##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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

For the quarterly period ended: June 30, 2007



| ̈ | 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



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ARCHON CORPORATION

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive office and zip code)

(702) 732-9120

(Registrants telephone number, including area code)



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



---

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

Indicate by 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.

6,280,931as ofAugust 13, 2007



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##### Table of Contents

ARCHON CORPORATION

INDEX



|        |  |                                                                                                                                       |  |     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                                       |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                                                                 |  |     
|        |  |                                                                                                                                      
|Item 1  |  | Condensed Consolidated Financial Statements:                                                                                          |  |     
|        |  | Condensed Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and September 30, 2006                                          |  | 1   
|        |  | Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended June 30, 2007 and 2006                  |  | 3   
|        |  | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended June 30, 2007 and 2006 |  | 4   
|        |  | Unaudited Condensed Consolidated Statement of Stockholders Equity for the Nine Months Ended June 30, 2007                            |  | 5   
|        |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2007 and 2006                            |  | 6   
|        |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                        |  | 7   
|        |  |                                                                                                                                      
|Item 2  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                 |  | 16  
|        |  |                                                                                                                                      
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                            |  | 25  
|        |  |                                                                                                                                      
|Item 4  |  | Controls and Procedures                                                                                                               |  | 26  
|        |  |                                                                                                                                      
|PART II |  | OTHER INFORMATION                                                                                                                     |  |     
|        |  |                                                                                                                                      
|Item 1  |  | Legal Proceedings                                                                                                                     |  | 27  
|        |  |                                                                                                                                      
|Item 2  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                                      |  | 27  
|        |  |                                                                                                                                      
|Item 3  |  | Defaults Upon Senior Securities                                                                                                       |  | 27  
|        |  |                                                                                                                                      
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                                                   |  | 28  
|        |  |                                                                                                                                      
|Item 5  |  | Other Information                                                                                                                     |  | 29  
|        |  |                                                                                                                                      
|Item 6  |  | Exhibits                                                                                                                              |  | 29  



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##### Table of Contents

PART I  FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



|                                    |  |               |             |                    |   |            
|----------------------------------- |  | ------------- | ----------- | ------------------ | - | -----------
|                                    |  | June 30, 2007 |             | September 30, 2006
|                                    |  | (Unaudited)   |             |                   
|ASSETS                              |  |               |             |                    |   |            
|Current assets:                     |  |               |             |                    |   |            
|Cash and cash equivalents           |  | $             | 47,464,303  |                    | $ | 6,187,533  
|Investment in marketable securities |  |               | 8,643,095   |                    |   | 6,011,225  
|Accounts receivable, net            |  |               | 90,634      |                    |   | 1,096,333  
|Inventories                         |  |               | 482,818     |                    |   | 414,033    
|Prepaid expenses and other          |  |               | 921,597     |                    |   | 1,045,654  
|                                    |  |               |             |                    |   |            
|Total current assets                |  |               | 57,602,447  |                    |   | 14,754,778 
|Land held for sale                  |  |               | 21,504,400  |                    |   | 21,504,400 
|Property held for investment, net   |  |               | 124,985,709 |                    |   | 127,364,625
|Property and equipment, net         |  |               | 25,327,452  |                    |   | 26,778,164 
|Other assets                        |  |               | 7,428,733   |                    |   | 7,648,201  
|                                    |  |               |             |                    |   |            
|Total assets                        |  | $             | 236,848,741 |                    | $ | 198,050,168
|                                    |  |               |             |                    |   |            

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)



|                                           |  |               |             |                    |   |            
|------------------------------------------ |  | ------------- | ----------- | ------------------ | - | -----------
|                                           |  | June 30, 2007 |             | September 30, 2006
|                                           |  | (Unaudited)   |             |                   
|LIABILITIES and STOCKHOLDERS EQUITY       |  |               |             |                    |   |            
|Current liabilities:                       |  |               |             |                    |   |            
|Accounts payable                           |  | $             | 3,032,499   |                    | $ | 2,770,938  
|Interest payable                           |  |               | 396,798     |                    |   | 1,310,796  
|Accrued and other liabilities              |  |               | 3,581,648   |                    |   | 3,524,408  
|Nonrefundable option                       |  |               | 0           |                    |   | 5,750,000  
|Current portion of debt                    |  |               | 11,071,685  |                    |   | 11,427,277 
|Current portion of non-recourse debt       |  |               | 2,411,505   |                    |   | 2,195,326  
|                                           |  |               |             |                    |   |            
|Total current liabilities                  |  |               | 20,494,135  |                    |   | 26,978,745 
|Debt  less current portion                |  |               | 59,119      |                    |   | 223,306    
|Non-recourse debt  less current portion   |  |               | 74,983,911  |                    |   | 76,818,600 
|Nonrefundable option                       |  |               | 47,422,500  |                    |   | 0          
|Deferred income taxes                      |  |               | 27,947,291  |                    |   | 27,245,317 
|Other liabilities                          |  |               | 42,824,479  |                    |   | 45,051,567 
|Stockholders equity                       |  |               | 23,117,306  |                    |   | 21,732,633 
|                                           |  |               |             |                    |   |            
|Total liabilities and stockholders equity |  | $             | 236,848,741 |                    | $ | 198,050,168
|                                           |  |               |             |                    |   |            

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

(Unaudited)



|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------ |  | --------------------------- | ---------- | - | -------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                                         |  | Three Months Ended June 30, |            |   | Nine Months Ended June 30, |  
|                                                                         |  | 2007                        |            |   | 2006                       |   |            | 2007 |  |   | 2006       |  
|Revenues:                                                                |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                                   |  | $                           | 5,536,450  |   |                            | $ | 5,797,738  |      |  | $ | 18,215,156 |   |  | $ | 18,882,938 |  
|Hotel                                                                    |  |                             | 763,961    |   |                            |   | 829,760    |      |  |   | 2,145,522  |   |  |   | 2,161,889  |  
|Food and beverage                                                        |  |                             | 1,907,714  |   |                            |   | 1,914,484  |      |  |   | 5,691,704  |   |  |   | 5,646,673  |  
|Investment properties                                                    |  |                             | 3,100,561  |   |                            |   | 3,100,562  |      |  |   | 9,301,685  |   |  |   | 9,301,685  |  
|Other                                                                    |  |                             | 1,214,736  |   |                            |   | 921,222    |      |  |   | 3,332,858  |   |  |   | 2,627,461  |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Gross revenues                                                           |  |                             | 12,523,422 |   |                            |   | 12,563,766 |      |  |   | 38,686,925 |   |  |   | 38,620,646 |  
|Less casino promotional allowances                                       |  |                             | (1,392,148 | ) |                            |   | (1,438,087 | )    |  |   | (4,609,563 | ) |  |   | (4,606,884 | )
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Net operating revenues                                                   |  |                             | 11,131,274 |   |                            |   | 11,125,679 |      |  |   | 34,077,362 |   |  |   | 34,013,762 |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Operating expenses:                                                      |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Casino                                                                   |  |                             | 3,175,479  |   |                            |   | 3,387,914  |      |  |   | 10,345,423 |   |  |   | 10,342,408 |  
|Hotel                                                                    |  |                             | 317,091    |   |                            |   | 302,130    |      |  |   | 885,194    |   |  |   | 805,112    |  
|Food and beverage                                                        |  |                             | 1,220,027  |   |                            |   | 1,097,120  |      |  |   | 3,192,850  |   |  |   | 3,017,775  |  
|Other                                                                    |  |                             | 462,669    |   |                            |   | 407,878    |      |  |   | 1,431,837  |   |  |   | 1,229,151  |  
|Selling, general and administrative                                      |  |                             | 916,323    |   |                            |   | 857,692    |      |  |   | 2,767,102  |   |  |   | 2,607,587  |  
|Corporate expenses                                                       |  |                             | 1,114,381  |   |                            |   | 2,102,855  |      |  |   | 2,953,482  |   |  |   | 3,880,531  |  
|Utilities and property expenses                                          |  |                             | 1,237,589  |   |                            |   | 1,145,566  |      |  |   | 3,545,174  |   |  |   | 3,375,685  |  
|Depreciation and amortization                                            |  |                             | 1,319,275  |   |                            |   | 1,369,072  |      |  |   | 3,997,141  |   |  |   | 4,140,101  |  
|Loss on sale / disposal of assets                                        |  |                             | 0          |   |                            |   | 21,520     |      |  |   | 0          |   |  |   | 21,520     |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Total operating expenses                                                 |  |                             | 9,762,834  |   |                            |   | 10,691,747 |      |  |   | 29,118,203 |   |  |   | 29,419,870 |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Operating income                                                         |  |                             | 1,368,440  |   |                            |   | 433,932    |      |  |   | 4,959,159  |   |  |   | 4,593,892  |  
|Interest expense                                                         |  |                             | (2,108,874 | ) |                            |   | (2,213,531 | )    |  |   | (6,362,864 | ) |  |   | (6,636,453 | )
|Interest and other income                                                |  |                             | 327,919    |   |                            |   | 8,040      |      |  |   | 481,116    |   |  |   | 197,113    |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss before income tax benefit and discontinued operations               |  |                             | (412,515   | ) |                            |   | (1,771,559 | )    |  |   | (922,589   | ) |  |   | (1,845,448 | )
|Federal income tax benefit                                               |  |                             | 140,255    |   |                            |   | 620,046    |      |  |   | 328,269    |   |  |   | 645,907    |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss before discontinued operations                                      |  |                             | (272,260   | ) |                            |   | (1,151,513 | )    |  |   | (594,320   | ) |  |   | (1,199,541 | )
|Discontinued operations  gain on sale, net of tax provision of $510,596 |  |                             | 0          |   |                            |   | 0          |      |  |   | 948,250    |   |  |   | 0          |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Net income (loss)                                                        |  |                             | (272,260   | ) |                            |   | (1,151,513 | )    |  |   | 353,930    |   |  |   | (1,199,541 | )
|Dividends accrued on preferred shares                                    |  |                             | (377,819   | ) |                            |   | (377,819   | )    |  |   | (1,133,458 | ) |  |   | (1,133,458 | )
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Net loss applicable to common shares                                     |  | $                           | (650,079   | ) |                            | $ | (1,529,332 | )    |  | $ | (779,528   | ) |  | $ | (2,332,999 | )
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Average common shares outstanding                                        |  |                             | 6,280,931  |   |                            |   | 6,235,931  |      |  |   | 6,422,040  |   |  |   | 6,235,931  |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Average common and common equivalent shares outstanding                  |  |                             | 6,280,931  |   |                            |   | 6,235,931  |      |  |   | 6,422,040  |   |  |   | 6,235,931  |  
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Loss per common share:                                                   |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Basic                                                                    |  | $                           | (0.10      | ) |                            | $ | (0.25      | )    |  | $ | (0.27      | ) |  | $ | (0.37      | )
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  
|Diluted                                                                  |  | $                           | (0.10      | ) |                            | $ | (0.25      | )    |  | $ | (0.27      | ) |  | $ | (0.37      | )
|                                                                         |  |                             |            |   |                            |   |            |      |  |   |            |   |  |   |            |  

