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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K/A

(Amendment No. 2)



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



| | For the fiscal year ended September 30, 2003
| | --------------------------------------------



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



| | For the transition period from  to
| | ----------------------------------



Commission File Number: 1-9481



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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)



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

(Address of principal executive office and zip code)



(702) 732-9120

(Registrants telephone number, including area code)



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Securities registered pursuant to Section 12(b) of the
Act: None



Securities registered pursuant to section
12(g) of the Act:



|                                        |  |                                
|--------------------------------------- |  | -------------------------------
|Common Stock, par value $.01 per share: |  | Over the Counter Bulletin Board
|(Title of class)                       



|                                         |  |                                
|---------------------------------------- |  | -------------------------------
|Exchangeable Redeemable Preferred Stock: |  | Over the Counter Bulletin Board
|(Title of class)                        



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 an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). ̈Yes x No



The aggregate market value of the common stock held by non-affiliates of the
registrant was approximately $3,536,379. The market value was computed by reference to the average bid and asked price of the common stock as of March 31, 2003.



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. x Yes ̈No



APPLICABLE ONLY TO CORPORATE REGISTRANTS:



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



|          |  |       |  |                  
|--------- |  | ----- |  | -----------------
|6,221,431 |  | as of |  | December 16, 2003



DOCUMENTS
INCORPORATED BY REFERENCE



None.



Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x Yes ̈No



Explanatory Note: The purpose of filing this Annual Report on Form 10-K/A is to include the information provided in
Part III of this annual report.



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ARCHON CORPORATION AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K/A FOR THE FISCAL

YEAR ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS



|         |  |          |  |                                                                                                |  |   
|-------- |  | -------- |  | ---------------------------------------------------------------------------------------------- |  | --
|         |  | Page    
|PART I   |  | 1       
|         |  | Item 1.  |  | Business                                                                                       |  | 1 
|         |  |          |  | General                                                                                        |  | 1 
|         |  |          |  | Hotel and Casino Operations                                                                    |  | 3 
|         |  |          |  | Investment Properties                                                                          |  | 4 
|         |  |          |  | Land Held for Development                                                                      |  | 4 
|         |  |          |  | Nevada Regulations and Licensing                                                               |  | 4 
|         |  | Item 2.  |  | Properties                                                                                     |  | 7 
|         |  | Item 3.  |  | Legal Proceedings                                                                              |  | 7 
|         |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 8 
|         | 
|PART II  |  | 9       
|         |  | Item 5.  |  | Market for the Registrants Common Stock and Related Security Holders Matters                  |  | 9 
|         |  | Item 6.  |  | Selected Financial Data                                                                        |  | 9 
|         |  | Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 10
|         |  | Item 7A. |  | Market Risk Disclosure                                                                         |  | 19
|         |  | Item 8.  |  | Financial Statements and Supplementary Data                                                    |  | 20
|         |  | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 44
|         | 
|PART III |  | 44      
|         |  | Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 44
|         |  | Item 11. |  | Executive Compensation                                                                         |  | 46
|         |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 48
|         |  | Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 49
|         |  | Item 14. |  | Controls and Procedures                                                                        |  | 50
|         |  | Item 15. |  | Principal Accountant Fees and Services                                                         |  | 51
|         | 
|PART IV  |  | 52      
|         |  | Item 16. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                |  | 52



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PART I



|Item 1. | Business
|------- | --------



General



Archon Corporation, (the
Company or Archon), is a publicly traded 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 under long-term lease and license arrangements. In addition, the Company through a wholly-owned subsidiary, Archon Sparks Management Company, formerly operated a casino
in Sparks, Nevada, owns real estate on Las Vegas Boulevard South (the Strip) and at the corner of Rainbow and Lone Mountain Road, both in Las Vegas, Nevada, and also owns investment properties in Dorchester, Massachusetts and
Gaithersburg, Maryland.



Until October 2, 2000, the Company,
through its wholly-owned subsidiary SFHI Inc., formerly known as Santa Fe Hotel, Inc. (SFHI), owned and operated the Santa Fe Hotel and Casino (the Santa Fe), located in Las Vegas, Nevada. On October 2, 2000, SFHI sold
substantially all of its assets, including the rights to the name Santa Fe Hotel and Casino, for $205.0 million (the SFHI Asset Sale). In connection with the sale, the Company, Paul W. Lowden, majority stockholder of the
Company, and members of Mr. Lowdens family entered into a three year non-compete agreement, which expired on October 2, 2003.



On December 29, 2000, the Company entered into a series of agreements to exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986,
as amended (the Code), the real and personal property, excluding gaming equipment, and intangible assets used in the operations of the Pioneer to a third party and agreed to lease and license the assets sold for up to 20 years, during
which period the Company will operate the Pioneer (collectively, the Pioneer Transactions). Additionally, the Company had the option to acquire the Pioneer during the period from December 29, 2003 to December 31, 2007. On November 13,
2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO was in the
amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming Corporation (PDS Gaming), a loan in the amount of $18.0 million, funds from the restricted cash accounts in the
amount of approximately $12.6 million, and $2.5 million from marketable securities.



In March 2001, SFHI completed the acquisition of investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland for an aggregate purchase price of $145.0 million plus debt issuance costs of $3.2
million, consisting of $15.5 million in cash and the assumption or issuance of an aggregate of $132.7 million of non-recourse indebtedness. The acquisitions are intended to qualify as like-kind exchanges of real property under Section 1031 of the
Code and to defer a portion of the federal corporate income tax resulting from the SFHI Asset Sale.



The principal executive office of the Company is located at 3993 Howard Hughes Parkway, Suite 630, Las Vegas, Nevada 89109 and the telephone number is
(702) 732-9120.



Recent Developments



Status of Delivery of Auditors Report and Consent.Archon
has been advised by its independent auditors Deloitte & Touche, LLP (Deloitte) that Deloitte has not delivered an audit report in connection with the Companys financial statements for the fiscal year ended September 30, 2003
(the Audit Opinion) or the consent of Deloitte that would be filed as Exhibit 23.01 to the Form 10-K (the Consent). At the time the Company filed its Form 10-K for the year ended September 30, 2003, which was filed on
December 29, 2003 (the Form 10-K), it was believed that the audit was complete, but now the Company understands and acknowledges that Deloitte did not deliver either the Audit Opinion or the Consent.



The Audit Committee of the Companys Board of Directors (the Audit
Committee) is currently investigating the circumstances surrounding this matter. Pending the outcome of such investigation, the Audit Committee will determine what actions are appropriate in light of the facts and circumstances in response to
this situation and to discuss the results of its investigation with Deloitte.



The Company believes that this Form 10-K/A, including the unaudited financial statements included herein, are true, correct and complete and do not misstate any material financial information or omit to state any
financial information that would be material to a reader of the unaudited financial statements. A change was made in the Companys Unaudited Consolidated Financial Statements (Financial Statements) in the Form 10-K/A (Amendment No.
1) that differs from the Unaudited Consolidated Financial Statements that appeared in the original Form 10-K as follows: A classification in the Companys Unaudited Consolidated Statements of Cash Flows was categorized incorrectly. In the year
ended September 30, 2003, Four Million Eight Hundred Eighty-four Thousand Three Hundred One Dollars ($4,884,301) of an item shown as Other assets was included under the subcategory Cash flows from operating activities. Such





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amount should instead have been under the subcategory Cash flows from investing activities as Note receivable. This Form 10-K/A makes
that correction.



The Company confirmed through the Form 10-K/A
(Amendment No. 1), which was filed on January 23, 2004, that:



| |  | The Company hereby removed the Audit Opinion and Consent that were incorrectly included in the Companys Form 10-K filed on December 29, 2003.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company advised all recipients of the Form 10-K, as well as any other third party that may be relying on or who is likely to be relying on the Form 10-K that: (1) the use of
Deloittes name and the inclusion of the Audit Opinion and the Consent was unauthorized relating to the fiscal year ended September 30, 2003; (2) Deloitte has not issued any Audit Opinion for the fiscal year ended September 30, 2003 or provided
its Consent; and (3) Deloitte is not to be associated in any manner with the financial statements for the fiscal year ended September 30, 2003 in either the Form 10-K or the Form 10-K/A filing.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Las Vegas Strip Property. On December 9, 2003, the Company filed
certain use permit applications with Clark County, Nevada, in connection with proposed development plans for its 27-acre Las Vegas Strip property. The Company is evaluating development and construction of a hotel-casino project on the site.



The Company cannot give any assurances that it will obtain
financing on acceptable terms for the project. A preliminary budget has been completed estimating the costs to develop, build, complete and open the project. There are numerous contingencies and intervening events that could occur that could impact
our plans for the site.



Archons Las Vegas Strip site is
currently leased by an operator of a water-themed amusement park. At this time, Archon has not given any notice to terminate that lease.



Acquisition of Pioneer. On December 29, 2003, the Company completed the purchase of the fee ownership of the Pioneer in Laughlin, Nevada from an
affiliate of GE pursuant to an early purchase option under its existing lease agreement dated December 29, 2000. In accordance with the lease agreement, the Company purchased certain property, including (i) the real property commonly known as 2200
South Casino Drive, located in Laughlin, Nevada, and (ii) the casino building, the hotel rooms, together with the meeting rooms, restaurants and associated facilities, (iii) building equipment and other similar additions and improvements located on
the real property. The purchase price for the property was approximately $35.6 million: approximately $12.6 million was paid through funds from the restricted cash accounts, approximately $2.5 in marketable securities, approximately $2.5 million
through a note from PDS Gaming that was due on December 29, 2003, and approximately $18.0 million from borrowed funds, whereby the Company assumed an $18.0 million note payable that is secured by the property.



Closing of Dukes Casino. The Company ceased operating
Dukes Casino in Sparks, Nevada that was operated through Archon Sparks Management Company, a wholly-owned subsidiary of the Company. All of the furniture, fixtures, gaming and non-gaming equipment and inventories have been transferred to the
Pioneer.



Lone Mountain Property. The Company owns,
through SFHI, an approximately 20-acre parcel of real property located next to the Santa Fe at the intersection of Rainbow and Lone Mountain in Las Vegas, Nevada. The Company and SFHI had granted to the buyer of the SFHI Asset Sale an option to
purchase the property for $5.0 million through October 2003. The buyer declined to exercise the option to purchase the property. As a result, the Company entered into an agreement on October 24, 2003 to sell the property for $5.7 million contingent
on City zoning approvals.



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Hotel and Casino Operations



The Pioneer



The Pioneer, built in 1982, features a classical western
architecture style, and is located in Laughlin, Nevada, an unincorporated town on the Colorado River bordering Arizona. The Pioneer is located on approximately 12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated
near the center of Laughlins Casino Drive. The property is leased from a third party under a lease that expires in December 2020, subject to two five-year options to extend the term. The third party in turn leases approximately 61/2 acres of the 12 acres under a 99-year ground lease which, by its terms, is scheduled to terminate in December 2078. The
leased land lies between and separates the remaining two parcels of land that are held in fee simple. The Pioneer is comprised of four buildings. One of the three motel buildings together with a portion of both the Pioneers casino building and
a second motel building are located on land subject to the Pioneer Ground Lease. The casino is located in the main building, totaling approximately 50,000 square feet of which approximately 21,500 square feet house the casino. The first floor
includes the casino, two bars, snack bar and gift shop, as well as a twenty-four hour restaurant, kitchen, special events area, restrooms and storage areas. A partial second floor houses a gourmet restaurant, administrative offices and banquet
rooms. The three motel buildings were built in 1984 and comprise approximately 66,000, 54,000 and 30,000 square feet, respectively. A total of 417 motel rooms are housed in the three buildings with improvements including a swimming pool and spa. See
also Item 1., Business  Recent Developments.



Revenues



The primary source of revenues to the Companys
hotel-casino operations is gaming, which represented 59.9%, 60.3% and 68.9% in 2003, 2002 and 2001, respectively, of total revenues. The Pioneer contributed 96.0% in fiscal 2003 to total gaming revenues and 100% in fiscal 2002 and 2001. As of
September 30, 2003 the Pioneer had 799 slot machines, nine blackjack tables (21), two craps tables, one roulette wheel and three other gaming tables. In addition, the Pioneer offers keno.



Market



The Pioneer targets primarily mature, out-of-town customers residing in Central Arizona and Southern California, retirees
who reside in the Northeast and Midwest United States and Canada and travel to the Southwest United States during the winter months, and local residents who reside in Laughlin, Nevada, and in Bullhead City, Kingman and Lake Havasu, Arizona. The
occupancy rate at the Pioneer was 77.3%, 75.0% and 74.0%, respectively, in fiscal years 2003, 2002 and 2001, respectively.



Business Strategy



The Pioneer attempts to attract and retain customers by offering slot and video poker machine payouts that compare favorably to the competition. A visible
means used by the Pioneer to accomplish this marketing program is to offer what management believes to be a large number of quarter video poker machines with liberal theoretical pay out, compared to other casinos in Laughlin. The Pioneer
periodically sponsors detailed product research of its competitors to categorize the number and type of video poker games by payouts and monitors changes in game products to assist it in developing competitive products.



The Pioneer has a program called the Bounty Hunter Round-Up Club
(the Club) established to encourage repeat business from frequent and active slot and table game customers. A member of the Club accumulates points in the members account for play on slot machines and table games that can be
redeemed for free gifts, food and beverages and additional points redeemable for free play. Pioneer management also uses the Club membership list for direct mail marketing.



Management and Personnel



At September 30, 2003, the Company employed 11 executive and administrative personnel, the Pioneer employed 540 persons, and Archon Sparks Management
Company, a wholly-owned subsidiary of the Company, employed 51 persons.



Competition



In addition to competing with the
hotel-casinos in Laughlin, the Pioneer also competes with the hotel-casinos in Las Vegas and those situated on I-15 (the principal highway between Las Vegas and Southern California) near the California-Nevada state line. In March 2000, California
voters approved an amendment to the California constitution which permits compacts that allow Native American tribes to operate as many as 115,000 slot machines in addition to banked card games and lotteries. Management believes that Native American
casinos in Southern California, Arizona and New Mexico have had an adverse impact on the Laughlin market, including the Pioneer, by drawing visitors away from the market.



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Investment Properties



The Company
acquired investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland in March 2001. The Dorchester, Massachusetts property is located on 12 acres and includes several buildings with approximately 425,000 square feet of commercial
office space. The property was acquired for approximately $82.4 million plus $500,000 in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the property. The property is under a
net lease through 2019 with a single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to the property.



The property in Gaithersburg, Maryland is located on 55 acres and includes one building with approximately 342,000 square
feet of commercial office space. The property was acquired for $62.6 million, plus debt issuance costs of $2.7 million. The Company paid $9.9 million in cash and issued $55.4 million in non-recourse first mortgage indebtedness. The building is
located on approximately 20 acres of the property. The property is under a net lease through 2014 with a single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to
the property.



See also Item 2., Properties.



