasedUnder thePlans
orPrograms
|October 2005:                              |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|October 1, 2005 through October 31, 2005   |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|November 2005:                             |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|November 1, 2005 through November 30, 2005 |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|December 2005:                             |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|December 1, 2005 through December 31, 2005 |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|January 2006:                              |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|January 1, 2006 through January 31, 2006   |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|February 2006:                             |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|February 1, 2006 through February 28, 2006 |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|March 2006:                                |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          
|March 1, 2006 through March 31, 2006       |  | 0                             |  | $                          | 0.00 |                                                                          | 709,305 |                                                                              | $ | 1,129,958
|                                           |  |                               |  |                            |      |                                                                          |         |                                                                              |   |          

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.



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|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 March 31, 2006, the aggregate liquidation preference of the Preferred Stock was approximately $21.0 million, or $4.76 per share.



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

None



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

None



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|I
tem 6. | Exhibits and Reports on Form 8-K
|-------- | --------------------------------

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.                                                                                                                                                               
|                    
|Reports on Form 8-K.
|                     | 
|10.30                |  | On March 15, 2006, the Company filed a Form 8-K announcing the relocation of its corporate headquarters to 4336 Losee Road, Suite 5, North Las Vegas, Nevada 89030 from 3993 Howard Hughes
Parkway, Suite 630, Las Vegas, Nevada 89109.



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SIGNATURES

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



ARCHON CORPORATION, RegistrantBy:

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


By:

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


Date: May 12, 2006



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