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 Comprehensive Income (Loss)

(Unaudited)



|                                                                     |  |                             |          |   |                            |   |            |      |  |      |           |  |   |            |  
|-------------------------------------------------------------------- |  | --------------------------- | -------- | - | -------------------------- | - | ---------- | ---- |  | ---- | --------- |  | - | ---------- | -
|                                                                     |  | Three Months Ended June 30, |          |   | Nine Months Ended June 30, |  
|                                                                     |  | 2007                        |          |   | 2006                       |   |            | 2007 |  | 2006 |          
|Net income (loss)                                                    |  | $                           | (272,260 | ) |                            | $ | (1,151,513 | )    |  | $    | 353,930   |  | $ | (1,199,541 | )
|Unrealized gain (loss) on marketable securities, net of income taxes |  |                             | (222,480 | ) |                            |   | 201,140    |      |  |      | 967,607   |  |   | 944,633    |  
|                                                                     |  |                             |          |   |                            |   |            |      |  |      |           |  |   |            |  
|Comprehensive income (loss)                                          |  | $                           | (494,740 | ) |                            | $ | (950,373   | )    |  | $    | 1,321,537 |  | $ | (254,908   | )
|                                                                     |  |                             |          |   |                            |   |            |      |  |      |           |  |   |            |  

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 Statement of Stockholders Equity

For the Nine Months Ended June 30, 2007

(Unaudited)



|                                         |  |              |        |   |                 |   |                            |  |                     |            |  |                                        |             |                |  |   |           |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ------------ | ------ | - | --------------- | - | -------------------------- |  | ------------------- | ---------- |  | -------------------------------------- | ----------- | -------------- |  | - | --------- |  | - | ------- | - |  | - | ---------- | -
|                                         |  | Common Stock |        |   | Preferred Stock |   | Additional Paid-In Capital |  | Accumulated Deficit |            |  | Accumulated Other Comprehensive Income |             | Treasury Stock |  |   | Total     | 
|Balances, October 1, 2006                |  | $            | 66,723 |   |                 | $ | 9,445,483                  |  | $                   | 61,482,194 |  | $                                      | (51,098,102 | )              |  | $ | 1,924,109 |  | $ | (87,774 | ) |  | $ | 21,732,633 |  
|Net income                               |  |              |        |   |                 |   |                            |  |                     |            |  |                                        | 353,930     |                |  |   |           |  |   |         |   |  |   | 353,930    |  
|Stock options exercised                  |  |              | 450    |   |                 |   |                            |  |                     | 37,250     |  |                                        |             |                |  |   |           |  |   |         |   |  |   | 37,700     |  
|Rescission of stock option exercise      |  |              | (4,364 | ) |                 |   |                            |  |                     |            |  |                                        |             |                |  |   |           |  |   |         |   |  |   | (4,364     | )
|Unrealized gain on marketable securities |  |              |        |   |                 |   |                            |  |                     |            |  |                                        |             |                |  |   | 967,607   |  |   |         |   |  |   | 967,607    |  
|Stock subscriptions received             |  |              |        |   |                 |   |                            |  |                     | 29,800     |  |                                        |             |                |  |   |           |  |   |         |   |  |   | 29,800     |  
|                                         |  |              |        |   |                 |   |                            |  |                     |            |  |                                        |             |                |  |   |           |  |   |         |   |  |   |            |  
|Balances, June 30, 2007                  |  | $            | 62,809 |   |                 | $ | 9,445,483                  |  | $                   | 61,549,244 |  | $                                      | (50,744,172 | )              |  | $ | 2,891,716 |  | $ | (87,774 | ) |  | $ | 23,117,306 |  
|                                         |  |              |        |   |                 |   |                            |  |                     |            |  |                                        |             |                |  |   |           |  |   |         |   |  |   |            |  

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 Cash Flows

(Unaudited)



|                                               |  |                            |            |   |      |   |            |  
|---------------------------------------------- |  | -------------------------- | ---------- | - | ---- | - | ---------- | -
|                                               |  | Nine Months Ended June 30, |           
|                                               |  | 2007                       |            |   | 2006 |  
|Net cash provided by operating activities      |  | $                          | 43,203,836 |   |      | $ | 2,056,986  |  
|                                               |  |                            |            |   |      |   |            |  
|Cash flows from investing activities:          |  |                            |            |   |      |   |            |  
|Proceeds from sale of property                 |  |                            | 1,809,683  |   |      |   | 54,950     |  
|Capital expenditures                           |  |                            | (518,351   | ) |      |   | (187,768   | )
|Marketable securities purchased                |  |                            | (1,172,032 | ) |      |   | (199,131   | )
|Marketable securities sold                     |  |                            | 28,787     |   |      |   | 1,855,000  |  
|Investments in partnerships                    |  |                            | 0          |   |      |   | (410,333   | )
|                                               |  |                            |            |   |      |   |            |  
|Net cash provided by investing activities      |  |                            | 148,087    |   |      |   | 1,112,718  |  
|                                               |  |                            |            |   |      |   |            |  
|Cash flows from financing activities:          |  |                            |            |   |      |   |            |  
|Proceeds from debt                             |  |                            | 0          |   |      |   | 683,069    |  
|Paid on debt and obligation under lease        |  |                            | (2,138,289 | ) |      |   | (3,195,336 | )
|Note receivable                                |  |                            | 29,800     |   |      |   | 0          |  
|Stock options exercised                        |  |                            | 37,700     |   |      |   | 0          |  
|Rescission of stock option exercise            |  |                            | (4,364     | ) |      |   | 0          |  
|                                               |  |                            |            |   |      |   |            |  
|Net cash used in financing activities          |  |                            | (2,075,153 | ) |      |   | (2,512,267 | )
|                                               |  |                            |            |   |      |   |            |  
|Increase in cash and cash equivalents          |  |                            | 41,276,770 |   |      |   | 657,437    |  
|Cash and cash equivalents, beginning of period |  |                            | 6,187,533  |   |      |   | 2,116,708  |  
|                                               |  |                            |            |   |      |   |            |  
|Cash and cash equivalents, end of period       |  | $                          | 47,464,303 |   |      | $ | 2,774,145  |  
|                                               |  |                            |            |   |      |   |            |  

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 UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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. In June 2006, the Company announced that it had entered into an option agreement for the sale of the real estate it owns on the Strip for a total sale price of
$450 million, subject to the terms of the agreement. The purchase price has since been increased and additional extension fees paid. See Note 7

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 (SEC). 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 nine 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, 2006 and Form 10-Q for the quarter ended March 31, 2007.