Land Held for Development



The
Company owns, through SLVC, an approximately 27-acre parcel of real property on the Strip. In connection with the acquisition of the property, the Company assumed an operating lease under which a water theme park operates. The lease may be
terminated at any time by the Company. At this time, Archon has not given any notice to terminate that lease.



On December 9, 2003, the Company filed certain use permit applications with Clark County, Nevada, in connection with proposed development plans for its
27-acre Las Vegas Strip property. The Company is evaluating development and construction of a hotel-casino project on the site.



The Company cannot give any assurances that it will obtain financing on acceptable terms for the project. A preliminary budget has been completed
estimating the costs to develop, build, complete and open the project. There are numerous contingencies and intervening events that could occur that could impact our plans for the site.



The Company owns, through SFHI, an approximately 20-acre parcel of real property located next to the Santa Fe at the
intersection of Rainbow and Lone Mountain in Las Vegas, Nevada. The Company and SFHI had granted to the buyer of the SFHI assets an option to purchase the property for $5.0 million through October 2003. The buyer declined to exercise the option to
purchase the property.



Any future development of these
properties is subject to, among other things, the Companys ability to obtain necessary financing. The Company can give no assurance that it will obtain development financing or successfully develop the properties.



See also Item 1. BusinessRecent Developments and Item 2.,
Properties.



The Company has provided financial
segment information in the Notes to Unaudited Consolidated Financial Statements, Note 23. Segment Information.



Nevada Regulations and Licensing



The Company and PHI (collectively, the Archon Group) are subject to extensive state and local regulation by the Nevada Gaming Commission (the Commission), the Nevada Gaming Control Board (the Board) and
in the case of PHI, the Clark County Liquor and Gaming Licensing Board (collectively the Nevada Gaming Authorities).



The laws, regulations and supervisory procedures of the Nevada Gaming Authorities seek (i) to prevent unsavory or unsuitable persons from having any
direct or indirect involvement with gaming at any time or in any capacity, (ii) to establish and maintain responsible accounting practices and procedures, (iii) to maintain effective control over the financial practices of licensees, including
establishing minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record-keeping and making periodic reports to the Nevada Gaming Authorities, (iv) to prevent cheating and fraudulent
practices and (v) to provide a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on any or all of the members of the Archon Group. Management
believes the Archon Group is in compliance with regulations promulgated by the Nevada Gaming Authorities.



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Licensing and Registration. PHI holds Nevada State gaming licenses to operate the Pioneer.
The Company has been approved by the Nevada Gaming Authorities to own, directly or indirectly, a beneficial interest in PHI.



The licenses held by members of the Archon Group are not transferable. Each issuing agency may at any time revoke, suspend, condition, limit or restrict
licenses or approvals to own a beneficial interest in PHI for any cause deemed reasonable by such agency. Any failure to retain a valid license or approval would have a material adverse effect on all members of the Archon Group.



If it is determined that PHI or, when applicable, new members of the Archon
Group, have violated the Nevada laws or regulations relating to gaming, PHI or, when applicable, new members of the Archon Group, could, under certain circumstances, be fined and the licenses of PHI or, when applicable, new members of the Archon
Group, could also be limited, conditioned, revoked or suspended. A violation under any of the licenses held by the Company, or PHI or, when applicable, new members of the Archon Group, may be deemed a violation of all the other licenses held by the
Company and PHI or, when applicable, new members of the Archon Group. If the Commission does petition for a supervisor to manage the affected casino and hotel facilities, the suspended or former licensees shall not receive any earnings of the gaming
establishment until approved by the court, and after deductions for the costs of the supervisors operation and expenses and amounts necessary to establish a reserve fund to facilitate continued operation in light of any pending litigation,
disputed claims, taxes, fees and other contingencies known to the supervisor which may require payment. The supervisor is authorized to offer the gaming establishment for sale if requested by the suspended or former licensee, or without such a
request after six months after the date the license was suspended, revoked or not renewed.



Individual Licensing. Certain stockholders, directors, officers and key employees of corporate gaming licensees must be licensed by the Nevada Gaming Authorities. An application for licensing of an
individual may be denied for any cause deemed reasonable by the issuing agency. Changes in licensed positions must be reported to Nevada Gaming Authorities. In addition to its authority to deny an application for an individual license, the Nevada
Gaming Authorities have jurisdiction to disapprove a change in corporate position. If the Nevada Gaming Authorities were to find any such person unsuitable for licensing or unsuitable to continue to have a relationship with a corporate licensee,
such licensee would have to suspend, dismiss and sever all relationships with such person. Such corporate licensee would have similar obligations with regard to any person who refuses to file appropriate applications, who is denied licensing
following the filing of an application or whose license is revoked. Each gaming employee must obtain a work permit which may be revoked upon the occurrence of certain specified events.



Any individual who is found to have a material relationship or a material involvement with a gaming licensee may be
investigated to be found suitable or to be licensed. The finding of suitability is comparable to licensing and requires submission of detailed financial information and a full investigation. Key employees, controlling persons or others who exercise
significant influence upon the management or affairs of a gaming licensee may be deemed to have such a relationship or involvement.



Beneficial owners of more than 10% of the voting securities of a corporation or partner interests of a partnership registered with the Nevada Gaming
Authorities that is publicly traded (a Registered Entity) must be found suitable by the Nevada Gaming Authorities, and any person who acquires more than 5% of the voting securities or partner interests, as the case may be, of
a Registered Entity must report the acquisition to the Nevada Gaming Authorities in a filing similar to the beneficial ownership filings required by the Federal securities laws. Under certain circumstances an institutional investor, as such term is
defined in the Gaming Control Act and the regulations of the Commission and Board (collectively, the Nevada Gaming Regulations), that acquires more than 10% of the Companys voting securities may apply to the Commission for a waiver
of such finding of suitability requirement. If the stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. Any beneficial owner
of equity or debt securities of a Registered Entity (whether or not a controlling stockholder) may be required to be found suitable if the relevant Nevada Gaming Authorities have reason to believe that such ownership would be inconsistent with the
declared policy of the State of Nevada. If the beneficial owner who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of its securities.



In addition, the Clark County Liquor and Gaming Licensing Board has taken the
position that it has the authority to approve all persons owning or controlling more than 2% of the stock or partner interests of a Registered Entity, including a gaming licensee or otherwise, or of any corporation, partnership or person controlling
such an entity. The applicant is required to pay all costs of investigation.



Any stockholder found unsuitable and who beneficially owns, directly or indirectly, any securities or partner interests of a Registered Entity beyond such period of time as may be prescribed by the Nevada Gaming
Authorities may be guilty of a gross misdemeanor. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so may be found unsuitable. A Registered Entity is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a security holder or partner, as the case may be, or to have any other relationship with it, such Registered Entity (a) pays the unsuitable person any dividends or property upon
any voting securities or partner interests or makes any payments or distributions of any kind whatsoever to such person, (b) recognizes the exercise, directly or indirectly, of any voting rights in its securities or partner



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interests by the unsuitable person, (c) pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain and
specific circumstances or (d) fails to pursue all lawful efforts to require the unsuitable person to divest himself of his voting securities, including, if necessary, the immediate purchase of the voting securities for cash at fair market value.



Registered Entities must maintain current stock ledgers in the
State of Nevada that may be examined by the Nevada Gaming Authorities at any time. If any securities or partner interests are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial
owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record owner unsuitable. Record owners are required to conform to all applicable rules and regulations of the Nevada Gaming Authorities.
Licensees also are required to render maximum assistance in determining the identity of a beneficial owner.



The Nevada Gaming Authorities have the power to require that certificates representing voting securities of a corporate licensee bear a legend to the
effect that such voting securities or partner interests are subject to the Nevada Gaming Regulations. The Nevada Gaming Authorities, through the power to regulate licensees, have the power to impose additional restrictions on the holders of such
voting securities at any time.



Financial
Responsibility. The Company and PHI are required to submit detailed financial and operating reports to the Nevada Gaming Authorities. Substantially all loans, leases, sales of securities and other financial transactions entered into by the
Company or PHI must be reported to and, in some cases, approved by the Nevada Gaming Authorities.



Certain Transactions. None of the Archon Group may make a public offering of its securities without the approval of the Commission if the
proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or retire or extend obligations incurred for such purposes. Such approval, if given, will not constitute a recommendation or approval of the
investment merits of the securities offered. Any public offering requires the approval of the Commission.



Changes in control of the Company through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover cannot
occur without the prior investigation of the Board and approval of the Commission. The Commission may require controlling stockholders, partners, officers, directors and other persons who have a material relationship or involvement in the
transaction to be licensed.



The Nevada legislature has
declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Nevada, and corporations whose securities are publicly traded that are
affiliated with those operations, may be injurious to stable and productive corporate gaming. The Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevadas gaming
industry and to further Nevadas policy to (i) assure the financial stability of corporate or partnership gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii)
promote a neutral environment for the orderly governance of corporate or partnership affairs. Approvals are, in certain circumstances, required from the Commission before the Company can make exceptional repurchases of voting securities above the
current market price thereof (commonly referred to as greenmail) and before an acquisition opposed by management can be consummated. Nevadas gaming regulations also require prior approval by the Commission if the Company were to
adopt a plan of recapitalization proposed by the Companys Board of Directors in opposition to a tender offer made directly to the stockholders for the purpose of acquiring control of the Company.



Miscellaneous. The Company and its Nevada-based affiliates,
including subsidiaries, may engage in gaming activities outside the State of Nevada without seeking the approval of the Authorities provided that such activities are lawful in the jurisdiction where they are to be conducted and that certain
information regarding the foreign operation is provided to the Board on a periodic basis. The Company and its Nevada-based affiliates may be disciplined by the Commission if any of them violates any laws of the foreign jurisdiction pertaining to the
foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the State of Nevada or its ability to
collect gaming taxes and fees, or employs a person in the foreign operation who had been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.



License fees and taxes, computed in various ways depending on the type of gaming involved, are payable to the State of
Nevada and to the counties and cities in which the Company and PHI conduct their respective operations. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon: (i)
a percentage of the gross gaming revenues received by the casino operation; (ii) the number of slot machines operated by the casino; or (iii) the number of table games operated by the casino. A casino entertainment tax is also paid by the licensee
where entertainment is furnished in connection with the selling of food or refreshments.



Finally, the Nevada Gaming Authorities may require that lenders to licensees be investigated to determine if they are suitable and, if found unsuitable, may require that they dispose of their loans.



6



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##### Table of Contents

|Item 2. | Properties
|------- | ----------



The
Pioneer is located on approximately 12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated near the center of Laughlins Casino Drive. The Company leases the Pioneer under a lease that expires in December
2020, subject to two five-year options to extend the term. Rental payments are $285,000 per month through December 2003, and will increase to $339,000 per month in 2004, and thereafter at 3% per year through December 2007. See Item 1.,
Business  Hotel and Casino Operations and  Recent Developments, for more detailed information regarding the Pioneer.



The Companys investment property in Dorchester, Massachusetts is located on 12 acres and includes several buildings with approximately 425,000
square feet of commercial office space. The property was acquired for approximately $82.4 million plus $500,000 in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the
property. The property is under a net lease through 2019 with a single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to the property.



The Companys investment property in Gaithersburg, Maryland is located
on 55 acres and includes one building with approximately 342,000 square feet of commercial office space. The property was acquired for $62.6 million, plus debt issuance costs of $2.7 million. The Company paid $9.9 million in cash and issued $55.4
million in non-recourse first mortgage indebtedness. The building is located on approximately 20 acres of the property. The property is under a net lease through 2014 with a single tenant with an investment grade credit rating. Under the lease, the
tenant is responsible for substantially all obligations related to the property.



The Company owns approximately 27 acres of real property located on the Strip. The property is subject to a ground lease, which the Company may terminate at any time.



SFHI owns the approximate 20-acre parcel of undeveloped real property located
on the corner of Rainbow and Lone Mountain Road. The Company and SFHI granted to the buyer of the SFHI assets an option to purchase the property for $5.0 million through October 2003. The buyer declined to exercise the option to purchase the
property. See Item 1. Business  Recent Developments.



|Item 3. | Legal Proceedings
|------- | -----------------



Poulos
v. Caesars World, Inc., et al. and Ahern v. Caesars World, Inc., et al.



The Company is a defendant in a class action lawsuit originally filed in the United States District Court of Florida, Orlando Division, entitled Poulos v. Caesars World, Inc., et al., Ahern v. Caesars
World, Inc., et al. and Schrier v. Caesars World, Inc., et al., along with a fourth action against cruise ship gaming operators and which have been consolidated in a single action now pending in the United States District Court,
District of Nevada (the Court). Also named as defendants in these actions are many of the largest gaming companies in the United States and certain gaming equipment manufacturers. Each complaint is identical in its material allegations.
The actions allege that the defendants have engaged in fraudulent and misleading conduct by inducing people to play video poker machines and electronic slot machines based on false beliefs concerning how the machines operate and the extent to which
there is actually an opportunity to win on a given play. The complaints allege that the defendants acts constitute violations of the Racketeer Influenced and Corrupt Organizations Act and also give rise to claims for common law fraud and
unjust enrichment, and seek compensatory, special consequential, incidental and punitive damages of several billion dollars.



In response to the complaints, all of the defendants, including the Company, filed motions attacking the pleadings for failure to state a claim, seeking
to dismiss the complaints for lack of personal jurisdiction and venue. As a result of those motions, the Court has required the Plaintiffs in the four consolidated cases to file a single consolidated amended complaint. Subsequent to Plaintiffs
filing of their consolidated amended complaint, the defendants refiled numerous motions attacking the amended complaint upon many of the bases as the prior motions. The Court heard the arguments on those motions and ultimately denied the motions.
Plaintiffs then filed their motion to certify a class. Defendants vigorously opposed the motion. On June 26, 2002, the court denied the motion to certify the class. Plaintiffs then sought discretionary review by the Ninth Circuit of the order
denying class certification. On August 15, 2002, the Ninth Circuit granted review. The briefing is complete, an oral hearing took place on January 15, 2004 and the defendants are waiting for a court ruling.



Local Joint Executive Board et al. v. Archon Corporation et al.



The Company was the defendant in an action titled Local Joint Executive
Board, et al. v. Santa Fe Gaming Corporation et al., No. CV-S-01-0233-RLH. The plaintiffs instituted the action on or about February 28, 2001 in the United States District Court for the District of Nevada, alleging that the Company violated the
Worker Adjustment Retraining and Notification Act, (WARN Act), by improperly providing notification of the closing of the Santa Fe. The plaintiffs sought damages in the amount provided for by the statute. The plaintiffs filed a motion
for class certification, and the Company stipulated to the certification. On October 12, 2001,



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##### Table of Contents

Archon filed a motion for summary judgment to dismiss the complaint in its entirety. Plaintiffs filed a memorandum in opposition to defendants motion
for summary judgment, as well as a counter-motion for summary judgment alleging the WARN Act notices sent by Archon were invalid. On February 1, 2002 a hearing was held on the motions and the court denied both the plaintiffs and Archons
motions for summary judgment. However, the court subsequently narrowed the scope of the case, and set the case for trial to commence October 21, 2002. On October 1, 2002, the parties participated in a settlement conference with the magistrate judge
assigned to the case. A settlement was reached whereby the Company agreed to pay the plaintiffs the total lump sum of $202,000 in exchange for a dismissal of the lawsuit with prejudice and a full release of all claims relating to the closure of the
Santa Fe. The class action settlement was approved by the court on October 24, 2002. The Company accrued the settlement payment in September 2002 and made the payment in December 2002.



In addition, the Company is subject to various lawsuits relating to routine matters incidental to its business. The Company
does not believe that the outcome of such litigation, in the aggregate, will have a material adverse effect on the Company.



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



There were no matters submitted to a vote of the Companys security holders during the fourth quarter of fiscal 2003.



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##### Table of Contents

PART II



|Item 5. | Market for the Registrants Common Stock and Related Security Holders Matters
|------- | -----------------------------------------------------------------------------



The Companys Common Stock is traded on the Over the Counter Bulletin Board (the OTCBB) under the symbol ARHN.



The closing bid price of the Common Stock on December 16, 2003 was $5.45 per
share. The tables below set forth the high and low bid prices by quarter for the fiscal years ended September 30, 2003 and 2002 or the Common Stock, as reported by the OTCBB.



|             |  |              |      |               |   |              |  |               |      |  |   |     
|------------ |  | ------------ | ---- | ------------- | - | ------------ |  | ------------- | ---- |  | - | ----
|             |  | FirstQuarter |      | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|Fiscal 2003: |  |              |      |               |   |              |  |               |      |  |   |     
|High         |  | $            | 3.00 |               | $ | 3.70         |  | $             | 3.10 |  | $ | 3.00
|Low          |  |              | 2.15 |               |   | 2.70         |  |               | 2.50 |  |   | 2.35
|Fiscal 2002: |  |              |      |               |   |              |  |               |      |  |   |     
|High         |  | $            | 4.00 |               | $ | 3.55         |  | $             | 3.55 |  | $ | 3.35
|Low          |  |              | 3.10 |               |   | 3.10         |  |               | 3.10 |  |   | 2.50



The Company has never
paid cash dividends on its Common Stock, nor does it anticipate paying such dividends in the foreseeable future. There were approximately 732 common stockholders of record as of December 16, 2003.



|Item 6. | Selected Financial Data
|------- | -----------------------



The table below sets forth a summary of selected financial data of the Company for the years ended September 30, 2003, 2002, 2001, 2000 and 1999:



|                                         |  |                                                  |         |   |      |   |         |      |  |      |         |      |   |         |  |   |         |  
|---------------------------------------- |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | ---- | ------- | ---- | - | ------- |  | - | ------- | -
|                                         |  | 2003                                             |         |   | 2002 |   |         | 2001 |  | 2000 |         | 1999 |  
|                                         |  | (dollars in thousands, except per share amounts) |        
|Net operating revenues(1)                |  | $                                                | 46,161  |   |      | $ | 48,765  |      |  | $    | 48,003  |      | $ | 128,595 |  | $ | 123,602 |  
|Net income (loss)                        |  |                                                  |         |   |      |   |         |      |  |      |         |      |   |         |  |   |         |  
|before extraordinary items, net of taxes |  |                                                  | (7,451  | ) |      |   | (7,707  | )    |  |      | 89,182  |      |   | 15,124  |  |   | (17,775 | )
|per common share                         |  |                                                  | (1.20   | ) |      |   | (1.25   | )    |  |      | 14.43   |      |   | 2.44    |  |   | (2.87   | )
|Net income (loss)(2)                     |  |                                                  | (8,977  | ) |      |   | (9,262  | )    |  |      | 87,231  |      |   | 12,802  |  |   | (19,908 | )
|per common share                         |  |                                                  | (1.44   | ) |      |   | (1.50   | )    |  |      | 14.11   |      |   | 2.07    |  |   | (3.21   | )
|Total assets                             |  |                                                  | 237,990 |   |      |   | 242,086 |      |  |      | 249,485 |      |   | 145,596 |  |   | 178,025 |  
|Long-term debt, less current portion     |  |                                                  | 148,698 |   |      |   | 153,029 |      |  |      | 157,667 |      |   | 350     |  |   | 177,047 |  
|Redeemable preferred stock(3)            |  |                                                  | 18,091  |   |      |   | 18,147  |      |  |      | 16,747  |      |   | 26,440  |  |   | 24,118  |  

---

|(1) | Net operating revenues for fiscal years 1999 and 2000 represent primarily the operations at the Santa Fe and Pioneer. Net operating revenues for fiscal years 2001
through 2003 represent primarily operations at the Pioneer and revenues from investment properties.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Fiscal 2001 results include a $137.2 million gain relating to the SFHI asset sale and a $3.4 million gain from litigation settlement. Fiscal 2000 results include a
$12.1 million gain relating to the sale of real property, among other items, located in Henderson, Nevada, a $2.8 million gain on the retirement of debt, and a $11.0 million tax benefit related to the release of a valuation reserve.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The Company has not declared dividends on its preferred stock since fiscal 1996. Accrued dividends of approximately $1.5 million, $1.6 million, $2.0 million, $2.3
million and $2.1 million for fiscal 2003, 2002, 2001, 2000 and 1999, respectively, have been recorded as an increase to the preferred stock account. Since October 17, 2001, the Company has repurchased and retired 761,288 shares of redeemable
preferred stock.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



General



Critical Accounting Policies and Estimates



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



Management believes the following critical accounting policies, among others,
affects its more significant judgments and estimates used in the preparation of its unaudited consolidated financial statements:



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



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



Income Taxes. The Company has
recorded a valuation allowance to reduce its deferred tax assets to the balance the Company believes can be recovered based on forecasted taxable income. Realization of the net deferred tax assets is dependent on the Companys ability to
generate profits from operations or from the sale of long-lived assets. There can be no assurance that the Company will generate profits from operations or sell those assets or will generate profits from sales if they were to occur in the future. In
the event the Company does generate profits from sales of long-lived assets in the future, an adjustment to the valuation allowance would increase income in the period in which the profit is realized.



Results of Operations  Fiscal 2003 Compared to Fiscal 2002



Consolidated



Net Operating Revenues.Consolidated net operating revenues for the year ended September 30, 2003 were
$46.2 million, a $2.6 million, or 5.3%, decrease from $48.8 million for the year ended September 30, 2002. Income from investment properties was $12.4 million in each of the fiscal years. Revenues decreased $3.6 million to $31.9 million at the
Pioneer Hotel and Gambling Hall (the Pioneer) compared to $35.5 million. Archon Sparks Management Company (ASMC), which began operating Dukes Casino in February 2003, had revenues of $1.3 million.



In fiscal 2003, 69.1% of the Companys net revenues were derived from
the Pioneer and 26.9% from investment properties. The Companys business strategy at the Pioneer emphasizes slot and video poker machine play. For fiscal 2003, 84.1% of the Pioneers net revenues were derived from casino operations.
Approximately 86.4% of gaming revenues at the Pioneer was derived from slot and video poker machines, while 11.9% of such revenues was from table games and 1.7% was from other gaming activities such as keno.



Operating Expenses.Total operating expenses increased
$400,000, or 0.9%, to $42.9 million for the year ended September 30, 2003 from $42.5 million for the year ended September 30, 2002. Total operating expenses as a percentage of revenue increased to 92.9% for the year ended September 30, 2003 from
87.1% for the year ended September 30, 2002. Operating expenses decreased $2.3 million, or 6.5%, at the Pioneer, by $300,000 at the investment properties and by $100,000 at corporate. The decrease in operating expenses at the investment properties
was due to an adjustment to depreciation and amortization expenses in the prior year period. The decrease at corporate was due to development costs associated with the development of certain gaming technology which was incurred



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in the prior year period. ASMC had operating expenses of $2.2 million. The Company recorded a $1.0 million reserve for receivable and wrote-off its initial
$100,000 investment with respect to Dukes Casino in the current year.



Operating Income. Consolidated operating income for the year ended September 30, 2003 was $3.3 million, a $3.0 million, or 47.6%, decrease from $6.3 million for the year ended September 30, 2002.
Operating income decreased by $1.3 million at the Pioneer and increased $300,000 at the investment properties. ASMC had an operating loss of $900,000.



Interest Expense. Consolidated interest expense for the year ended September 30, 2003 was $16.2 million, a $200,000 decrease compared
to $16.4 million for the year ended September 30, 2002. Interest expense from the investment properties decreased $500,000 due to a reduction through principal payments of outstanding debt. Interest expense increased $100,000 at the Pioneer due to
an increase in outstanding debt through negative amortization of debt. ASMC had $100,000 in interest expense.



Interest Income. Interest income for the year ended September 30, 2003 was $1.5 million, an increase of $200,000 from $1.3 million for the
year ended September 30, 2002 due to a higher return on investments.



Loss Before Income Tax. Consolidated loss before income tax for the year ended September 30, 2003 was $11.4 million, a $2.6 million increase compared to $8.8 million for the year ended September 30, 2002. The loss increased at
the Pioneer by $1.4 million to $5.9 million. ASMC had a loss of $1.0 million.



Federal Income Tax.The Company recorded a federal income tax benefit of $3.9 million for the year ended September 30, 2003 compared to $1.1 million for the year ended September 30, 2002.



Preferred Share Dividends. Dividends of
approximately $1.5 million and $1.6 million for fiscal years 2003 and 2002, respectively, accrued on the preferred stock. The dividend rate increased to 15.5% effective April 1, 2003 from 15.0% beginning on October 1, 2002. The accrued dividend rate
increases 50 basis points at each semi-annual dividend payment date, subject to a maximum of 16.0%, and is 16.0% as of October 1, 2003. Dividends for the twelve months ended September 30, 2003 and 2002 are reported net of shares of preferred stock
acquired and retired by the Company. Covenants in financing agreements for the Pioneer currently prohibit the Company from paying dividends on the preferred stock.



Net Loss. Consolidated net loss applicable to common shares was $9.0 million, or $1.44 per common share, for
the year ended September 30, 2003 compared to net loss applicable to common shares of $9.3 million, or $1.50 per common share, for the year ended September 30, 2002.



Pioneer



Net Operating Revenues.Revenues at the Pioneer decreased $3.6 million, or 10.0%, to $31.9 million for the year ended September 30,
2003 from $35.5 million for the year ended September 30, 2002, due to a decrease in the number of casino patrons, which management believes is due primarily to expansion of Native American gaming facilities in Southern California, Arizona and New
Mexico and a loss of market share in the Laughlin market.



Casino revenues decreased $2.6 million, or 8.8%, to $26.8 million for the year ended September 30, 2003 from $29.4 million for the year ended September 30, 2002. Slot and video poker revenues decreased $2.3 million, or 9.0%, to $23.2
million for the year ended September 30, 2003 from $25.5 million for the year ended September 30, 2002. Management believes that the decrease resulted from fewer casino patrons. Other gaming revenues, including table games, decreased $300,000, or
7.2%, due primarily to decreased table game win of $200,000, or 5.9%. Casino promotional allowances were unchanged at $6.7 million for the years ended September 30, 2003 and 2002, despite the decrease in revenues due to marketing promotions
developed to increase business volume.



Hotel revenues were
unchanged at $2.7 million for the years ended September 30, 2003 and 2002, as an increase in occupancy rate to 77.3% from 75.0% was offset by a decrease in the average daily room rate. Food and beverage revenues decreased $700,000, or 9.1%, to $7.1
million for the year ended September 30, 2003 from $7.8 million for the year ended September 30, 2002, due to the decrease in the number of casino patrons and the closure of the Pioneers main food outlet for renovations during the fourth
quarter of 2003. Other revenues decreased $300,000, or 13.7%, to $2.0 million for the year ended September 30, 2003 from $2.3 million for the year ended September 30, 2002, due to decreased sales in the Pioneers retail outlets caused by fewer
patrons and competition from retail establishments in other casinos in Laughlin.



Operating Expenses. Operating expenses decreased $2.3 million, or 6.5%, to $32.9 million for the year ended September 30, 2003 from $35.2 million for the year ended September 30, 2002. Operating expenses
as a percentage of revenues increased to 103.2% in fiscal 2003 from 99.3% in fiscal 2002.



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##### Table of Contents

Casino expenses decreased $700,000, or 4.4%, to $15.3 million for the year ended September 30, 2003 from
$16.0 million for the year ended September 30, 2002, primarily related to reductions in payroll and supplies. Casino expenses as a percentage of casino revenues increased to 56.9% for the year ended September 30, 2003 from 54.3% for the year ended
September 30, 2002. Hotel expenses were relatively unchanged at $700,000 for the year ended September 30, 2003 and $800,000 for the year ended September 30, 2002. Food and beverage expenses decreased $800,000, or 19.9 %, to $3.3 million from $4.1
million, due to the decrease in food and beverage revenues. Food and beverage expenses as a percentage of food and beverage revenues decreased to 45.9% for the year ended September 30, 2003 from 52.1% for the year ended September 30, 2002. Other
expenses decreased $200,000, or 9.2%, to $1.8 million for the year ended September 30, 2003 compared to $2.0 million for the year ended September 30, 2002, due to the decrease in retail sales. Other expenses as a percentage of other revenues
increased to 89.7% for the year ended September 30, 2003 from 85.2% for the year ended September 30, 2002.



Selling, general and administrative expenses decreased $300,000, or 5.3%, to $5.2 million for the year ended September 30, 2003 compared to $5.5 million
for the year ended September 30, 2002, primarily due to reductions in payroll, supplies and outside services. Selling, general and administrative expenses as a percentage of revenues increased to 16.2% for the year ended September 30, 2003 from
15.4% for the year ended September 30, 2002. 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
decreased $700,000, or 14.0%, to $4.2 million for the year ended September 30, 2003 from $4.9 million for the year ended September 30, 2002, due to a decrease in rent expense resulting from the purchase in May 2002 of gaming equipment that was
leased in the prior year period. Utilities and property expenses as a percentage of revenues decreased to 13.3% for the year ended September 30, 2003 from 13.9% for the year ended September 30, 2002. Depreciation and amortization expenses increased
$500,000, or 24.0%, to $2.5 million for the year ended September 30, 2003 from $2.0 million for the year ended September 30, 2002, due to the purchase of gaming equipment in May 2002.



Interest Expense. Interest expense increased $100,000, or 2.9%, to $4.9 million for the year ended September
30, 2003 from $4.8 million for the year ended September 30, 2002, due to the interest expense component of the $33.5 million obligation under lease incurred on December 29, 2000 in connection with the Pioneer sale/leaseback transactions.