2. Earnings Per Share

The Company presents its per
share results in accordance with Financial Accounting Standards Boards (FASB) Statement of Accounting Standards (SFAS) No. 128, Earnings Per Share (SFAS 128). SFAS 128 requires the
presentation of basic net income (loss) per share and diluted net income (loss) per share. Basic per share amounts are computed by dividing net income (loss) by average shares outstanding during the period, while diluted per share amounts reflect
the impact of additional dilution for all potentially dilutive securities, such as stock options. Potential dilutive stock options of approximately 830,000 were not used to calculate diluted per share information for the three and nine months ended
June 30, 2006, as the Company incurred net losses for those periods and, therefore, the effect would be antidilutive. Potential dilutive stock options of approximately 705,000 were not used to calculate diluted per share information for the
three and nine months ended June 30, 2007, as the Company incurred net losses, applicable to common shares, for those periods and, therefore, the effect would be antidilutive.



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3. Stock-Based Compensation

As of June 30, 2007, 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) provides for the grant of up to 1.2 million shares of its common stock to key employees. The Stock Option Plan provides for both
incentive stock options and non-qualified stock options. Stock option grants generally vest over a three-year period from the employees hire date. During the nine months ended June 30, 2007, there were no stock options granted under the
Stock Option Plan. As of June 30, 2007, there were approximately 692,000 options outstanding and exercisable under the Stock Option Plan. During the nine months ended June 30, 2007, 32,500 options were exercised and another approximately
80,000 options were cancelled and returned to the Stock Option Plan. In February, 2007, Mr. Lowden, President and Chairman of the Board, elected to not exercise 80,000 stock options, exercisable at $1.50 per share, and the stock options were
cancelled and returned to the Stock Option Plan.

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 on March 21, 2002. As of June 30, 2007, there were 12,500 options outstanding and exercisable under this plan. During the nine months ended June 30, 2007, 12,500 options were exercised.

Subsidiary Stock Option Plans: SFHI, Inc. (SFHI), 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 June 30, 2007, no options had been granted under any of the
Subsidiary Plans.

The following table summarizes stock option activity during the nine months ended June 30, 2007 under all plans:



|                                                     |  |                          |  |                                            |      |                                              |         |                                    |   |       
|---------------------------------------------------- |  | ------------------------ |  | ------------------------------------------ | ---- | -------------------------------------------- | ------- | ---------------------------------- | - | ------
|                                                     |  | Number of Shares (000s) |  | Weighted- Average Exercise Price Per Share |      | Weighted- Average Remaining Contractual Term |         | Aggregate Intrinsic Value ($000s)
|Options outstanding at September 30, 2006:           |  | 830                      |  | $                                          | 8.12 |                                              | 3.6 yrs |                                    | $ | 20,560
|Activity during the nine months ended June 30, 2007: |  |                          |  |                                            |      |                                              |         |                                    |   |       
|Granted                                              |  | 0                        |  |                                            | N/A  |                                              | N/A     |                                    |   | N/A   
|Exercised                                            |  | 45                       |  |                                            | N/A  |                                              | N/A     |                                    |   | N/A   
|Cancelled                                            |  | 80                       |  |                                            | N/A  |                                              | N/A     |                                    |   | N/A   
|Options outstanding at June 30, 2007                 |  | 705                      |  | $                                          | 9.30 |                                              | 3.6 yrs |                                    | $ | 30,301
|Exercisable at June 30, 2007                         |  | 705                      |  | $                                          | 9.30 |                                              | 3.6 yrs |                                    | $ | 30,301



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As of June 30, 2007, there was no unrecognized compensation cost related to unvested stock options.
45,000 options were exercised in the nine months ended June 30, 2007.The fair value of options vested in the nine months ended June 30, 2007 is not applicable as no options were vested for the first time during this quarter. There
were no unvested options at June 30, 2007.

The fair value of each option award is estimated on the date of grant using the
Black-Scholes-Merton option valuation model. 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 volatility and historical volatility on the stock.

For options granted prior to October 1, 2005, and valued in accordance with FASB SFAS No. 123, Accounting for Stock-Based
Compensation(FAS 123), the expected volatility used to estimate the fair value of the options was based solely on the historical volatility of the stock; the Company used the graded vested method for expense attribution.

For options granted after October 1, 2005, and valued in accordance with SFAS No. 123(R), Share-Based
Payment, (FAS 123R), the Company will use the straight-line method for expense attribution, and it will estimate forfeitures and only recognize expense for those shares expected to vest.

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 Company did not calculate the fair value of stock options granted during the nine months ended June 30, 2007 and 2006 as no stock options were granted during these periods.

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 NO. 159: In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, (SFAS No. 159), which provides companies an option to report selected financial assets and liabilities at fair value. SFAS No. 159 requires companies to provide information to assist financial statement
users to understand the effect of a companys choice to use fair value on its earnings, as well as to display on the face of the balance sheet the fair value of assets and liabilities chose by the company for fair value accounting.
Additionally, SFAS No. 159 establishes presentation and disclosure requirements designed to simplify comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is
effective for the Company in its fiscal year beginning October 2008. The Company is currently evaluating the impact that SFAS No. 159 will have on its condensed consolidated financial statements.



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4. Other Assets

Included in Other assets at June 30, 2007 and September 30, 2006 are unamortized loan issue costs, which were incurred during the acquisition of certain rental property and certain debt, and deferred rents
of $4.6 million for both periods. The unamortized loan issue costs are being amortized on the straight-line basis over the loan period, which closely approximates the effective interest method, and the deferred rents are being amortized on the
straight-line basis over the lease period.

Additionally, Other assets at June 30, 2007 and September 30, 2006 include $50,000 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 agreement 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.

Other assets also include amounts for the cash surrender value of life insurance of $0.8 million on June 30, 2007 and September 30, 2006 and
investments in unconsolidated entities of $1.8 million on June 30, 2007 and September 30, 2006.

One of the Companys
unconsolidated entities is a 50% owned LLC which has the following financial profile as of June 30, 2007 and 2006, (in thousands):



|                    |  |          |     |      |   |    
|------------------- |  | -------- | --- | ---- | - | ---
|                    |  | June 30,
|                    |  | 2007     |     | 2006
|Current assets      |  | $        | 148 |      | $ | 154
|Total assets        |  |          | 931 |      |   | 961
|Current liabilities |  |          | 124 |      |   | 122
|Total liabilities   |  |          | 195 |      |   | 362
|Total equity        |  |          | 736 |      |   | 599

This unconsolidated entity has the following profit profile for the three and nine months ended
June 30, 2007 and 2006 (in thousands):



|              |  |                             |     |                            |   |      |  |      |       |  |   |      
|------------- |  | --------------------------- | --- | -------------------------- | - | ---- |  | ---- | ----- |  | - | -----
|              |  | Three Months Ended June 30, |     | Nine Months Ended June 30,
|              |  | 2007                        |     | 2006                       |   | 2007 |  | 2006
|Revenues      |  | $                           | 352 |                            | $ | 404  |  | $    | 1,123 |  | $ | 1,279
|Pretax income |  |                             | 45  |                            |   | 77   |  |      | 190   |  |   | 305  

This entity is indebted to a bank in the amount of $0.1 million and $0.2 million at on
June 30, 2007 and 2006 respectively. The debt is secured by a deed of trust and is guaranteed by the Company.



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5. Federal Income Tax

The Company recorded a federal income tax benefit, based on estimated annual effective rates, of $0.1 million and $0.6 million for the three months ended June 30, 2007 and June 30, 2006, respectively. The
Company recorded a federal income tax benefit, based on estimated annual effective rates, of $0.3 million and $0.6 million for the nine months ended June 30, 2007 and June 30, 2006, respectively. The 2007 tax provision is comprised of a
$0.8 million benefit on continuing operations and a $0.5 million provision on discontinued operations.

The Company continues to record tax
benefits for its taxable losses as it believes that tax provisions for future taxable income from operations or from the sales of assets will be sufficient to offset the tax benefits currently recorded.