Results of Operations  Fiscal 2002 Compared to Fiscal 2001



Consolidated



Net Operating Revenues.Consolidated net operating revenues for the year ended September 30, 2002 were
$48.8 million, an $0.8 million, or 1.6%, increase from $48.0 million for the same period in fiscal 2001. The year ended September 30, 2002 included revenues of $35.5 million at the Pioneer and rental income of $12.4 million from investment
properties. The year ended September 30, 2001 included revenues of $40.0 million at the Pioneer and rental income of $7.2 million from investment properties. Revenues decreased by $4.5 million in fiscal 2002 at the Pioneer. Revenues from investment
properties increased by $5.2 million. The investment properties were purchased in March 2001 and, therefore, the fiscal 2001 year had only seven months of results.



In fiscal 2002, 72.7% of the Companys net revenues were derived from the Pioneer and 25.4% from investment properties.
The Companys business strategy at the Pioneer emphasizes slot and video poker machine play. For fiscal 2002, 82.9% of the Pioneers net revenues were derived from casino operations. Approximately 86.6% of gaming revenues at the Pioneer
was derived from slot and video poker machines, while 11.6% of such revenues was from table games and 1.8% was from other gaming activities such as keno.



Operating Expenses.Total operating expenses decreased $1.5 million, or 3.5%, to $42.5 million for the year ended September 30, 2002
from $44.0 million in the year ended September 30, 2001. Total operating expenses as a percentage of revenue decreased to 87.1% in the year ended September 30, 2002 from 91.7% in the year ended September 30, 2001. Operating expenses at the Pioneer
decreased by $3.3 million, or 8.6%. Operating expenses from the investment properties increased $2.0 million, due to the fact that the properties were owned for only a portion of fiscal 2001. Operating expenses of the Company other than the Pioneer
and the investment properties decreased $200,000.



Operating Income.Consolidated operating income for the year ended September 30, 2002 was $6.3 million, a $2.3 million, or 58.2%, increase from $4.0 million for the same period in fiscal 2001. Operating income decreased
by $1.2 million at the Pioneer. Operating income from the investment properties increased $3.2 million, related to the fact that the properties were owned for the entire fiscal year. Operating loss of the Company other than the Pioneer and the
investment properties improved by $300,000, due to the decrease in operating expenses.



Interest Expense.Consolidated interest expense for the year ended September 30, 2002 was $16.4 million, a $5.3 million increase compared to $11.1 million in fiscal 2001. The increase is due to
interest expense related to $132.7 million of non-recourse debt incurred and assumed in the second quarter of fiscal 2001 in connection with the acquisition of the investment properties, as well



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##### Table of Contents

as the interest expense component of the $33.5 million obligation under lease incurred on December 29, 2000 in connection with the Pioneer sale/leaseback
transactions.



Interest Income.
Consolidated interest income for the 2002 fiscal year was $1.3 million, a decrease of $700,000, or 36.2% from $2.0 million in the 2001 fiscal year due to a decrease in cash and cash equivalents available for investment and lower returns on
investment.



Income (Loss) Before Income Tax.Consolidated loss before income tax for the year ended September 30, 2002 was $8.8 million compared to consolidated income before income tax of $135.5 million in the prior year. The prior year included a gain of $137.2 million on sale of the
Santa Fe assets and a $3.4 million net gain from a litigation settlement. The loss increased at the Pioneer by $1.7 million to $4.5 million. Loss from the investment properties increased by $1.3 million to $3.1 million due to increased depreciation
and interest expense, partially offset by increased revenues.



Federal Income Tax.The Company recorded a federal income tax provision of $46.3 million in the prior year. The Company recorded a $1.1 million tax benefit in fiscal 2002 to reflect the net effects of temporary
differences between the carrying amounts of assets and liabilities and the operating loss and tax credit carryforwards.



Preferred Share Dividends.Dividends of approximately $1.6 million and $2.0 million for fiscal 2002 and 2001, respectively, accrued
on the preferred stock. The accrued dividend rate increases 50 basis points at each semi-annual dividend payment date, subject to a maximum of 16.0%, and is 15.0% as of October 1, 2002. Dividends for the twelve months ended September 30, 2002 and
2001 are reported net of shares of preferred stock acquired and retired by the Company.



Net Income (Loss).Consolidated net loss applicable to common shares was $9.3 million, or $1.50 per common share, in the 2002 year compared to net income applicable to common shares of $87.2
million, or $14.11 per common share, in the prior year.



Pioneer



Net Operating Revenues.Revenues at
the Pioneer decreased $4.5 million, or 11.4%, to $35.5 million in fiscal 2002 from $40.0 million in fiscal 2001. The decline in revenues at the Pioneer is consistent with a continuing general decline in the Laughlin market, which management believes
is due primarily to expansion of Native American gaming facilities in Southern California, Arizona and New Mexico.



Casino revenues decreased $3.7 million, or 11.1%, to $29.4 million in fiscal 2002 from $33.1 million in fiscal 2001. Slot and video poker revenues
decreased $3.5 million, or 12.1%, to $25.5 million in fiscal 2002 from $29.0 million in fiscal 2001. Other gaming revenues, including table games, decreased $200,000, or 3.7%, due primarily to decreased table game win of $200,000, or 6.0%. Casino
promotional allowances decreased approximately $1.1 million, or 13.3%, to $6.7 million in fiscal 2002 from $7.8 million in fiscal 2001.



Hotel revenues increased $100,000, or 3.9%, to $2.7 million in fiscal 2002 from $2.6 million in fiscal 2001. Occupancy rate increased to 75.0% from 74.0%
and the average daily room rate increased by 0.3%. Food and beverage revenues decreased $700,000, or 7.7%, to $7.8 million in fiscal 2002 from $8.5 million in fiscal 2001 primarily due to a decline in the number of casino patrons. Other revenues
decreased $1.4 million, or 37.2%, to $2.3 million in fiscal 2002 from $3.7 million in fiscal 2001 due to decreased sales in retail outlets as a result of competition from retail establishments in other casinos.



Operating Expenses.Operating expenses decreased $3.3
million, or 8.6%, to $35.2 million in fiscal 2002 from $38.5 million in fiscal 2001, but operating expenses as a percentage of revenues increased to 99.3% in fiscal 2002 from 96.3% in fiscal 2001.



Casino expenses decreased $1.4 million, or 8.1%, to $16.0 million in fiscal
2002 from $17.4 million in fiscal 2001, primarily related to the decrease in casino promotional allowances. Casino expenses as a percentage of casino revenues increased to 54.3% in the year ended September 30, 2002 from 52.6% in the year ended
September 30, 2001. Hotel expenses were unchanged at $800,000 in the 2002 and 2001 years. Food and beverage expenses decreased $300,000, or 8.0 %, to $4.1 million from $4.4 million, related to the decrease in food and beverage revenues. Food and
beverage expenses as a percentage of food and beverage revenues decreased to 52.1% in the 2002 period from 52.4% in the 2001 period. Other expenses decreased $1.4 million, or 42.0%, to $2.0 million for fiscal 2002 compared to $3.4 million for fiscal
2001. The decrease is related to the lower volume of retail sales. Other expenses as a percentage of other revenues decreased to 85.2% in the 2002 period from 92.4% in the 2001 period.



Selling, general and administrative expenses decreased $100,000, or 1.5%, to $5.4 million in fiscal 2002 compared to $5.5
million in fiscal 2001. Selling, general and administrative expenses as a percentage of revenues increased to 15.4% in fiscal 2002 from 13.8% in fiscal 2001. Utilities and property expenses were unchanged at $4.9 million. Utilities and property
expenses as a percentage of revenues increased to 13.9% in fiscal 2002 from 12.3% in fiscal 2001. Depreciation and amortization expenses decreased $100,000,



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or 3.6%, to $2.0 million in fiscal 2002 from $2.1 million in fiscal 2001. The Company sold certain gaming equipment on December 29, 2000 and repurchased the
gaming equipment in May 2002. Depreciation and amortization expense decreased during the period from January 2001 to May 2002.



Interest Expense.Interest expense increased $400,000, or 8.9%, to $4.8 million in fiscal 2002 from $4.4 million in fiscal 2001 due
to the interest expense component of the $33.5 million obligation under lease incurred on December 29, 2000 in connection with the Pioneer sale/leaseback transactions.



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



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



|                         |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|------------------------ |  | ----------------------- | ------ | ---- | - | ------ |  | ---- | ----- | ---- | - | ----- |  | ------------------ | ----- | ----- | - | ----- |  | - | ------- |  | - | -------
|                         |  | Payments Due By Periods
|                         |  | 2004                    |        | 2005 |   | 2006   |  | 2007 |       | 2008 |   | 2009  |  | 2010 andThereafter |       | Total
|                         |  | (dollars in thousands) 
|Non-recourse debt:       |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|Gaithersburg             |  | $                       | 1,411  |      | $ | 1,658  |  | $    | 1,915 |      | $ | 2,195 |  | $                  | 2,490 |       | $ | 2,828 |  | $ | 40,302  |  | $ | 52,799 
|Sovereign                |  |                         | 5,004  |      |   | 28,400 |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 31,199  |  |   | 64,603 
|Obligations under lease: |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|Pioneer Hotel Inc.(1)    |  |                         | 3,901  |      |   | 4,155  |  |      | 4,280 |      |   | 4,408 |  |                    | 4,907 |       |   | 5,263 |  |   | 82,320  |  |   | 109,234
|Long-term debt:          |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|Building                 |  |                         | 61     |      |   | 70     |  |      | 80    |      |   | 13    |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 224    
|Equipment                |  |                         | 547    |      |   | 589    |  |      | 317   |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 1,453  
|Other                    |  |                         | 2,902  |      |   | 4      |  |      | 0     |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 2,906  
|Operating leases:        |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|Ground lease             |  |                         | 809    |      |   | 807    |  |      | 807   |      |   | 807   |  |                    | 807   |       |   | 807   |  |   | 55,916  |  |   | 60,760 
|Corporate offices        |  |                         | 126    |      |   | 108    |  |      | 54    |      |   | 0     |  |                    | 0     |       |   | 0     |  |   | 0       |  |   | 288    
|                         |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        
|                         |  | $                       | 14,761 |      | $ | 35,791 |  | $    | 7,453 |      | $ | 7,423 |  | $                  | 8,204 |       | $ | 8,898 |  | $ | 209,737 |  | $ | 292,267
|                         |  |                         |        |      |   |        |  |      |       |      |   |       |  |                    |       |       |   |       |  |   |         |  |   |        

---

|(1) | On November 23, 2003, the Company notified GE Capital that the Company will exercise its early purchase option on December 29, 2003. As a result, the payments shown
herein are anticipated to be replaced by certain secured debt payments. The Company completed the purchase on December 29, 2003.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Liquidity. As of September 30, 2003, the Company held cash and cash equivalents of $5.9 million compared to $8.6 million at September 30,
2002. Approximately $2.1 million was held by PHI and was subject to certain restrictions and limitations on its use, including restrictions on its availability for distribution to the Company, by the terms of the agreements entered into in
connection with the sale/leaseback transactions in December 2000 relating to the Pioneer. Approximately $1.6 million at September 30, 2003 was held in escrow pursuant to the agreements related to the sale of the Santa Fe assets. In addition, the
Company had $7.3 million in investment in marketable securities at September 30, 2003 compared to $12.2 million at September 30, 2002. Management believes that the Company will have sufficient available cash and cash resources to meet its cash
requirements through the twelve month period ending September 30, 2004.



Cash Flows from Operating Activities.The Companys cash provided by operations was $2.4 million for the year ended September 30, 2003 as compared to $1.6 million at September 30, 2002. The increase was primarily
due to an increase in accrued and other liabilities partially offset by an adjustment to net loss for the non-cash deferred income tax benefit.



Cash Flows from Investing Activities.Cash provided by investing activities was $3.0 million during the year ended September 30,
2003, compared to cash used in investing activities of $3.9 million during the year ended September 30, 2002. In the current year, $5.5 million, net, was provided from the redemption of marketable securities, of which $500,000, net, was deposited in
the restricted



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cash accounts. Capital expenditures for the current year were $2.0 million. In the prior year, the Company invested $2.1 million, net, in marketable
securities and made $4.4 million in capital expenditures. These capital expenditures were funded in part by the use of cash in the amount of $2.5 million, net of interest income, from the restricted cash accounts.



Cash Flows from Financing Activities. Cash used in
financing activities was $8.1 million in the year ended September 30, 2003 compared to $5.3 million in the prior year. In the years ended September 30, 2003 and 2002, the Company repaid $6.0 million and $5.2 million of debt, respectively. In the
2003 period, the Company also used $600,000 to acquire shares of its preferred stock, borrowed $2.9 million for operating cash, issued a note receivable for $4.9 million and received a capital contribution of $500,000.



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



The Companys primary use of
funds is for operations of Archon, which includes costs of executive and administrative personnel, administrative functions, costs to explore development opportunities and required capital contributions to Pioneer and deposits of cash in the Pioneer
restricted cash accounts pursuant to the terms of the agreements related to the Pioneer transactions (see Pioneer). Additionally, the Company had the option to acquire the Pioneer during the period from December 29, 2003 to December 31,
2007. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29,
2003. The EPO was in the amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of
approximately $12.6 million, and $2.5 million from marketable securities.



As a result of the SFHI Asset Sale, the Company incurred an estimated $161.0 million tax gain for federal income tax purposes for fiscal 2001. As of September 30, 2000, the Company had an estimated net operating loss
carryforward for regular tax purposes of approximately $49.1 million, all of which could be utilized in fiscal 2001. In March 2001, SFHI acquired investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland. The acquisitions are
intended to qualify as like-kind exchanges of real property under Section 1031 of the Internal Revenue Code of 1986, as amended (the Code) and to defer approximately $90.0 million of the gain for federal corporate income tax purposes
resulting from the SFHI Asset Sale. The Company made an alternative minimum tax payment of $500,000 in fiscal 2001, which was refunded in fiscal year 2002.



Pioneer



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



Payments of
obligations under lease were $3.4 million for the years ended September 30, 2003 and 2002. Rent expense was $800,000 and $1.3 million in the years ended September 30, 2003 and 2002, respectively. Rent expense decreased as the result of the purchase
in May 2002 of gaming equipment previously under lease. Capital expenditures are expected to be funded primarily from the restricted cash account.



On December 29, 2000, the Company entered into a series of agreements to transfer, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986
as amended, the real and personal property, excluding gaming equipment, and intangible assets used in the operation of the Pioneer to a third party (the Purchaser) and agreed to lease and license the assets for up to 20 years, during
which period the Company will operate the Pioneer (collectively, the Pioneer Transactions). The consideration for the Pioneer Transactions consisted of the assumption and immediate repayment by the Purchaser of $32.5 million of debt owed
by Pioneer Hotel Inc. (PHI) to SFHI Inc. (SFHI) and preferred stock of the Purchaser having a $1.0 million liquidation preference.



Archon and SFHI guaranteed the payments under the lease and license agreements and agreed to certain covenants, including restrictions on the payment of
management fees, competing in the Laughlin, Nevada area and payment of dividends with respect to the Archon preferred stock. In addition, Archon agreed to maintain consolidated liquidity (as defined in the agreements relating to the Pioneer
Transactions) of not less than $25.0 million. At September 30, 2003, Archons consolidated liquidity was in excess of $25.0



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million. Archon has agreed to forgo all or a portion of the management fees payable by PHI if PHIs ratio of fixed charges to operating cash flow
(fixed charges ratio) falls below 1.20 to 1.00. Further, Archon has agreed to contribute capital to PHI and in certain events to deposit cash in restricted cash accounts in the event PHIs fixed charges ratio falls below 1.00 to
1.00 during any rolling four-quarter period, calculated on a quarterly basis.



Specifically, if the fixed charges ratio was less than 1.00 to 1.00 for any four-quarter period ending on or before December 31, 2003, the Company had been obligated to contribute capital to PHI in the amount of the
deficiency and, if the fixed charges ratio was less than 1.00 to 1.00 for three consecutive quarters during that period, to deposit additional cash to restricted cash accounts based upon a specified percentage of the stipulated loss value set forth
in the lease, with payments ranging from $500,000 for the quarter ended June 30, 2003 to $2,000,000 for the quarter ending December 31, 2003. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease
between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO was in the amount of $35.6 million and was paid from the following monies: a $2.5 million
payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.5 million from marketable securities.



Pursuant to the agreements relating to the Pioneer Transactions, the Company
has foregone the management fee otherwise payable to it since April 2001. PHIs fixed charges ratio was 0.61 to 1.00 for the four quarters ended September 30, 2003. As a result, the Company was required to make a deposit to the restricted cash
account in the amount of $983,000. A deposit in the amount of $489,000 was required for the quarter ended June 30, 2003, in which quarter the fixed charges ratio was 0.60 to 1.00. As a result of the EPO, the Company did not make the deposits as all
funds were paid to the lessor to satisfy the EPO. PHIs fixed charges ratio for the four quarters ended June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003 were 0.92 to 1.00, 0.87 to 1.00, 0.81 to 1.00 and 0.55 to 1.00,
respectively. As a result, Archon made capital contributions to PHI in the amounts of approximately $375,000, $275,000, $314,000 and $1,372,000 with respect to the four-quarter periods ended June 30, September 30, December 31, 2002 and March 31,
2003, respectively. Additionally, it deposited $484,000 and $487,000 in the restricted cash account for the four quarters ended December 31, 2002 and March 31, 2003, respectively.



Furthermore, the Company would have been required to make capital contributions aggregating approximately $400,000 as a
result of PHIs fixed charges ratios for the four quarters ended December 31, 2001 and March 31, 2002, in which the fixed charges ratio was 0.93 to 1.00, and 0.92 to 1.00, respectively. However, in May 2002, the Company completed the purchase,
for approximately $2.1 million, of leased gaming equipment with $1.9 million of cash from the restricted cash account and cash from operations. The elimination of the rent payments reduced fixed charges in periods subsequent to the repurchase date.
Giving effect to the gaming equipment purchase as if it had occurred at the beginning of the relevant four-quarter period, on a pro forma basis PHIs fixed charges ratio for the four quarters ended December 31, 2001 and March 31, 2002 would
have been 1.04 to 1.00 and 1.05 to 1.00, respectively. The Company advised the Purchaser that it was not making any capital contributions to PHI for the four-quarter periods ended December 31, 2001 and March 31, 2002 based on the pro forma fixed
charges ratios giving effect to the May 2002 purchase of leased gaming equipment. Prior to the exercise of the EPO, the Purchaser had not advised the Company whether or not it agreed that the Company had the right to calculate the ratios on a pro
forma basis. If the Purchaser disagreed, the Company may have been required to make capital contributions with respect to the four-quarter periods ended December 31, 2001 and March 31, 2002 and may have been required to deposit additional cash to
the restricted cash account.



The agreements related to the
Pioneer Transactions provide an option for the Company to purchase the assets under the lease and license agreements to PHI during the period from December 29, 2003 and December 31, 2007, at purchase price amounts ranging between $35.5 million and
$38.7 million, which, as of the date of the agreements, approximated estimated fair market value at the relevant purchase dates, and at the end of the lease term for fair market value. On November 13, 2003, the Company notified GE Capital that in
accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO was in the amount of $35.6 million and was paid from the
following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.5 million from marketable securities.
The Company is in the process of valuing the assets that were transferred to the Pioneer to determine to what extent the Companys remaining receivable from Dukes LLC has been satisfied. Management believes that the value of the assets
will substantially satisfy the receivable. The Company does not have any further obligation to the senior lender. See also Item 1., Business  Recent Developments.



Dukes Casino



In fiscal 2001, the Company purchased for $100,000 Class B member interests in Dukes-Sparks (Dukes), a Nevada limited liability
company that developed Dukes Casino, a restricted slot operation, restaurant and entertainment facility in Sparks, Nevada. Christopher Lowden, son of Paul W. Lowden, is a limited partner in the company that is the managing member of
Dukes.



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On October 8, 2002 the Company entered into a Subordinated Loan Agreement (the Dukes Loan
Agreement) with Dukes. Under the Dukes Loan Agreement, Dukes was entitled to borrow up to $1.1 million for construction, equipment, furnishings and other costs related to the completion and opening of Dukes Casino. The
loan, which is secured on a subordinated basis by the real property on which Dukes is located (the Dukes Real Property) and on a senior basis by non-gaming equipment and certain other personal property, matures on October 8,
2009 and bears interest at an annual rate of 15%, plus additional interest at an annual rate of 10% until such time as the option described in the following sentence is exercised. In connection with the Dukes Loan Agreement, the Company
received an option to acquire 70% of the equity in the entity that owns Dukes. Dukes borrowed the entire $1.1 million available under the Dukes Loan Agreement by December 31, 2002. Furthermore, the Company has advanced Dukes
an additional approximately $333,000 on an unsecured basis, which advances are evidenced by a promissory note payable on demand.



The Companys advances to Dukes under the Dukes Loan Agreement are subordinate to a senior loan in the amount of $4.0 million, which is secured
on a senior basis by the Dukes Real Property (the Dukes Senior Loan). Dukes is in default under both the Dukes Senior Loan and the Companys loans to Dukes pursuant to the Dukes Loan Agreement and
the promissory note. Both the senior lender and the Company recorded notices of default and elections to sell the Dukes Real Property and provided notice of such recordation to Dukes and other parties in interest as required by Nevada
law. On August 13, 2003, the trustee under the deed of trust with respect to the Dukes Senior Loan held a foreclosure sale of the property. In the foreclosure sale, the senior lender acquired the Dukes Real Property in partial
satisfaction of the Dukes Senior Loan, as a result of which the Companys security interest in the Dukes Real Property was extinguished. Pursuant to the terms of the Companys loan agreement with Dukes, Dukes is
prohibited from making payments on the Companys loans until the Dukes Senior Loan is paid in full or the senior lender waives the requirement. As a result, the Company recorded a reserve of $1.1 million against investment and receivable
from Dukes.



The Company and the senior lender had agreed
in principle that the senior lender would sell the Dukes Real Property to the Company for $3.7 million payable no later than June 1, 2007, subject to an increase to $3.8 million if not paid in full by June 1, 2005. The purchase price would
have been evidenced by a promissory note which would have bore interest during the first 36 months of the loan at the rate of 1.75% plus the senior lenders actual cost of funds (currently the prime rate less 25 basis points) increasing to a
rate of 2.5% plus the senior lenders cost of funds for months 37 through 48. Interest was to accrue monthly, commencing as of June 1, 2003, and be payable on a monthly basis. All principal and accrued but unpaid interest was to be payable on
or before June 1, 2007. The promissory note was to be secured by a deed of trust on the Dukes Real Property. Consummation of the purchase was subject to the execution of a mutually acceptable purchase and sale agreement, promissory note,
security agreement and related closing documents. Additionally, the purchase was subject to approval of the Board of Directors of the Company. Until such time as a final agreement was reached with the senior lender with respect to the purchase of
the Dukes Real Property and the Company acquired the Dukes Real Property, the Company had expected to continue to operate Dukes on the same terms as provided in the Dukes-Sparks Lease described below. If the Company and the
senior lender were unable to reach agreement and the Company did not acquire the Dukes Real Property, the Dukes-Sparks Lease would be voided. As a result of the foreclosure of the Dukes Real Property and continuing default under
the Dukes Senior Loan, and the Companys loans to Dukes, the Company established a reserve in the amount of $1.0 million with respect to its loans to Dukes. In addition, the Company wrote-off its $100,000 initial investment in
Dukes.



On October 4, 2002, a subsidiary of the Company
entered into a lease (the Dukes-Sparks Lease) with Dukes, with respect to the Dukes Casino. The Dukes-Sparks Lease provided that it would commence on the first day of the month (the Commencement Date)
following the month in which the Companys subsidiary obtained all required gaming regulatory approvals to conduct gaming activities at Dukes, provided that the Commencement Date will not occur until all the remodeling work being
performed by Dukes at the facility had been substantially completed and the City of Sparks has issued a certificate of occupancy for the facility, and that it will expire on the date which is the earlier of three years after the Commencement
Date or the date which is the first day of the month which immediately follows the month in which Dukes receives the necessary regulatory approvals to operate the casino. The Dukes-Sparks Lease provides for monthly base rent in the
amount of $81,216. The required gaming regulatory approvals were obtained by the Companys subsidiary on January 24, 2003, and the Company began operating Dukes on February 7, 2003. However, the remodeling of the facility was not
substantially complete, so the Company had not paid any rent to Dukes. Until such time as a final agreement was reached with the senior lender with respect to the Companys purchase of the Dukes Real Property and the Company
acquired the Dukes Real Property, the senior lender had agreed that the Company would continue to operate Dukes on the same terms as provided in the Dukes-Sparks Lease. Because the Company and the senior lender did not reach an
agreement and the Company did not acquire the Dukes Real Property, the Dukes-Sparks Lease was terminated on September 2, 2003. However, the Company continued to operate Dukes Casino on a month to month basis, with no rent payable.
The Company owns and had installed approximately 190 slot and video poker machines in Dukes Casino valued at approximately $1.7 million. On December 31, 2003, the Company ceased operations at Dukes. All of the furniture, fixtures, gaming
and non-gaming equipment and inventories have been transferred to the Pioneer.



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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 accrued 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 continues to increase by an additional 50 basis points on each succeeding semiannual dividend payment date up to a
maximum of 16% per annum. In October 2003, the dividend rate increased to 16.0%. The accrued stock dividends have been recorded as an increase to the preferred stock account. As of September 30, 2003, the aggregate liquidation preference of the
preferred stock was $18.1 million, or $3.90 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. The
agreements relating to the Pioneer Transactions contain provisions restricting the payment of dividends on the preferred stock.



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
December 16, 2003, the Company had purchased 795,228 shares of preferred stock for $1,213,382 under this program. In addition, in April 2001 the Company acquired approximately 3.5 million shares of preferred stock as part of a litigation
settlement agreement.



Recently Issued Accounting Standards



SFAS 143. In June 2001, the FASB issued SFAS 143,
Accounting for Asset Retirement Obligations. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies
to all entities and to all legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees.
We adopted SFAS 143 at the beginning of fiscal 2003. The adoption of this statement did not have a material impact on our results of operations or financial position.



SFAS 144. In August 2001, the FASB issued SFAS 144, Accounting for the Impairment and Disposal of Long-Lived
Assets. This statement requires one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired and broadens the presentation of discontinued operations to include additional disposal
transactions. We adopted SFAS 144 at the beginning of fiscal 2003. The adoption of this statement did not have a material impact on our results of operations or financial position.



SFAS 146. In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal
Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. A fundamental conclusion
reached by the FASB in this statement is that an entitys commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. SFAS 146 also establishes that fair value is the objective for
initial measurement of the liability. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this statement did not have a material impact on our results of
operations or financial position.



SFAS 148. In
December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure. This Statement amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure requirements of this statement were effective for our interim financial statements beginning with
our quarter ended March 2003.



SFAS 150.In May
2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. Financial instruments that are within the scope of the statement, which previously were often classified as equity, must now be classified as liabilities. This statement is effective for financial
instruments entered into or



18



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modified after May 31, 2003, and otherwise generally effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of
this statement did not have a material effect on our results of operations or financial position.



FIN 45.In November 2002, the FASB issued FASB Interpretation (FIN) 45, Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 expands the disclosures required by guarantors for obligations under certain types of guarantees. It also requires initial recognition at fair value of a liability for such
guarantees. We adopted the disclosure requirements of FIN 45 for the quarter ended December 28, 2002 and the liability recognition requirements to all guarantees issued or modified after December 31, 2002. The adoption of these requirements did not
have a material impact on our results of operations or financial position.



FIN 46.In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities (VIEs). FIN 46 establishes standards for determining under what circumstances VIEs should be consolidated with
their primary beneficiary, including those to which the usual condition for consolidation does not apply. FIN 46 also requires disclosures about unconsolidated VIEs in which the Company has a significant variable interest. The consolidation
requirements of FIN 46 apply immediately to VIEs created after January 31, 2003 and is effective for our first quarter of our 2004 fiscal year. We have evaluated our relationships and do not believe we have any consolidatable VIEs. As such, we
do not believe the adoption of this requirement will have a material impact on our results of operations or financial position.



Effects of Inflation



The Company has been generally successful in recovering costs associated with inflation through price adjustments in its hotels-casinos. Expenses of
operating the Companys investment properties are generally borne by the tenants. 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 Annual Report on Form 10-K/A which are not
historical facts are forward-looking statements, such as statements relating to future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities,
capital expenditures and expansion of business operations into new areas. Such forward-looking statements involve a number of risks and uncertainties that may significantly affect the Companys liquidity and results in the future and,
accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not limited to, those related to effects of competition, leverage and debt service, general
economic conditions, changes in gaming laws or regulations (including the legalization of gaming in various jurisdictions) and risks related to development activities and the startup of non-gaming operations.



|Item 7A. | Market Risk Disclosure
|-------- | ----------------------



Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity process. The Company has no debt instruments subject to interest rate fluctuation.



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



19



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



INDEX

TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULES

For the Years Ended September 30, 2003, 2002 and 2001



|                                                                                                                |  |     
|--------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                |  | Page
|                                                                                                                | 
|Note Regarding Status of Delivery of Auditors Report                                                           |  | 22  
|                                                                                                                | 
|Unaudited Consolidated Balance Sheets as of September 30, 2003 and 2002                                         |  | 23  
|                                                                                                                | 
|Unaudited Consolidated Statements of Operations for the Years Ended September 30, 2003, 2002 and 2001           |  | 24  
|                                                                                                                | 
|Unaudited Consolidated Statements of Stockholders Equity for the Years Ended September 30, 2003, 2002 and 2001 |  | 25  
|                                                                                                                | 
|Unaudited Consolidated Statements of Cash Flows for the Years Ended September 30, 2003, 2002 and 2001           |  | 26  
|                                                                                                                | 
|Notes to Unaudited Consolidated Financial Statements                                                            |  | 27  



Financial Statement
Schedules are omitted because of the absence of conditions under which they are required or because the information is included in the financial statements or the notes thereto.