6. Sale of Option for Strip Land

On June 24,
2006, SLVC, a Nevada corporation and subsidiary of Archon Corporation entered into an Option Agreement (the Agreement) between SLVC and LVTI LLC, a Delaware limited liability company (LVTI). Pursuant to the Agreement, SLVC
granted to LVTI an option (the Option) to purchase an approximately 27 acre parcel of real property located on Las Vegas Boulevard South (the Property) or, alternatively, SLVCs membership interest in a limited liability
company (LVT LLC) that may be formed and into which the Property would be contributed.

The initial purchase price to be paid by LVTI for purchase of the Property or the membership interest in LVT LLC was $450 million. LVTI paid an initial deposit of $5.0 million on June 27, 2006. The Agreement also
provided for a second deposit of $40.0 million due on or before September 22, 2006, and additional monthly payments of approximately $2.2 million in each month commencing on the 13thcalendar month following the date the second deposit is paid until the closing of the exercise of the Option. The 30-day due diligence period ended and LVTI did not terminate the Agreement. Upon exercise of the
Option, the initial deposit and the second deposit will be credited against the total purchase price. The Agreement provides for certain adjustments to the purchase price if certain easements are entered into with respect to the Property prior to
the closing. The Option may be exercised by LVTI at any time between the last day of the 12thcalendar month and the last day of the 18thcalendar month following the date on which the second deposit is paid; provided that the option term may be extended by up to 30 days if SLVC does not give
written notice to LVTI of the option term expiration as required by the Agreement. The first and second deposits and any additional monthly payments paid to SLVC prior to termination of the Agreement will be retained by SLVC upon termination of the
Agreement without exercise of the option, except under certain circumstances specified in the Agreement.

Pursuant to
a First Amendment of the Agreement, LVTI elected to pay to the Company $750,000 to extend the date on which the second deposit of $40.0 million was due from September 22, 2006 to December 31, 2006. Pursuant to a Second Amendment, LVTI
elected to pay to the Company $1,172,500 to further extend the date on which the second deposit of $40.0 million was due from December 31, 2006 to March 31, 2007. Pursuant to a Third and a Fourth Amendment to the Agreement, LVTI elected to
pay to the Company two additional payments in April 2007 totaling $500,000 to further extend the date on which the second deposit was due from March 31, 2007 to May 31, 2007. LVTI paid the $40.0 million second deposit on May 25, 2007.
Additionally, the initial purchase price was increased from $450 million to $475 million. Pursuant to a Fifth Amendment, three months, to be exercised in the discretion of LVTI, were added to the Option term, extending the end of the Option term
from March 31, 2008 to June 30, 2008. LVTI will pay a fee of $2,866,667 (Carry Option Payments) for each of the three month extensions utilized, with a proration for any partial month utilized. All Carry Option Payments and all
monthly option extension payments are nonrefundable and will not be applied against the purchase price under the Agreement.

The
nonrefundable payment of $5.0 million and a nonrefundable extension fee of $750,000 were recorded as a deposit liability, at September 30, 2006. The Company received an additional nonrefundable extension fee of



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$1.2 million in December 2006 which was recorded as a deposit liability at March 31, 2007. The Company received additional nonrefundable extension fees
of $500,000 in April 2007 and the nonrefundable second deposit payment of $40.0 million on May 25, 2007, which payments were recorded as a deposit liability at June 30, 2007.

The obligations of SLVC and LVTI to consummate the transactions contemplated by the Agreement are subject to the satisfaction or waiver of customary
closing conditions.

The Company has guaranteed the obligations of SLVC under the Agreement.

7. 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. As originally drafted, the Certificate of Designation of the Exchangeable Redeemable Preferred Stock (Certificate of Designation) provides in
part that:

The holders of record of shares of Exchangeable Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore, cumulative cash dividends at a rate per annum per share (the Dividend Rate) initially set at 8% of (i) $2.14
plus (ii) accrued but unpaid dividends as to which a Dividend Payment Date has occurred. Dividends shall accrue from the date of issuance and be payable semi-annually in arrears on the 31stday of March and the 30thday of September in each year (or if such day is a
non-business day, on the next business day), commencing on March 31, 1994 (each of such dates a Dividend Payment Date); provided, however, that on any or all of the first six Dividend Payment Dates, the Company may, at its option,
pay dividends on the Exchangeable Preferred Stock in the form of additional shares of Exchangeable Preferred Stock at the rate per annum of 0.08 shares of additional Exchangeable Preferred Stock for every share of Exchangeable Preferred Stock
entitled to receive a dividend. If all Exchangeable Preferred Stock has not been redeemed prior to the tenth Dividend Payment Date, the Dividend Rate will increase on the tenth Dividend Payment Date to the rate per annum per share of 11% and will
thereafter increase by an additional 0.50% per annum per share on each Dividend Payment Date until either the Dividend Rate reaches a rate per annum per share of 16% or the Exchangeable Preferred Stock is redeemed or exchanged by the Company.
In no circumstances will the Dividend Rate exceed 16% per annum per share.

In October 2003, the dividend rate
increased to 16.0%. As of June 30, 2007 the aggregate liquidation preference of the preferred stock was approximately $22.9 million, or $5.18 per share.

Pursuant to the Certificate of Designation, 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.

During the quarter ended June 30,
2006, a holder of the Companys preferred stock advised the Company that the holder had concluded that the Companys calculation of the dividends on the preferred stock should accumulate at a compounded rate and is therefore erroneous, and
that as a result the aggregate liquidation preference of the preferred stock is significantly greater than that calculated by the Company. Based upon the Companys review to date of the relevant documents, the Company does not agree with the
holders position.



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The holder of the preferred stock filed a complaint (the Complaint) in November 2006. The
Complaint alleged, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 14 years ago. The
Complaint further alleged that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company vigorously defended
this Complaint.

In this suit, two holders of the Companys Exchangeable Refundable Preferred Stock (the Preferred Stock)
alleged that the Company, beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the liquidation preference for the Preferred Stock. The Complaint sought damages for
violations of Section 10(b) of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticuts Unfair Trade Practices Act. The Complaint sought unspecified compensatory damages and the
equitable relief of an accounting.

The Company filed a motion to dismiss the Complaint in its entirety on December 19, 2006. On
February 7, 2007, the plaintiffs filed a motion for leave to amend the Complaint. The Court granted the motion to amend the Complaint. The plaintiffs filed an amended Complaint and the Company renewed its motion to dismiss the Complaint in its
entirety. Prior to a decision by the court as to the Companys motion to dismiss the amended Complaint, both parties consented and stipulated that the court could enter an Order for Dismissal, and on May 15, 2007, the court ordered that
the action be dismissed with prejudice as to the plaintiffs rights to assert any of the claims set forth in the action in the State of Connecticut, and without prejudice as to the plaintiffs rights to assert any of the claims set forth
in the action in any other jurisdiction outside the State of Connecticut.

8. Discontinued Operations

In October 2006, the Company sold real estate with a net book value of $0.4 million for $1.8 million. A gain of $0.9 million, net of taxes of $0.5
million, on the sale was recorded as discontinued operations. The operating results from this property are insignificant and are not recorded as discontinued operations.

9. 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 financial information for the Companys corporate operations, adjusted to reflect eliminations upon consolidation.

Set forth
below is the unaudited financial information for the segments in which the Company operates for the three- month and nine month periods ended June 30, 2007 and 2006.



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|                                 |  |                             |        |   |      |   |        |  
|-------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                 |  | Three Months Ended June 30, |       
|                                 |  | 2007                        |        |   | 2006 |  
|                                 |  | (dollars in thousands)      |       
|Pioneer Hotel / Casino:          |  |                             |        |   |      |   |        |  
|Net operating revenues           |  | $                           | 7,402  |   |      | $ | 7,624  |  
|Operating loss                   |  |                             | (445   | ) |      |   | (197   | )
|Depreciation and amortization    |  |                             | 500    |   |      |   | 545    |  
|Interest expense                 |  |                             | 322    |   |      |   | 356    |  
|Interest and other income        |  |                             | 3      |   |      |   | 3      |  
|Loss before income taxes         |  |                             | (763   | ) |      |   | (550   | )
|Capital expenditures / transfers |  |                             | 212    |   |      |   | 75     |  
|                                 |  |                            
|Investment Properties:           |  |                             |        |   |      |   |        |  
|Net operating revenues           |  | $                           | 3,101  |   |      | $ | 3,101  |  
|Operating income                 |  |                             | 2,308  |   |      |   | 2,308  |  
|Depreciation and amortization    |  |                             | 793    |   |      |   | 793    |  
|Interest expense                 |  |                             | 1,833  |   |      |   | 1,870  |  
|Interest and other income        |  |                             | 1      |   |      |   | 1      |  
|Income before income taxes       |  |                             | 475    |   |      |   | 438    |  
|Capital expenditures / transfers |  |                             | 0      |   |      |   | 0      |  
|                                 |  |                            
|Other and Eliminations:          |  |                             |        |   |      |   |        |  
|Net operating revenues           |  | $                           | 628    |   |      | $ | 401    |  
|Operating loss                   |  |                             | (495   | ) |      |   | (1,677 | )
|Depreciation and amortization    |  |                             | 26     |   |      |   | 31     |  
|Interest expense                 |  |                             | (46    | ) |      |   | (12    | )
|Interest and other income        |  |                             | 324    |   |      |   | 4      |  
|Loss before income taxes         |  |                             | (125   | ) |      |   | (1,660 | )
|Capital expenditures / transfers |  |                             | 131    |   |      |   | 0      |  
|                                 |  |                            
|Total:                           |  |                             |        |   |      |   |        |  
|Net operating revenues           |  | $                           | 11,131 |   |      | $ | 11,126 |  
|Operating income                 |  |                             | 1,368  |   |      |   | 434    |  
|Depreciation and amortization    |  |                             | 1,319  |   |      |   | 1,369  |  
|Interest expense                 |  |                             | 2,109  |   |      |   | 2,214  |  
|Interest and other income        |  |                             | 328    |   |      |   | 8      |  
|Loss before income taxes         |  |                             | (413   | ) |      |   | (1,772 | )
|Capital expenditures / transfers |  |                             | 343    |   |      |   | 75     |  



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|                                 |  |                            |         |   |      |   |         |  
|-------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                 |  | Nine Months Ended June 30, |        
|                                 |  | 2007                       |         |   | 2006 |  
|                                 |  | (dollars in thousands)     |        
|Pioneer Hotel / Casino:          |  |                            |         |   |      |   |         |  
|Net operating revenues           |  | $                          | 23,128  |   |      | $ | 23,500  |  
|Operating income (loss)          |  |                            | (670    | ) |      |   | 375     |  
|Depreciation and amortization    |  |                            | 1,541   |   |      |   | 1,660   |  
|Interest expense                 |  |                            | 980     |   |      |   | 1,051   |  
|Interest and other income        |  |                            | 9       |   |      |   | 9       |  
|Loss before income taxes         |  |                            | (1,642  | ) |      |   | (667    | )
|Capital expenditures / transfers |  |                            | 247     |   |      |   | 178     |  
|Identifiable assets (1)          |  |                            | 28,415  |   |      |   | 30,660  |  
|                                 |  |                           
|Investment Properties:           |  |                            |         |   |      |   |         |  
|Net operating revenues           |  | $                          | 9,302   |   |      | $ | 9,302   |  
|Operating income                 |  |                            | 6,923   |   |      |   | 6,923   |  
|Depreciation and amortization    |  |                            | 2,379   |   |      |   | 2,379   |  
|Interest expense                 |  |                            | 5,519   |   |      |   | 5,627   |  
|Interest and other income        |  |                            | 2       |   |      |   | 2       |  
|Income before income taxes       |  |                            | 1,406   |   |      |   | 1,298   |  
|Capital expenditures / transfers |  |                            | 0       |   |      |   | 0       |  
|Identifiable assets (1)          |  |                            | 129,515 |   |      |   | 133,916 |  
|                                 |  |                           
|Other and Eliminations:          |  |                            |         |   |      |   |         |  
|Net operating revenues           |  | $                          | 1,647   |   |      | $ | 1,212   |  
|Operating loss                   |  |                            | (1,294  | ) |      |   | (2,704  | )
|Depreciation and amortization    |  |                            | 77      |   |      |   | 101     |  
|Interest expense                 |  |                            | (136    | ) |      |   | (42     | )
|Interest and other income        |  |                            | 470     |   |      |   | 186     |  
|Loss before income taxes         |  |                            | (687    | ) |      |   | (2,476  | )
|Capital expenditures / transfers |  |                            | 271     |   |      |   | 10      |  
|Identifiable assets (1)          |  |                            | 78,919  |   |      |   | 31,858  |  
|                                 |  |                           
|Total:                           |  |                            |         |   |      |   |         |  
|Net operating revenues           |  | $                          | 34,077  |   |      | $ | 34,014  |  
|Operating income                 |  |                            | 4,959   |   |      |   | 4,594   |  
|Depreciation and amortization    |  |                            | 3,997   |   |      |   | 4,140   |  
|Interest expense                 |  |                            | 6,363   |   |      |   | 6,636   |  
|Interest and other income        |  |                            | 481     |   |      |   | 197     |  
|Loss before income taxes         |  |                            | (923    | ) |      |   | (1,845  | )
|Capital expenditures / transfers |  |                            | 518     |   |      |   | 188     |  
|Identifiable assets (1)          |  |                            | 236,849 |   |      |   | 196,434 |  

---

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

10. Subsequent Events

Redemption of the Companys Exchangeable Redeemable Preferred Stock: Pursuant to the provisions of the Certificate of Designation, the Company provided written notice to the outstanding
holders of the Preferred Stock on July 31, 2007, that the Company would redeem, in whole, the Exchangeable Redeemable Preferred Stock. The noticed date of the redemption and the delisting of all the outstanding Preferred Stock is
August 31, 2007. All funds necessary for the redemption have been set aside by the Company, separate and apart from its other funds, in trust for the account of the holders of the shares to be redeemed. Instructions for redemption of Preferred
Stock are attached to Form 8-K filed by the Company on July 31, 2007 or by request from the Company.



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##### Table of Contents

ARCHON CORPORATION

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

This
discussion is intended to further the readers understanding of the condensed consolidated financial condition and results of operations of Archon Corporation (the Company or Archon). It should be read in conjunction
with the financial statements included in this quarterly report on Form 10-Q and the Companys annual report on Form 10-K for the year ended September 30, 2006. 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 the Pioneer Hotel & Gambling Hall (the Pioneer) in Laughlin, Nevada. The
Company also owns property on Las Vegas Boulevard (the Strip) in Las Vegas, Nevada that may be sold pursuant to an option agreement entered into in fiscal 2006 whereby the optionee has the right to purchase the property from the Company
for $475 million.

The Pioneer has experienced a flattening and, to a certain extent, a decline of its revenues over the last few years
after experiencing strong revenue and profit growth in the early 1990s. Management believes the growth of casino properties on Native American lands in such locations as California and Arizona within the last several years caused revenue
declines and caused the Company to focus on market definition and development in Laughlin to maintain profitability. Management believes Laughlin has now become a mature market with marginal growth forecasted for the next few years based on its
current plans.

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

Management believes the recent revenue and expense trends at the Pioneer may not change
significantly over the next few years.

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, Maryland and Dorchester, Massachusetts. The
Company acquired the properties and nonrecourse debt associated with the properties which are subject to long-term leases. Tenants remit payments to banks according to the terms of the leases and notes. The payments are used to liquidate the
nonrecourse debt obligations. Rental income is recorded by the Company on a straight-line basis and totals approximately $12.4 million annually and will remain at this level until approximately 2020. The buildings are also being depreciated on a
straight-line basis and the depreciation expense is approximately $3.2 million annually and will remain at this level until approximately 2020 or until the assets are sold, otherwise disposed of or become impaired. Interest expense is also recorded
based on the outstanding nonrecourse debt remaining to be paid based on unamortized loan issue costs and remaining debt amortization timetables. At any time during the life of the leases and debt amortization, the fair market values of the
properties may be different than its book values. Interest is presently being expensed at approximately $7.4 million annually and will decrease in relation to debt principal reductions through 2020.



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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 are
affected by significant judgments and estimates used by management in the preparation of the Companys consolidated financial statements:

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

Long-Lived Assets. The Company has a significant investment in long-lived property and equipment. It estimates that the undiscounted future cash flows expected to result from the use of these assets
exceeds the current carrying value of these assets. Any adverse change in the estimate of these undiscounted future cash flows could necessitate an impairment charge that would adversely affect operating results. 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 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 records federal income provisions / benefits, based on estimated annual effective rates. The Company continues to record tax benefits for its taxable losses as it believes that tax provisions from
future taxable income from operations or from the sales of assets will be sufficient to offset such tax benefits.

Recently Issued
Accounting Standards. SFAS NO. 159: In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, (SFAS No. 159), which provides companies an
option to report selected financial assets and liabilities at fair value. SFAS No. 159 requires companies to provide information to assist financial statement users to understand the effect of a companys choice to use fair value on its
earnings, as well as to display on the face of the balance sheet the fair value of assets and liabilities selected by the company for fair value accounting. Additionally, SFAS No. 159 establishes presentation and disclosure requirements
designed to simplify comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for the Company in its fiscal year beginning October 2008. The Company is
currently evaluating the impact that SFAS No. 159 will have on its condensed consolidated financial statements.