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NOTE REGARDING STATUS OF DELIVERY OF AUDITORS REPORT



Archon has been advised by its independent auditors Deloitte & Touche, LLP (Deloitte) that Deloitte has not delivered an audit report in connection with the Companys financial statements for the
fiscal year ended September 30, 2003 (the Audit Opinion) or the consent of Deloitte that would be filed as Exhibit 23.01 to the Form 10-K (the Consent). At the time the Company filed its Form 10-K for the year ended September
30, 2003, which was filed on December 29, 2003 (the Form 10-K), it was believed that the audit was complete, but now the Company understands and acknowledges that Deloitte did not deliver either the Audit Opinion or the Consent.



The Audit Committee of the Companys Board of Directors
(the Audit Committee) is currently investigating the circumstances surrounding this matter. Pending the outcome of such investigation, the Audit Committee will determine what actions are appropriate in light of the facts and
circumstances in response to this situation and to discuss the results of its investigation with Deloitte.



The Company believes that this Form 10-K/A, including the unaudited financial statements included herein, are true, correct and complete and do not
misstate any material financial information or omit to state any financial information that would be material to a reader of the unaudited financial statements. A change was made in the Companys Unaudited Consolidated Financial Statements
(Financial Statements) in the Form 10-K/A (Amendment No. 1) that differs from the Unaudited Consolidated Financial Statements that appeared in the original Form 10-K as follows: A classification in the Companys Unaudited
Consolidated Statements of Cash Flows was categorized incorrectly. In the year ended September 30, 2003, Four Million Eight Hundred Eighty-four Thousand Three Hundred One Dollars ($4,884,301) of an item shown as Other assets was included
under the subcategory Cash flows from operating activities. Such amount should instead have been under the subcategory Cash flows from investing activities as Note receivable. This Form 10-K/A makes that
correction.



The Company confirmed through the Form 10-K/A
(Amendment No. 1), which was filed on January 23, 2004, that:



| |  | The Company hereby removes the Audit Opinion and Consent that were incorrectly included in the Companys Form 10-K filed on December 29, 2003.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | The Company advised all recipients of the Form 10-K, as well as any other third party that may be relying on or who is likely to be relying on the Form 10-K that: (1) the use of
Deloittes name and the inclusion of the Audit Opinion and the Consent was unauthorized relating to the fiscal year ended September 30, 2003; (2) Deloitte has not issued any Audit Opinion for the fiscal year ended September 30, 2003 or provided
its Consent; and (3) Deloitte is not to be associated in any manner with the financial statements for the fiscal year ended September 30, 2003 in either the Form 10-K or the Form 10-K/A filing.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Archon Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets

as of September 30, 2003 and 2002



|                                    |  |      |             |   |      |   |             |  
|----------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                    |  | 2003 |             |   | 2002 |  
|ASSETS                              |  |      |             |   |      |   |             |  
|Current assets:                     |  |      |             |   |      |   |             |  
|Cash and cash equivalents           |  | $    | 5,852,354   |   |      | $ | 8,615,412   |  
|Investment in marketable securities |  |      | 7,262,208   |   |      |   | 12,180,399  |  
|Accounts receivable, net            |  |      | 3,178,143   |   |      |   | 3,225,944   |  
|Inventories                         |  |      | 288,947     |   |      |   | 286,585     |  
|Prepaid expenses and other          |  |      | 755,537     |   |      |   | 975,199     |  
|                                    |  |      |             |   |      |   |             |  
|Total current assets                |  |      | 17,337,189  |   |      |   | 25,283,539  |  
|Property and equipment:             |  |      |             |   |      |   |             |  
|Land held for development           |  |      | 23,109,400  |   |      |   | 23,109,400  |  
|Property held for investment, net   |  |      | 136,824,589 |   |      |   | 139,996,477 |  
|Land used in operations             |  |      | 8,125,589   |   |      |   | 8,125,589   |  
|Buildings and improvements          |  |      | 35,639,920  |   |      |   | 35,710,958  |  
|Machinery and equipment             |  |      | 11,515,818  |   |      |   | 11,863,817  |  
|Accumulated depreciation            |  |      | (20,587,802 | ) |      |   | (21,529,072 | )
|                                    |  |      |             |   |      |   |             |  
|Property and equipment, net         |  |      | 194,627,514 |   |      |   | 197,277,169 |  
|Restricted cash                     |  |      | 13,898,971  |   |      |   | 13,021,550  |  
|Other assets                        |  |      | 12,126,516  |   |      |   | 6,503,307   |  
|                                    |  |      |             |   |      |   |             |  
|Total assets                        |  | $    | 237,990,190 |   |      | $ | 242,085,565 |  
|                                    |  |      |             |   |      |   |             |  



See
the accompanying Notes to Unaudited Consolidated Financial Statements.



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Archon Corporation and Subsidiaries

Unaudited Consolidated Balance Sheets

as of September 30, 2003 and 2002



|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                                                                                       |  | 2003 |             |   | 2002 |  
|LIABILITIES and STOCKHOLDERS EQUITY                                                                                                                                                                                                                   |  |      |             |   |      |   |             |  
|Current liabilities:                                                                                                                                                                                                                                   |  |      |             |   |      |   |             |  
|Accounts payable                                                                                                                                                                                                                                       |  | $    | 2,668,187   |   |      | $ | 1,926,804   |  
|Interest payable                                                                                                                                                                                                                                       |  |      | 2,249,954   |   |      |   | 2,285,248   |  
|Accrued and other liabilities                                                                                                                                                                                                                          |  |      | 3,071,867   |   |      |   | 2,360,996   |  
|Current portion of long-term debt                                                                                                                                                                                                                      |  |      | 3,510,004   |   |      |   | 93,100      |  
|Current portion of non-recourse debt                                                                                                                                                                                                                   |  |      | 6,414,729   |   |      |   | 5,733,795   |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                                                                                                                              |  |      | 17,914,741  |   |      |   | 12,399,943  |  
|Long-term debt - less current portion                                                                                                                                                                                                                  |  |      | 1,073,305   |   |      |   | 261,966     |  
|Non-recourse debt - less current portion                                                                                                                                                                                                               |  |      | 110,987,179 |   |      |   | 117,401,909 |  
|Obligation under lease                                                                                                                                                                                                                                 |  |      | 36,637,505  |   |      |   | 35,365,308  |  
|Deferred income taxes                                                                                                                                                                                                                                  |  |      | 30,143,408  |   |      |   | 34,091,076  |  
|Other liabilities                                                                                                                                                                                                                                      |  |      | 16,586,096  |   |      |   | 11,269,374  |  
|Commitments                                                                                                                                                                                                                                            |  |      |             |   |      |   |             |  
|Stockholders equity:                                                                                                                                                                                                                                  |  |      |             |   |      |   |             |  
|Common stock, $.01 par value; authorized-100,000,000 shares; issued and outstanding  6,221,431 shares at September 30, 2003 and
6,221,431 at September 30, 2002                                                                                       |  |      | 62,214      |   |      |   | 62,214      |  
|Preferred stock, exchangeable, redeemable 15.5% cumulative, stated at $2.14 liquidation value plus accrued interest, authorized-10,000,000
shares; issued and outstanding  4,638,421 shares at September 30, 2003 and 5,077,720 at September 30, 2002 |  |      | 18,090,538  |   |      |   | 18,146,756  |  
|Additional paid-in capital                                                                                                                                                                                                                             |  |      | 58,883,538  |   |      |   | 57,437,482  |  
|Accumulated deficit                                                                                                                                                                                                                                    |  |      | (53,071,658 | ) |      |   | (44,094,268 | )
|Accumulated other comprehensive income (loss)                                                                                                                                                                                                          |  |      | 844,841     |   |      |   | (94,678     | )
|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|Subtotal                                                                                                                                                                                                                                               |  |      | 24,809,473  |   |      |   | 31,457,506  |  
|Less stock subscriptions receivable                                                                                                                                                                                                                    |  |      | (73,743     | ) |      |   | (73,743     | )
|Less treasury common stock  4,875 shares, at cost                                                                                                                                                                                                     |  |      | (87,774     | ) |      |   | (87,774     | )
|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                                                                                                                                                             |  |      | 24,647,956  |   |      |   | 31,295,989  |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                                                                             |  | $    | 237,990,190 |   |      | $ | 242,085,565 |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |   |             |  



See
the accompanying Notes to Unaudited Consolidated Financial Statements.



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Archon Corporation and Subsidiaries

Unaudited Consolidated Statements of Operations

For the Years Ended September 30, 2003, 2002 and 2001



|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                        |  | 2003 |             |   | 2002 |   |             | 2001 | 
|Revenues:                                               |  |      |             |   |      |   |             |      |  |   |             |  
|Casino                                                  |  | $    | 27,948,767  |   |      | $ | 29,415,497  |      |  | $ | 33,087,526  |  
|Hotel                                                   |  |      | 2,689,656   |   |      |   | 2,659,335   |      |  |   | 2,558,935   |  
|Food and beverage                                       |  |      | 7,385,940   |   |      |   | 7,831,579   |      |  |   | 8,483,624   |  
|Investment properties                                   |  |      | 12,402,246  |   |      |   | 12,402,247  |      |  |   | 7,204,361   |  
|Other                                                   |  |      | 2,576,058   |   |      |   | 3,197,838   |      |  |   | 4,442,936   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Gross revenues                                          |  |      | 53,002,667  |   |      |   | 55,506,496  |      |  |   | 55,777,382  |  
|Less casino promotional allowances                      |  |      | (6,841,198  | ) |      |   | (6,741,025  | )    |  |   | (7,774,291  | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Net operating revenues                                  |  |      | 46,161,469  |   |      |   | 48,765,471  |      |  |   | 48,003,091  |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Operating expenses:                                     |  |      |             |   |      |   |             |      |  |   |             |  
|Casino                                                  |  |      | 16,337,894  |   |      |   | 15,978,110  |      |  |   | 17,390,831  |  
|Hotel                                                   |  |      | 733,436     |   |      |   | 816,471     |      |  |   | 786,342     |  
|Food and beverage                                       |  |      | 3,567,409   |   |      |   | 4,084,003   |      |  |   | 4,441,273   |  
|Other                                                   |  |      | 1,828,325   |   |      |   | 1,988,276   |      |  |   | 3,406,857   |  
|Selling, general and administrative                     |  |      | 4,806,533   |   |      |   | 5,062,358   |      |  |   | 5,680,787   |  
|Corporate expenses                                      |  |      | 2,796,269   |   |      |   | 2,815,467   |      |  |   | 2,662,194   |  
|Utilities and property expenses                         |  |      | 5,236,325   |   |      |   | 5,701,546   |      |  |   | 5,530,873   |  
|Depreciation and amortization                           |  |      | 6,459,589   |   |      |   | 6,035,038   |      |  |   | 4,132,320   |  
|Reserve for receivable and investment                   |  |      | 1,100,000   |   |      |   | 0           |      |  |   | 0           |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Total operating expenses                                |  |      | 42,865,780  |   |      |   | 42,481,269  |      |  |   | 44,031,477  |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Operating income                                        |  |      | 3,295,689   |   |      |   | 6,284,202   |      |  |   | 3,971,614   |  
|Interest expense                                        |  |      | (16,183,619 | ) |      |   | (16,413,145 | )    |  |   | (11,140,111 | )
|Gain on sale of assets                                  |  |      | 0           |   |      |   | 0           |      |  |   | 137,238,005 |  
|Litigation settlement, net                              |  |      | 0           |   |      |   | 0           |      |  |   | 3,374,482   |  
|Interest income                                         |  |      | 1,489,483   |   |      |   | 1,288,887   |      |  |   | 2,021,747   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Income (loss) before income tax (expense) benefit       |  |      | (11,398,447 | ) |      |   | (8,840,056  | )    |  |   | 135,465,737 |  
|Federal income tax (expense) benefit                    |  |      | 3,947,668   |   |      |   | 1,133,000   |      |  |   | (46,284,078 | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Net income (loss)                                       |  |      | (7,450,779  | ) |      |   | (7,707,056  | )    |  |   | 89,181,659  |  
|Dividends accrued on preferred shares                   |  |      | (1,526,611  | ) |      |   | (1,555,246  | )    |  |   | (1,950,401  | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Net income (loss) applicable to common shares           |  | $    | (8,977,390  | ) |      | $ | (9,262,302  | )    |  | $ | 87,231,258  |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Average common shares outstanding                       |  |      | 6,221,431   |   |      |   | 6,180,152   |      |  |   | 6,181,664   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Average common and common equivalent shares outstanding |  |      | 6,221,431   |   |      |   | 6,180,152   |      |  |   | 6,808,185   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Income (loss) per common share:                         |  |      |             |   |      |   |             |      |  |   |             |  
|Basic                                                   |  | $    | (1.44       | ) |      | $ | (1.50       | )    |  | $ | 14.11       |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Diluted                                                 |  | $    | (1.44       | ) |      | $ | (1.50       | )    |  | $ | 12.81       |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  



See
the accompanying Notes to Unaudited Consolidated Financial Statements.