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Results of Operations  Nine Months Ended June 30, 2007 and 2006

General

During the nine months ended June 30,
2007, the Companys net operating revenues were relatively unchanged and operating expenses decreased $0.3 million, resulting in an increase in operating income of $0.4 million from the nine months ended June 30, 2006. The change in
operating results was primarily due to a decrease in corporate stock based compensation expenses of $0.9 million, which was partially offset by an increase in payroll and utility expenses at the Pioneer. The operating results at the investment
properties were unchanged.

Consolidated

Net Operating Revenues. Consolidated net operating revenues for the nine months ended June 30, 2007 were $34.1 million, a $0.1 million increase or 0.2%, as compared to $34.0 million for the nine months ended
June 30, 2006. The change in net operating revenue was related to higher interest income from deposits received on the land sale option, which was partially offset by lower casino revenues at the Pioneer Revenues at the Pioneer for the nine
months ended June 30, 2007 were $23.1 million, a $0.4 million decrease or 1.6%, as compared to $23.5 million for the nine months ended June 30, 2006. Revenues from the investment properties were $9.3 million for each of the nine
months ended June 30, 2007 and 2006. Sahara Las Vegas Corp (SLVC) had net revenues of approximately $1.0 million during the nine months ended June 30, 2007 and 2006, respectively. Revenues at Corporate for the nine months ended
June 30, 2007 increased $0.1 million as compared to the nine months ended June 30, 2006.

Operating Expenses. Total
operating expenses million for the nine months ended June 30, 2007 were $29.1, a $0.3 million decrease or 1%, as compared to $29.4 million for the nine months ended June 30, 2006. The change in operating expenses resulted from a
decrease in corporate stock based compensation of $0.9 million, offset by $0.4 million higher payroll and $0.2 million higher utility expenses at the Pioneer. Total operating expenses as a percentage of revenue decreased to 85.4% in the current year
period from 86.5% in the prior year period, as a result of the higher revenues and lower operating expenses. Operating expenses at the Pioneer for the nine months ended June 30, 2007 were approximately $23.8 million, a $0.7 million increase or
2.9%, as compared to $23.1 million for the nine months ended June 30, 2006.

Operating Income. Consolidated operating
income for the nine months ended June 30, 2007 was $5.0 million, a $0.4 million increase or 8.0%, as compared to $4.6 million for the nine months ended June 30, 2006. This increase was due to the aforementioned change in corporate and
operating expenses. Operating income for the nine months ended June 30, 2007 and 2006 of $6.9 million was attributable to the investment properties. Operating income at the Pioneer decreased by $1.0 million to an operating loss of $0.7 million
for the nine months ended June 30, 2007. The operating loss at Corporate improved by $1.4 million to $1.3 million for the nine months ended June 30, 2007.

Interest Expense. Consolidated interest expense for the nine months ended June 30, 2007 was $6.4 million, a $0.2 million decrease or 4.1%, as compared to $6.6 million for the nine months
ended June 30, 2006. 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 nine months ended June 30, 2007 was $0.5 million, a $0.3 million increase or 144.1%, as compared to $0.2 million for the nine months
ended June 30, 2006. The increase was primarily due to the increase in cash flows from operating activities.

Loss Before Income
Tax Benefit and Discontinued Operations. Consolidated loss before income tax benefit for the nine months ended June 30, 2007 was $0.9 million, a $0.9 million improvement as compared to a loss of $1.8 million for the nine months
ended June 30, 2006.



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Discontinued Operations. In October 2006, the Company sold real estate with a net book
value of $0.4 million for $1.8 million. A gain of $0.9 million, net of taxes of $0.5 million. The sale was recorded as discontinued operations.

Federal Income Tax. The Company recorded a net federal income tax provision of $0.2 million for the nine months ended June 30, 2007 comprised of a $0.3 million tax benefit on continuing operations and a $0.5 million
provision on discontinued operations. The Company recorded a federal income tax benefit for the nine months ended June 30, 2006 of $0.6 million based on estimated annual effective rates.

Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders equity section of the balance
sheet as the Company has elected at its sole discretion to redeem its preferred stock. However, dividends of $1.1 million for each of the nine-months ended June 30, 2007 and 2006 were accrued on the preferred stock for purposes of calculating
net income (loss) applicable to common shares.

Net Loss. Consolidated net loss attributable to common shares
for the nine months ended June 30, 2007 was $0.8 million, or $0.27 per common share, as compared to net loss attributable to common shares of $2.3 million, or $0.37 per common share, for the nine months ended June 30,
2006.

Pioneer

Net Operating
Revenues. Net operating revenues at the Pioneer for the nine months ended June 30, 2007 were $23.1 million, a $0.4 million decrease or 2%, as compared to $23.5 million for the nine months ended June 30, 2006 primarily due to
the reasons set forth below.

Casino revenues for the nine months ended June 30, 2007 were $18.2 million, a $0.7 million decrease or
4%, as compared to $18.9 million for the nine months ended June 30, 2006. Slot and video poker revenues for the nine months ended June 30, 2007 were $16.6 million, a $0.5 million decrease or 3%, as compared to $17.1 million for
the nine months ended June 30, 2006. Slot handle increased by $2.7 million, but slot win decreased by $0.5 million, due to a lower hold percentage. Other gaming revenues, including table games for the nine months ended June 30, 2007 were
$1.6 million, a $0.2 million decrease or 10%, from $1.8 million for the nine months ended June 30, 2006. Other gaming volume increased by $0.1 million, but win decreased by nearly $0.2 million, due to lower hold percentage. Casino promotional
allowances were unchanged at $3.2 million.

Hotel revenues were relatively unchanged at $2.1 million for the nine months ended
June 30, 2007 as compared to $2.2 million for the nine months ended June 30, 2006. An increase in rooms occupied was partially offset by a decrease in the average room rate. Competitive pressures in the Laughlin market in the 2007 period
caused the decline in average room rate. Food and beverage revenues for the nine months ended June 30, 2007 were $5.7 million, a slight increase or 1%, as compared to $5.6 million for the nine months ended June 30, 2006. A
decline in food and beverage comp revenue was offset with increases in cash sales. Other revenues for the nine months ended June 30, 2007 were $1.7 million, a $0.3 million increase or 19%, as compared to $1.4 million for the nine months ended
June 30, 2006, due to increased retail sales driven by the closing of a popular local retail store.

Operating Expenses.
Operating expenses for the nine months ended June 30, 2007 were approximately $23.8 million a $0.7 million increase or 3%, from $23.1 million for the nine months ended June 30, 2006. The increase was primarily a result of $0.5
million higher payroll expenses, primarily due to a change in Nevadas minimum wage law. Operating expenses as a percentage of revenue increased to 102.9% in the current year period from 98.4% in the prior year period, a direct result of lower
operating revenue and higher operating expenses.

Casino expenses for the nine months ended June 30, 2007 were unchanged from the
prior year at $10.3 million. Casino expenses as a percentage of revenue increased to 56.8% in the current year period from 54.8% in the prior year period.

Hotel expenses for the nine months ended June 30, 2007 were $0.9 million, a $0.1 million increase or 10%, as compared to $0.8 million for the nine months ended June 30, 2006, due to the increase in occupied
rooms and



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payroll expense. Hotel expenses as a percentage of revenue increased to 41.3% in the current year period from 37.2% in the prior period. Food and beverage
expenses for the nine months ended June 30, 2007 were $3.2 million, a $0.2 million increase or 6%, as compared to $3.0 million for the nine months ended June 30, 2006, primarily due to the increase in the Nevada minimum wage rate. Food and
beverage expenses as a percentage of revenue increased to 56.1% in the current year period from 53.4% in the prior period. Other expenses for the nine months ended June 30, 2007 were $1.4 million, a $0.2 million increase or 17%, as compared to
$1.2 million for the nine months ended June 30, 2006. Other expenses as a percentage of revenue declined to 83.8% in the current year period from 85.6% in the prior year period.

Selling, general and administrative expenses for the nine months ended June 30, 2007 were $3.4 million, a $0.1 million increase or 4%, as compared
to $3.3 million for the nine months ended June 30, 2006. Selling, general and administrative expenses as a percentage of revenue increased to 14.8% in the current year period from 14.1% in the prior year period. Pioneers selling, general
and administrative expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses for the nine months ended June 30, 2007 were $3.0 million, a $0.2 million
increase or 8%, as compared to $2.8 million for the nine months ended June 30, 2006. Aggressive measures have been taken to moderate the rising electricity rates, through the installation of energy efficient lighting and signage. Utilities
and property expenses as a percentage of revenue increased to 12.9% in the current year period from 11.8% in the prior year period. Depreciation and amortization expenses for the nine months ended June 30, 2007 were $1.5 million, a $0.2 million
decrease or 7%, as compared to $1.7 million for the nine months ended June 30, 2006, due to a reduction in the amortization of loan issue costs.

Results of Operations  Three Months Ended June 30, 2007 and 2006

General

During the three months ended June 30, 2007, the Companys net operating revenues were relatively unchanged and operating expenses decreased
$0.9 million, resulting in an increase in operating income of $0.9 million as compared to the three months ended June 30, 2006. The change in operating results was primarily due to a decrease in corporate stock based compensation expense of
$0.9 million, which was partially offset by an increase in payroll and utility expenses at the Pioneer. The operating results at the investment properties were unchanged.

Consolidated

Net Operating Revenues.Consolidated net operating revenues for
the three months ended June 30, 2007 were $11.1 million, relatively unchanged from the three months ended June 30, 2006. Revenues at the Pioneer for the three months ended June 30, 2007 were $7.4 million, a $0.2 million decrease or
3%, as compared to $7.6 million for the three months ended June 30, 2006 primarily caused by lower casino revenues. Income from the investment properties was approximately $3.1 million for the three months ended June 30, 2007 and 2006.
Revenues at Corporate increased $0.2 million for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006, related to higher interest income from deposits received on the land sale option. SLVC had net
revenues of approximately $0.3 million during the three months ended June 30, 2007 and 2006.

Operating Expenses. Total
operating expenses for the three months ended June 30, 2007 were $9.8 million, a $0.9 million decrease or 9%, as compared to $10.7 million for the three months ended June 30, 2006. The change in operating expenses resulted from a
decrease in corporate stock based compensation of $0.9 million, offset by $0.1 million higher payroll and utility expenses at the Pioneer. Total operating expenses as a percentage of revenue decreased to 87.7% for the three months ended
June 30, 2007 from 96.1% for the three months ended June 30, 2006 in the prior year period, as a result of the lower operating expenses.



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Operating Income. Consolidated operating income for the three months ended June 30,
2007 was $1.4 million, a $1.0 million increase or 215%, as compared to $0.4 million for the three months ended June 30, 2006. The increase was due to the aforementioned decrease in operating expenses. Operating income of $3.1 million
for each of the three months ended June 30, 2007 and 2006 is attributable to the investment properties. Operating loss at the Pioneer for the three months ended June 30, 2007 was $0.4 million, a $0.2 million decrease, or 126%, as compared
to $0.2 million for the three months ended June 30, 2006. The operating losses at Corporate improved by $1.2 million to $0.5 million. Operating income changes are a result of the aforementioned changes in operating revenues and expenses.

Interest Expense. Consolidated interest expense for the three months ended June 30, 2007 was $2.1 million, a $0.1
million decrease or 5%, as compared to $2.2 million for the three months ended June 30, 2006. 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 June 30, 2007 was $0.3 million, a $0.3
million increase over the three months ended June 30, 2006. The increase was primarily due to the increase in cash flows from operating activities.

Loss Before Income Tax and Discontinued Operations. Consolidated loss before income tax and discontinued operations for the three months ended June 30, 2007 was $0.4 million, a $1.4 million increase
or 77%, as compared to a $1.8 million loss for the three months ended June 30, 2006.

Federal Income Tax. The Company
recorded a federal income tax benefit for the three months ended June 30, 2007 of $0.1 million as compared to a $0.6 million benefit for the three months ended June 30, 2006 based on estimated annual effective 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 months ended June 30, 2007 and 2006 accrued on the preferred stock for purposes
of calculating net loss applicable to common shares.

Net Loss. Consolidated net loss attributable to common shares for the
three months ended June 30, 2007 was $0.7 million, or $0.10 per common share, as compared to net loss attributable to common shares of $1.5 million, or $0.25 per common share, for the three months ended June 30, 2006.

Pioneer

Net Operating Revenues. Net
operating revenues at the Pioneer for the three months ended June 30, 2007 were $7.4 million, a $0.2 million decrease or 3%, as compared to $7.6 million for the three months ended June 30, 2006, primarily for the reasons set
forth below.

Casino revenues for the three months ended June 30, 2007 were $5.5 million, a $0.3 million decrease or 5%, as compared
to $5.8 million for the three months ended June 30, 2006. Slot and video poker revenues for the three months ended June 30, 2007 were $5.0 million, a $0.2 million decrease or 4%, as compared to $5.2 million for the three months
ended June 30, 2006. Lower slot handle was offset by a higher hold percentage. Other gaming revenues, including table games, for the three months ended June 30, 2007 were $0.7 million, a $0.1 million decrease or 12%, as compared to $0.6
million for the three months ended June 30, 2006. Lower table games hold percentage was offset by a slightly improved hold in keno. Casino promotional allowances were relatively unchanged at $1.4 million for the three months ended June 30,
2007 and 2006.

Hotel revenues were unchanged at $0.8 million for the three months ended June 30, 2007 and 2006. Food and
beverage revenues were unchanged at $1.9 million for the three months ended June 30, 2007 and 2006. Other revenues for the three months ended June 30, 2007 were $0.6 million, a $0.1 million increase or 13%, as compared to $0.5 million for
the three months ended June 30, 2006, due to increased retail sales, driven by the closing of a popular local retail store.



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Operating Expenses. Operating expenses were unchanged at $7.8 million for the three months
ended June 30, 2007 and 2006. Payroll expense increased $0.1 million, primarily due to a change in Nevadas minimum wage law, but was offset by reductions in supplies, outside services, and other expenses. Operating expenses as a
percentage of revenue increased to 106.0% from 102.6% as a result of the aforementioned lower revenues.

Casino expenses for the three
months ended June 30, 2007 were $3.2 million, a $0.2 million decrease or 6%, as compared to $3.4 million for the three months ended June 30, 2006. Increases in payroll expenses were offset by decreases in participation and bonus point
expenses. Casino expenses as a percentage of revenue decreased to 57.4% for the three months ended June 30, 2007 from 58.4% for the three months ended June 30, 2006.

Hotel expenses were relatively unchanged at $0.3 million in both of the three months ended June 30, 2007 and 2006. Hotel expenses as a percentage of
revenue increased to 41.5% for the three months ended June 30, 2007 from 36.4% for the three months ended June 30, 2006. Food and beverage expenses for the three months ended June 30, 2007 were $1.2 million, a $0.1 million increase or
11%, as compared to $1.1 million for the three months ended June 30, 2006, primarily due to the increase in the Nevada minimum wage rate. Food and beverage expenses as a percentage of revenue increased to 64.0% for the three months ended
June 30, 2007 from 57.3% for the three months ended June 30, 2006. Other expenses for the three months ended June 30, 2007 were $0.5 million, a $0.1 million increase or 14%, as compared to $0.4 million for the three months ended
June 30, 2006, due to the aforementioned increase in retail sales. Other expenses as a percentage of revenue increased to 77.8% for the three months ended June 30, 2007 from 77.3% for the three months ended June 30, 2006.

Selling, general and administrative expenses were unchanged at $1.1 million in both of the three months ended June 30, 2007 and 2006. Selling,
general and administrative expenses as a percentage of revenue increased to 15.3% for the three months ended June 30, 2007 from 14.4% for the three months ended June 30, 2006. Pioneers selling, general and administrative expenses are
greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses were relatively unchanged at $1.0 million in both of the three months ended June 30, 2007 and 2006.
Utilities and property expenses as a percentage of revenue increased to 14.2% for the three months ended June 30, 2007 from 12.7% for the three months ended June 30, 2006. Depreciation and amortization expenses were relatively unchanged at
$0.5 million for the three months ended June 30, 2007 and 2006.

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

Contractual Obligations and Commitments: There have been no material changes from the information reported in the Companys
annual report on form 10-K for the fiscal year ended September 30, 2006.

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. 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 $9.8 million in January 2008. At December 31, 2006, under the original loan terms, the loan balance of $10.0 million was due as of December 15, 2006. In January 2007, the loan was
modified to extend the maturity date until January 15, 2008. The Company has cash reserves sufficient to pay the obligation in full when it becomes due and payable on January 15, 2008. The debt is guaranteed by the Companys primary
shareholder, who is also the CEO and Chairman of the Board.