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Archon Corporation and Subsidiaries

Unaudited Consolidated Statements of Stockholders Equity

For the Years Ended September 30, 2003, 2002
and 2001



|                                                             |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   |             |  
|------------------------------------------------------------ |  | ----------- | ------ | - | -------------- | - | ----------- | ------------------------ |  | ------------------ | ---------- |  | --------------------------------- | ------------ | - | ---------------------------- | - | -------- | ------------- |  | - | ------- | - |  | - | ------- | - |  | - | ----------- | -
|                                                             |  | CommonStock |        |   | PreferredStock |   |             | AdditionalPaid-InCapital |  | AccumulatedDeficit |            |  | AccumulatedOtherComprehensiveLoss |              |   | StockSubscriptionsReceivable |   |          | TreasuryStock |  |   | Total   |  
|Balances, October 1, 2000                                    |  | $           | 62,004 |   |                | $ | 26,439,760  |                          |  | $                  | 51,520,954 |  | $                                 | (122,063,224 | ) |                              | $ | 0        |               |  | $ | 0       |   |  | $ | (87,774 | ) |  | $ | (44,128,280 | )
|Net income                                                   |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   | 89,181,659   |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 89,181,659  |  
|Preferred stock dividend accrued                             |  |             |        |   |                |   | 1,950,401   |                          |  |                    |            |  |                                   | (1,950,401   | ) |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 0           |  
|Common and preferred stock acquired in litigation settlement |  |             | (536   | ) |                |   | (10,800,869 | )                        |  |                    | 5,364,422  |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (5,436,983  | )
|Preferred stock purchased                                    |  |             |        |   |                |   | (842,706    | )                        |  |                    | 390,473    |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (452,233    | )
|Unrealized loss on marketable securities                     |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   | (406,701 | )             |  |   |         |   |  |   |         |   |  |   | (406,701    | )
|Stock options exercised                                      |  |             | 65     |   |                |   |             |                          |  |                    | 7,935      |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 8,000       |  
|                                                             |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2001                                 |  |             | 61,533 |   |                |   | 16,746,586  |                          |  |                    | 57,283,784 |  |                                   | (34,831,966  | ) |                              |   | (406,701 | )             |  |   | 0       |   |  |   | (87,774 | ) |  |   | 38,765,462  |  
|Net loss                                                     |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   | (7,707,056   | ) |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (7,707,056  | )
|Preferred stock dividend accrued                             |  |             |        |   |                |   | 1,555,246   |                          |  |                    |            |  |                                   | (1,555,246   | ) |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 0           |  
|Preferred stock purchased                                    |  |             |        |   |                |   | (155,076    | )                        |  |                    | 79,955     |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (75,121     | )
|Stock options exercised                                      |  |             | 681    |   |                |   |             |                          |  |                    | 73,743     |  |                                   |              |   |                              |   |          |               |  |   | (73,743 | ) |  |   |         |   |  |   | 681         |  
|Unrealized gain on marketable securities                     |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   | 312,023  |               |  |   |         |   |  |   |         |   |  |   | 312,023     |  
|                                                             |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2002                                 |  |             | 62,214 |   |                |   | 18,146,756  |                          |  |                    | 57,437,482 |  |                                   | (44,094,268  | ) |                              |   | (94,678  | )             |  |   | (73,743 | ) |  |   | (87,774 | ) |  |   | 31,295,989  |  
|Net loss                                                     |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   | (7,450,779   | ) |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (7,450,779  | )
|Preferred stock dividend accrued                             |  |             |        |   |                |   | 1,526,611   |                          |  |                    |            |  |                                   | (1,526,611   | ) |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 0           |  
|Preferred stock purchased                                    |  |             |        |   |                |   | (1,582,829  | )                        |  |                    | 953,692    |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | (629,137    | )
|Capital contributions                                        |  |             |        |   |                |   |             |                          |  |                    | 492,364    |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   | 492,364     |  
|Unrealized gain on marketable securities                     |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   | 939,519  |               |  |   |         |   |  |   |         |   |  |   | 939,519     |  
|                                                             |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2003                                 |  | $           | 62,214 |   |                | $ | 18,090,538  |                          |  | $                  | 58,883,538 |  | $                                 | (53,071,658  | ) |                              | $ | 844,841  |               |  | $ | (73,743 | ) |  | $ | (87,774 | ) |  | $ | 24,647,956  |  
|                                                             |  |             |        |   |                |   |             |                          |  |                    |            |  |                                   |              |   |                              |   |          |               |  |   |         |   |  |   |         |   |  |   |             |  



See
the accompanying Notes to Unaudited Consolidated Financial Statements.



25



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Archon Corporation and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

For the Years Ended September 30, 2003, 2002 and 2001



|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- |  | - | ------------ | -
|                                                                                                   |  | 2003 |            |   | 2002 |   |            | 2001 | 
|Cash flows from operating activities:                                                              |  |      |            |   |      |   |            |      |  |   |              |  
|Net income (loss)                                                                                  |  | $    | (7,450,779 | ) |      | $ | (7,707,056 | )    |  | $ | 89,181,659   |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |      |            |   |      |   |            |      |  |   |              |  
|Depreciation and amortization                                                                      |  |      | 6,459,589  |   |      |   | 6,035,038  |      |  |   | 4,132,320    |  
|Gain on sale of assets                                                                             |  |      | 0          |   |      |   | 0          |      |  |   | (137,238,005 | )
|Negative amortization of debt                                                                      |  |      | 1,272,197  |   |      |   | 1,117,411  |      |  |   | 747,897      |  
|Change in assets and liabilities:                                                                  |  |      |            |   |      |   |            |      |  |   |              |  
|Accounts receivable, net                                                                           |  |      | 47,801     |   |      |   | (165,917   | )    |  |   | (2,116,020   | )
|Inventories                                                                                        |  |      | (2,362     | ) |      |   | (12,542    | )    |  |   | 495,175      |  
|Prepaid expenses and other                                                                         |  |      | 219,661    |   |      |   | (5,629     | )    |  |   | 3,030,599    |  
|Deferred income taxes                                                                              |  |      | (3,947,668 | ) |      |   | (633,000   | )    |  |   | 45,706,083   |  
|Other assets                                                                                       |  |      | (941,946   | ) |      |   | (1,846,292 | )    |  |   | (1,126,285   | )
|Accounts payable                                                                                   |  |      | 741,383    |   |      |   | 922,826    |      |  |   | (1,437,275   | )
|Interest payable                                                                                   |  |      | (35,294    | ) |      |   | (91,770    | )    |  |   | (1,745,170   | )
|Accrued and other liabilities                                                                      |  |      | 6,027,592  |   |      |   | 3,987,202  |      |  |   | 162,999      |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Net cash provided by (used in) operating activities                                                |  |      | 2,390,174  |   |      |   | 1,600,271  |      |  |   | (206,023     | )
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Cash flows from investing activities:                                                              |  |      |            |   |      |   |            |      |  |   |              |  
|Proceeds from sale of assets                                                                       |  |      | 0          |   |      |   | 0          |      |  |   | 207,500,000  |  
|Decrease (increase) in restricted cash                                                             |  |      | (483,814   | ) |      |   | 2,485,305  |      |  |   | (15,506,855  | )
|Cost and expenses related to sale of assets                                                        |  |      | 0          |   |      |   | 0          |      |  |   | (3,691,166   | )
|Capital expenditures                                                                               |  |      | (2,022,838 | ) |      |   | (4,352,497 | )    |  |   | (68,936,475  | )
|Marketable securities purchased                                                                    |  |      | (1,067,096 | ) |      |   | (7,314,325 | )    |  |   | (9,673,334   | )
|Marketable securities sold                                                                         |  |      | 6,531,199  |   |      |   | 5,262,028  |      |  |   | 0            |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Net cash provided by (used in) investing activities                                                |  |      | 2,957,451  |   |      |   | (3,919,489 | )    |  |   | 109,692,170  |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Cash flows from financing activities:                                                              |  |      |            |   |      |   |            |      |  |   |              |  
|Long-term debt                                                                                     |  |      | 2,867,171  |   |      |   | 0          |      |  |   | 0            |  
|Non-recourse debt                                                                                  |  |      | 0          |   |      |   | 0          |      |  |   | 55,434,006   |  
|Obligation under lease                                                                             |  |      | 0          |   |      |   | 0          |      |  |   | 32,500,000   |  
|Paid on long-term debt                                                                             |  |      | (5,956,780 | ) |      |   | (5,203,337 | )    |  |   | (177,618,484 | )
|Note receivable                                                                                    |  |      | (4,884,301 | ) |      |   | 0          |      |  |   | 0            |  
|Paid on note payable  officer                                                                     |  |      | 0          |   |      |   | 0          |      |  |   | (1,500,000   | )
|Debt issue costs                                                                                   |  |      | 0          |   |      |   | 0          |      |  |   | (3,194,349   | )
|Capital stock acquired                                                                             |  |      | (629,137   | ) |      |   | (75,121    | )    |  |   | (5,889,216   | )
|Capital contributions                                                                              |  |      | 492,364    |   |      |   | 0          |      |  |   | 0            |  
|Stock options exercised                                                                            |  |      | 0          |   |      |   | 0          |      |  |   | 8,000        |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Net cash used in financing activities                                                              |  |      | (8,110,683 | ) |      |   | (5,278,458 | )    |  |   | (100,260,043 | )
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Increase (decrease) in cash and cash equivalents                                                   |  |      | (2,763,058 | ) |      |   | (7,597,676 | )    |  |   | 9,226,104    |  
|Cash and cash equivalents, beginning of year                                                       |  |      | 8,615,412  |   |      |   | 16,213,088 |      |  |   | 6,986,984    |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  
|Cash and cash equivalents, end of year                                                             |  | $    | 5,852,354  |   |      | $ | 8,615,412  |      |  | $ | 16,213,088   |  
|                                                                                                   |  |      |            |   |      |   |            |      |  |   |              |  



See the accompanying Notes to
Unaudited Consolidated Financial Statements.



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ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

For the years ended September 30, 2003, 2002 and 2001



1. Basis of Presentation and General Information



Archon Corporation, (the Company or Archon), is a
publicly traded 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 under long-term lease and license arrangements. In addition, the Company through a wholly-owned subsidiary, Archon Sparks Management Company, operates a casino in Sparks, Nevada, owns real estate on Las Vegas
Boulevard South (the Strip) and at the corner of Rainbow and Lone Mountain Road, both in Las Vegas, Nevada, and also owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland.



Until October 2, 2000, the Company, through its wholly-owned subsidiary SFHI
Inc., formerly known as Santa Fe Hotel, Inc. (SFHI), owned and operated the Santa Fe Hotel and Casino (the Santa Fe), located in Las Vegas, Nevada. On October 2, 2000, SFHI sold substantially all of its assets, including the
rights to the name Santa Fe Hotel and Casino for $205.0 million (the SFHI Asset Sale). The SFHI Asset Sale resulted in a pre-tax gain of $137.2 million. In connection with the sale, the Company, Paul W. Lowden, majority
stockholder of the Company, and members of Mr. Lowdens family entered into a three year non-compete agreement, in which they agreed not to compete through October 2, 2003 within a three mile radius of the Santa Fe.



On December 29, 2000, the Company entered into a series of agreements to
exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986, as amended (the Code), the real and personal property, excluding gaming equipment, and intangible assets used in the operation of the Pioneer to a third
party and agreed to lease and license the assets sold for up to 20 years, during which period the Company will operate the Pioneer (collectively, the Pioneer Transactions). Additionally, the Company has the option to acquire the Pioneer
during the period from December 29, 2003 to December 31, 2007. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its
Early Purchase Option (EPO) on December 29, 2003. The EPO was in the amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million,
funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.5 million from marketable securities.



In March 2001, SFHI completed the acquisition of investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland for an aggregate purchase
price of $145.0 million plus debt issuance costs of $3.2 million, consisting of $15.5 million in cash and the assumption or issuance of an aggregate of $132.7 million of non-recourse indebtedness. The acquisitions are intended to qualify as
like-kind exchanges of real property under Section 1031 of the Code and defer a portion of the federal corporate income tax resulting from the SFHI Asset Sale.



2. Summary of Significant Accounting Policies



Principles of Consolidation



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



Cash and Cash Equivalents



Investments which mature within 90 days from the date of purchase are
treated as cash equivalents. These investments are stated at cost which approximates their market value.



Investment in Marketable Securities



Debt securities available-for-sale are stated at market value with unrealized gains or losses, when material, reported as a component of accumulated other comprehensive income (loss). Gains or losses on disposition
are based on the net proceeds and the adjusted carrying amount of the securities. Debt securities available-for-sale at September 30, 2003 and 2002 includes investments in government obligations and corporate securities.



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Equity securities available-for-sale are reported at fair value with unrealized gains or losses, when
material, reported as a component of accumulated other comprehensive income (loss). Realized gains and losses are determined on a specific identification method. At September 30, 2003 and 2002, equity securities available-for-sale included
investments in common and preferred stock.



The Company
recorded $940,000 and $312,000 of other comprehensive gain and $407,000 of other comprehensive loss associated with unrealized gains or losses on these securities during the years ended September 30, 2003, 2002 and 2001, respectively.



The following is a summary of available-for-sale marketable securities as of
September 30, 2003 and 2002:



|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|--------------------------------- |  | ---- | ---------- | -------------- | - | ---------------- |  | ------------------- | ------- |  | - | ----------
|                                  |  | 2003
|                                  |  | Cost |            | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Government and agency obligations |  | $    | 0          |                | $ | 0                |  | $                   | 0       |  | $ | 0         
|Other debt securities             |  |      | 4,303,395  |                |   | 167,255          |  |                     | 11,393  |  |   | 4,459,257 
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|Total debt securities             |  |      | 4,303,395  |                |   | 167,255          |  |                     | 11,393  |  |   | 4,459,257 
|Equity securities                 |  |      | 1,874,910  |                |   | 1,001,439        |  |                     | 73,398  |  |   | 2,802,951 
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|Total                             |  | $    | 6,178,305  |                | $ | 1,168,694        |  | $                   | 84,791  |  | $ | 7,262,208 
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|                                  | 
|                                  |  | 2002
|                                  |  | Cost |            | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Government and agency obligations |  | $    | 3,781,128  |                | $ | 2,167            |  | $                   | 17,446  |  | $ | 3,765,849 
|Other debt securities             |  |      | 6,094,982  |                |   | 127,793          |  |                     | 55,564  |  |   | 6,167,211 
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|Total debt securities             |  |      | 9,876,110  |                |   | 129,960          |  |                     | 73,010  |  |   | 9,933,060 
|Equity securities                 |  |      | 1,992,264  |                |   | 425,069          |  |                     | 169,994 |  |   | 2,247,339 
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           
|Total                             |  | $    | 11,868,374 |                | $ | 555,029          |  | $                   | 243,004 |  | $ | 12,180,399
|                                  |  |      |            |                |   |                  |  |                     |         |  |   |           



The cost and estimated
fair value of debt securities as of September 30, 2003 and 2002 by contractual maturity are shown below:



|                                       |  |      |           |            |   |          
|-------------------------------------- |  | ---- | --------- | ---------- | - | ---------
|                                       |  | 2003
|                                       |  | Cost |           | Fair Value
|Due in one year or less                |  | $    | 0         |            | $ | 0        
|Due after one year through five years  |  |      | 0         |            |   | 0        
|Due after five years through ten years |  |      | 764,445   |            |   | 779,650  
|Due after ten years                    |  |      | 3,538,950 |            |   | 3,679,607
|Mortgage backed securities             |  |      | 0         |            |   | 0        
|                                       |  |      |           |            |   |          
|Total                                  |  | $    | 4,303,395 |            | $ | 4,459,257
|                                       |  |      |           |            |   |          
|                                       | 
|                                       |  | 2002
|                                       |  | Cost |           | Fair Value
|Due in one year or less                |  | $    | 259,535   |            | $ | 248,785  
|Due after one year through five years  |  |      | 569,741   |            |   | 573,196  
|Due after five years through ten years |  |      | 1,763,694 |            |   | 1,755,170
|Due after ten years                    |  |      | 3,502,012 |            |   | 3,590,060
|Mortgage backed securities             |  |      | 3,781,128 |            |   | 3,765,849
|                                       |  |      |           |            |   |          
|Total                                  |  | $    | 9,876,110 |            | $ | 9,933,060
|                                       |  |      |           |            |   |          



Inventories



Food, beverage, gift shop and other inventories are stated at first-in,
first-out cost, not in excess of market.



Property and Equipment



Property and equipment are stated at cost less
accumulated depreciation. Costs of maintenance and repairs of property and equipment are expensed as incurred. Costs of major improvements are capitalized and depreciated over the estimated useful lives of the assets or the remaining term of the
leases. Gains or losses on the disposal of property and equipment are recognized in the year of sale. In sale/leaseback transactions of equipment, gains are deferred and recognized over the lease term and losses are recognized in the year of sale.