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Liquidity. The investment properties are structured such that future tenants payments
cover future required mortgage payments including any balloon payments. Management believes that the Company will have sufficient available cash and cash resources to meet its cash requirements for a reasonable period of time.

The Company has a balloon payment due in January 2008 of approximately $9.8 million related to debt owed to a bank. The Company has cash reserves
sufficient to pay the obligation in full when it becomes due and payable on January 15, 2008. The debt obligation is secured by 27 acres of land owned on the Las Vegas Strip and is personally guaranteed by Paul W. Lowden, the Companys
CEO, Chairman of the Board and primary stockholder.

Cash Flows from Operating Activities.The Companys
cash provided by operating activities was $43.2 million for the nine months ended June 30, 2007 as compared to $2.1 million for the nine months ended June 30, 2006.

Cash Flows from Investing Activities. Cash provided by investing activities was $0.1 million for the nine months ended June 30, 2007,
as compared to cash provided by investing activities of $1.1 million for the nine months ended June 30, 2006. In the current year period, the Company received $1.8 million from the sale of property and equipment, which was offset by purchases
of marketable securities of $2.5 million and $0.5 million in capital expenditures. In the prior year period, the Company received $1.9 million from the sale of marketable securities, which was offset by purchases of marketable securities of $0.2
million, investments of $0.4 million in a partnership and $0.2 million in capital expenditures.

Cash Used in Financing
Activities. Cash used in financing activities was $2.1 million for the nine months ended June 30, 2007 as compared to $2.5 million for the nine months ended June 30, 2006. In the current year period, $2.1 million was used for debt
payments. In the prior year period, $3.2 million was used for debt payments, and $0.7 million was provided by debt borrowings.

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

Pioneer

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

Payments of rent were approximately $0.3 and $0.1 million for the nine months ended June 30, 2007
and 2006, respectively. Capital expenditures to maintain the facility in fiscal 2007 are expected to be less than $1.0 million.



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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%. As of June 30, 2007, the aggregate liquidation preference of the preferred stock was approximately $22.9 million, or $5.18 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
August 11, 2007, the Company had purchased 709,305 shares of preferred stock for $1.4 million under this program. Previously, the Company had purchased 276,627 shares for $500,000. During the nine months ended June 30, 2007, the Company
did not purchase any of its outstanding preferred shares.

During the three months ended June 30, 2006, a holder of the Companys
preferred stock advised the Company that the holder had concluded that the Companys calculation of the dividends on the preferred stock should accumulate at a compounded rate and is therefore erroneous, and that as a result the aggregate
liquidation preference of the preferred stock is significantly greater than that calculated by the Company. Based upon the Companys review to date of the relevant documents, the Company does not agree with the holders position.

The holder of the preferred stock filed a complaint (the Complaint) in November 2006. The Complaint alleged, amongst other
things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 14 years ago. The Complaint further alleged that
previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company vigorously defended this Complaint.

In this suit, two holders of the Companys Exchangeable Refundable Preferred Stock (the Preferred Stock) alleged that the Company,
beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the liquidation preference for the Preferred Stock. The Complaint sought damages for violations of Section 10(b)
of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticuts Unfair Trade Practices Act. The Complaint sought unspecified compensatory damages and the equitable relief of an accounting.

The Company filed a motion to dismiss the Complaint in its entirety on December 19, 2006. On February 7, 2007, the plaintiffs
filed a motion for leave to amend the Complaint. The Court granted the motion to amend the Complaint. The plaintiffs filed an amended Complaint and the Company renewed its motion to dismiss the Complaint in its entirety. Prior to a decision by the
court as to the Companys motion to dismiss the amended Complaint, both parties consented and stipulated that the court could enter an Order for Dismissal, and on May 15, 2007, the court ordered that the action be dismissed with prejudice
as to the plaintiffs rights to assert any of the claims set forth in the action in the State of Connecticut, and without prejudice as to the plaintiffs rights to assert any of the claims set forth in the action in any other jurisdiction
outside the State of Connecticut.



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##### Table of Contents

Effects of Inflation

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

Private Securities Litigation Reform Act

Certain statements in this Quarterly Report on Form 10-Q which are not historical facts are forward-looking statements, such as statements relating to
future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities, capital expenditures and expansion of business operations into new areas. Such
forward-looking statements involve a number of risks and uncertainties that may significantly affect the Companys liquidity and operating 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 prices. Excluding its non-recourse debt, the Company has total interest-bearing debt at June 30, 2007 of approximately $11.3
million, of which approximately $9.9 million bears interest at a variable rate (approximately 9.25% at June 30, 2007). Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would
cause an approximate $99,000 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.



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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures:

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

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

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



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ARCHON CORPORATION

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

During the three months ended June 30, 2007, a holder of the
Companys preferred stock advised the Company that the holder had concluded that the Companys calculation of the dividends on the preferred stock would accumulate at a compounded rate and is therefore erroneous, and that as a result the
aggregate liquidation preference of the preferred stock is significantly greater than that calculated by the Company. Based upon the Companys review to date of the relevant documents, the Company does not agree with the holders position.

The holder of the preferred stock filed a complaint (the Complaint) in November 2006. The Complaint alleged, amongst other
things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 14 years ago. The Complaint further alleged that
previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company vigorously defended this Complaint.

In this suit, two holders of the Companys Exchangeable Refundable Preferred Stock (the Preferred Stock) alleged that the Company,
beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the liquidation preference for the Preferred Stock. The Complaint sought damages for violations of Section 10(b)
of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticuts Unfair Trade Practices Act. The Complaint sought unspecified compensatory damages and the equitable relief of an accounting.

The Company filed a motion to dismiss the Complaint in its entirety on December 19, 2006. On February 7, 2007, the plaintiffs
filed a motion for leave to amend the Complaint. The Court granted the motion to amend the Complaint. The plaintiffs filed an amended Complaint and the Company renewed its motion to dismiss the Complaint in its entirety. Prior to a decision by the
court as to the Companys motion to dismiss the amended Complaint, both parties consented and stipulated that the court could enter an Order for Dismissal, and on May 15, 2007, the court ordered that the action be dismissed with prejudice
as to the plaintiffs rights to assert any of the claims set forth in the action in the State of Connecticut, and without prejudice as to the plaintiffs rights to assert any of the claims set forth in the action in any other jurisdiction
outside the State of Connecticut.

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

None

Item 3. Defaults Upon Senior Securities

None



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##### Table of Contents

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

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

At the Annual Meeting of Stockholders held on June 22, 2007, common stockholders elected one director and voted on a proposal to ratify the selection of Piercy Bowler Taylor & Kern (PBTK) as
the Companys public accountants. Preferred stockholders elected one special director.

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



|                  |  |             
|----------------- |  | ------------
|                  |  | Term Expires
|Paul W. Lowden    |  | 2008        
|William J. Raggio |  | 2008        
|John W. Delaney   |  | 2009        
|Suzanne Lowden    |  | 2010        

There were 6,280,931 shares of Common Stock entitled to vote at the meeting. A total of
6,233,231 votes (99.2%) were represented at the meeting. The result of the vote taken on the election of Directors elected by the common stockholders to hold office until the 2010 Annual Meeting of Stockholders and until her
successor is elected and has qualified is as follows:



|               |  |           |  |         
|-------------- |  | --------- |  | --------
|               |  | For       |  | Withheld
|Suzanne Lowden |  | 5,634,866 |  | 597,543 

The result of the vote taken for ratification of the selection of PBTK as the Companys
independent registered public accounting firm and approval of the Companys financial statements as of September 30, 2006 are as follows:



|          |  |         |  |         |  |                
|--------- |  | ------- |  | ------- |  | ---------------
|For       |  | Against |  | Abstain |  | Broker Non-Vote
|6,208,794 |  | 23,161  |  | 454     |  | 0              

The special directors elected by the preferred stockholders whose terms in office continued after
the meeting are as follows:



|                   |  |             
|------------------ |  | ------------
|                   |  | Term Expires
|Howard E. Foster   |  | 2009        
|Richard H. Taggart |  | 2010        

There were 4,413,777 shares of Preferred Stock entitled to vote at the meeting. A total of
4,066,146 votes (92.1%) were represented at the meeting. The result of the vote taken for the election of the special director by the preferred stockholders was as follows:



|                   |  |           |  |          
|------------------ |  | --------- |  | ---------
|                   |  | For       |  | Withheld 
|Richard H. Taggart |  | 2,975,118 |  | 1,091,028



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Item 5. Other Information

None

Item 6. Exhibits



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



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



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SIGNATURES

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



ARCHON CORPORATION, RegistrantBy:

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


Date: August 20, 2007



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