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The Company periodically assesses the recoverability of property and equipment and evaluates such
assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest
charges, are less than the carrying amount in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).



Depreciation and amortization are computed by the straight-line method over
the shorter of the estimated useful lives or lease terms. The length of depreciation and amortization periods are for buildings and improvements seven to 40 years and for machinery and equipment three to 15 years.



Pre-Opening Expenses and Capitalized Interest



The Company expenses development costs as incurred. Interest costs are
capitalized on funds disbursed during the development phase of projects and expensed pursuant to depreciation and amortization methods over the assets estimated useful life.



Federal Income Taxes



Deferred income taxes are provided on temporary differences between pre-tax financial statement income and taxable income resulting primarily from
different methods of depreciation and amortization. The Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes (SFAS 109).



Treasury Stock



Treasury stock is the Companys common stock that has been issued and subsequently reacquired. The acquisition of common stock is accounted for under
the cost method, and presented as a reduction of stockholders equity.



Revenue Recognition



Casino revenue is
recorded as gaming wins less losses. Revenues include the retail amount of room, food, beverage and other services provided gratuitously to customers. Such amounts are then deducted as promotional allowances. The estimated cost of providing these
promotional services has been reported in the accompanying Unaudited Consolidated Statements of Operations as an expense of each department granting complimentary services. The table below summarizes the departments costs of such services
(dollars in thousands):



|                  |  |      |       |      |   |       |  |   |      
|----------------- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                  |  | 2003 |       | 2002 |   | 2001 
|Food and beverage |  | $    | 4,661 |      | $ | 4,530 |  | $ | 5,120
|Hotel             |  |      | 893   |      |   | 825   |  |   | 843  
|Other             |  |      | 78    |      |   | 72    |  |   | 133  
|                  |  |      |       |      |   |       |  |   |      
|Total             |  | $    | 5,632 |      | $ | 5,427 |  | $ | 6,096
|                  |  |      |       |      |   |       |  |   |      



Rental revenue from
investment properties is recognized and accrued as earned on a pro rata basis over the term of the lease. When rents received exceed rents recognized, the difference is recorded as other liabilities. When rents recognized exceed rents received, the
difference is recorded as other assets.



Indirect Expenses



Certain indirect expenses of operating departments
such as utilities and property expense and depreciation and amortization are shown separately in the accompanying Unaudited Consolidated Statements of Operations.



Earnings Per Share



The Company presents its per share results in accordance with 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. The effect of options outstanding was included in diluted calculations during the year ended September 30, 2001 but was not included in
diluted calculations during fiscal years 2003 and 2002 since the Company incurred a net loss. The dilutive effect of the assumed exercise of stock options increased the weighted average number of shares of common stock by 626,521 shares for the year
ended September 30, 2001.



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The Board of Directors of the Company has authorized the purchase from time to time by the Company of
preferred stock for total consideration of up to $2.5 million. Additionally, as discussed in Note 15, in connection with the settlement of litigation initiated by the Company, the Company, among other items, acquired 3,456,942 shares of preferred
stock. Pursuant to the Certificate of Designation of the preferred stock, shares of preferred stock acquired by the Company are retired.



Accounting for Stock-Based Compensation



The Company has a Key Employee Stock Option Plan (the Stock Option Plan) which terminated on September 30, 2003. The Company accounts for the
Stock Option Plan under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees and related Interpretations. No stock-based employee compensation cost is reflected in net income, as all
options granted under the Stock Option Plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income/(loss) and income/(loss) per share as if the
Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands except for per share amounts).



|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                            |  | Twelve Months EndedSeptember 30, |       
|                                                                                                                                            |  | 2003                             |        |   | 2002 |   |        | 2001 | 
|Net income (loss)                                                                                                                           |  | $                                | (8,977 | ) |      | $ | (9,262 | )    |  | $ | 87,231 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                  | (1     | ) |      |   | (13    | )    |  |   | (57    | )
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|Pro forma net income/(loss)                                                                                                                 |  | $                                | (8,978 | ) |      | $ | (9,275 | )    |  | $ | 87,174 |  
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|Income/(loss) per share:                                                                                                                    |  |                                  |        |   |      |   |        |      |  |   |        |  
|Basic-as reported                                                                                                                           |  | $                                | (1.44  | ) |      | $ | (1.50  | )    |  | $ | 14.11  |  
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|Basic-pro forma                                                                                                                             |  | $                                | (1.44  | ) |      | $ | (1.50  | )    |  | $ | 14.10  |  
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|Diluted-as reported                                                                                                                         |  | $                                | (1.44  | ) |      | $ | (1.50  | )    |  | $ | 12.81  |  
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  
|Diluted-pro forma                                                                                                                           |  | $                                | (1.44  | ) |      | $ | (1.50  | )    |  | $ | 12.80  |  
|                                                                                                                                            |  |                                  |        |   |      |   |        |      |  |   |        |  



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 estimated useful lives for depreciable and amortizable assets, certain other estimated
liabilities and valuation reserves and estimated cash flows in assessing the recoverability of long-lived assets. Actual results may differ from estimates.



Recently Issued Accounting Standards



SFAS 143. In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations. This statement addresses financial accounting
and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement applies to all entities and to all legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and the normal operation of a long-lived asset, except for certain obligations of lessees. We adopted SFAS 143 at the beginning of fiscal 2003. The adoption of this statement did not
have a material impact on our results of operations or financial position.



SFAS 144. In August 2001, the FASB issued SFAS 144, Accounting for the Impairment and Disposal of Long-Lived Assets. This statement requires one accounting model be used for long-lived assets to be
disposed of by sale, whether previously held and used or newly acquired and broadens the presentation of discontinued operations to include additional disposal transactions. We adopted SFAS 144 at the beginning of fiscal 2003. The adoption of this
statement did not have a material impact on our results of operations or financial position.



SFAS 146. In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires
that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. A fundamental conclusion reached by the FASB in this statement is that an entitys commitment to a plan, by itself, does not
create a present obligation to others that meets the definition of a liability. SFAS 146



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also establishes that fair value is the objective for initial measurement of the liability. The provisions of this statement are effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption of this statement did not have a material impact on our results of operations or financial position.



SFAS 148. In December 2002, the FASB issued SFAS 148, Accounting for Stock-Based Compensation-Transition and
Disclosure. This Statement amends SFAS 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The disclosure requirements of this statement were effective for our interim financial statements beginning with our quarter ended March 2003.



SFAS 150.In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. Financial instruments that are within
the scope of the statement, which previously were often classified as equity, must now be classified as liabilities. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise generally effective
at the beginning of the first interim period beginning after June 15, 2003. The adoption of this statement did not have a material effect on our results of operations or financial position.



FIN 45.In November 2002, the FASB issued FASB Interpretation
(FIN) 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 expands the disclosures required by guarantors for obligations under certain types of guarantees. It
also requires initial recognition at fair value of a liability for such guarantees. We adopted the disclosure requirements of FIN 45 for the quarter ended December 28, 2002 and the liability recognition requirements to all guarantees issued or
modified after December 31, 2002. The adoption of these requirements did not have a material impact on our results of operations or financial position.



FIN 46.In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest Entities (VIEs). FIN 46 establishes standards for
determining under what circumstances VIEs should be consolidated with their primary beneficiary, including those to which the usual condition for consolidation does not apply. FIN 46 also requires disclosures about unconsolidated VIEs in which the
Company has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to VIEs created after January 31, 2003 and is effective for our first quarter of our 2004 fiscal year. We have evaluated our relationships and do
not believe we have any consolidatable VIEs. As such, we do not believe the adoption of this requirement will have a material impact on our results of operations or financial position.



Fair Value of Financial Instruments



The Company estimates the fair value of its preferred stock to be $8.1
million at September 30, 2003 based upon available market prices. The Company estimates that its debt and all other financial instruments have a fair value which approximates their recorded value.



Reclassifications



Certain reclassifications have been made in the prior years
consolidated financial statements to conform to the presentation used in 2003.



3. Cash and Cash Equivalents



At September 30,
2003, the Company held cash and cash equivalents of $5.9 million compared to $8.6 million at September 30, 2002. Approximately $2.1 million was held by PHI and was subject to certain restrictions and limitations on its use, including restrictions on
its availability for distribution to the Company, by the terms of the agreements entered into in the Pioneer Transactions. See Note 12



At September 30, 2003, approximately $1.6 million was held in escrow pursuant to the agreements related to the SFHI Asset Sale.



4. Restricted Cash



At September 30, 2003 and 2002, approximately $13.9 million and $13.0 million, respectively, were held by SFHI and is
restricted in use and has been pledged to secure SFHIs guaranty of PHIs lease and license obligations. The permitted investments for



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the restricted cash are investment grade commercial paper, money market accounts, government backed securities and preferred stock of the Purchaser.
Additionally, $1.9 million of the $13.9 million may be used for capital expenditures at the Pioneer and acquisition of real property and equipment under lease at the Pioneer. See Note 12



5. Accounts Receivable, Net



Accounts receivable at September 30, 2003 and 2002 consisted of the following:



|                                     |  |      |           |   |      |   |           |  
|------------------------------------ |  | ---- | --------- | - | ---- | - | --------- | -
|                                     |  | 2003 |           |   | 2002 |  
|Casino and hotel                     |  | $    | 485,202   |   |      | $ | 552,965   |  
|Investment properties                |  |      | 3,021,562 |   |      |   | 3,021,562 |  
|Other                                |  |      | 258,016   |   |      |   | 258,016   |  
|                                     |  |      |           |   |      |   |           |  
|                                     |  |      | 3,764,780 |   |      |   | 3,832,543 |  
|Less allowance for doubtful accounts |  |      | (586,637  | ) |      |   | (606,599  | )
|                                     |  |      |           |   |      |   |           |  
|Total                                |  | $    | 3,178,143 |   |      | $ | 3,225,944 |  
|                                     |  |      |           |   |      |   |           |  



Changes in the
allowance for doubtful accounts for the years ended September 30, 2003, 2002, and 2001 were as follows:



|                           |  |      |         |   |      |   |           |      |  |   |           |  
|-------------------------- |  | ---- | ------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                           |  | 2003 |         |   | 2002 |   |           | 2001 | 
|Balance, beginning of year |  | $    | 606,599 |   |      | $ | 1,495,859 |      |  | $ | 2,081,913 |  
|Provision                  |  |      | 40,999  |   |      |   | 35,714    |      |  |   | 156,302   |  
|Accounts written-off       |  |      | (60,961 | ) |      |   | (924,974  | )    |  |   | (742,356  | )
|                           |  |      |         |   |      |   |           |      |  |   |           |  
|Balance, end of year       |  | $    | 586,637 |   |      | $ | 606,599   |      |  | $ | 1,495,859 |  
|                           |  |      |         |   |      |   |           |      |  |   |           |  



6. Land Held for Development



In October 1995, the Company acquired an approximately
27-acre parcel on Las Vegas Boulevard South which was valued at approximately $21.5 million. The Company assumed an operating lease under which a water theme park operates on the 27-acre parcel. The lease may be terminated by the Company at any
time. A loan owed by the tenant to the former owner would have been payable by SLVC if it terminated the lease prior to December 31, 2004; however, that loan was paid in full by the tenant in July 2002. Under the terms of the lease, as amended, the
water theme park remits a base rent of approximately $19,000 monthly plus an annual rent payment based on gross receipts.



In 1994, SFHI acquired for $1.6 million the approximately 20-acre parcel of undeveloped real property at the corner of Rainbow and Lone Mountain Road in
Las Vegas, Nevada. In connection with the SFHI Asset Sale, the Company and SFHI granted an option to the buyer through October 2003 to purchase the property for $5.0 million. The buyer has declined to exercise the option to purchase the property.
See Note 27



7. Property and Equipment, Net



In December 2000, PHI sold all of its gaming equipment for cash
consideration of $2.5 million. Simultaneously, PHI entered into an agreement to lease the equipment for a period of four years at approximately $63,000 per month. The lease had been accounted for as an operating lease, and accordingly, the gain on
sale of approximately $800,000 had been deferred and was being amortized over the term of the lease. Upon repurchase of the equipment, the unamortized balance of the deferred gain was accounted for as part of the cost basis of the repurchased
equipment.



In May 2002, the Pioneer purchased gaming equipment
previously subject to lease for approximately $2.1 million, $1.9 million of which was released from the restricted cash account. As a result, the rental expense for gaming equipment decreased by approximately $63,000 per month subsequent to April
30, 2002. In addition, the Company used approximately $1.0 million from the restricted cash account for partial payment for a slot tracking system at the Pioneer and approximately $400,000 from the restricted cash account for additional capital
expenditures at the Pioneer, including the purchase of new slot equipment.



Included in Property and equipment, net in the accompanying Unaudited Consolidated Balance Sheets at September 30, 2003 and 2002 are certain assets held under lease at the Pioneer with a net carrying value of
approximately $27.2 million and $28.7 million, respectively. See Note 12



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8. Rental Property Held for Investment, Net



The property in Dorchester, Massachusetts is located on 12 acres and includes several buildings with approximately 425,000
square feet of commercial office space. The property was acquired for approximately $82.4 million plus $500,000 in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the
property. The property is under a net lease through 2019 with a single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to the property. The Company allocated
approximately $15.0 million of the purchase price to land and the balance to building and improvements. The expense incurred to acquire the property is recorded in Other assets in the accompanying Unaudited Consolidated Balance Sheets and is being
amortized over the remaining term of the lease. Deferred rent at September 30, 2003 and 2002 in the amount of $16.6 million and $11.3 million, respectively, is included in Other liabilities on the accompanying Unaudited Consolidated Balance Sheets.
See Note 11



The property in Gaithersburg, Maryland is located
on 55 acres and includes one building with approximately 342,000 square feet of commercial office space. The property was acquired for $62.6 million, plus debt issuance costs of $2.7 million. The Company paid $9.9 million in cash and issued $55.4
million in non-recourse first mortgage indebtedness. The building is located on approximately 20 acres of the property. The property is under a net lease through 2014 with a single tenant with an investment grade credit rating. Under the lease, the
tenant is responsible for substantially all obligations related to the property. The Company allocated approximately $23.0 million of the purchase price to land, $3.0 million to machinery and equipment and the balance to building and improvements.
The expenses incurred to acquire the property are recorded in Other assets in the accompanying Unaudited Consolidated Balance Sheets and are being amortized over the remaining term of the lease. Deferred rent at September 30, 2003 and 2002 in the
amount of $1.8 million and $1.2 million, respectively, is included in Other assets on the accompanying Unaudited Consolidated Balance Sheets. See Note 11



9. Other Assets



Included in Other assets at September 30, 2003 is a $4.9 million note receivable from PDS Gaming, Inc. with a rate of 10% and a maturity date of the
earlier of November 1, 2004, or December 29, 2003 if the Company exercises the Early Purchase Option in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, which the Company has notified GE that it intends to
exercise. See Note 27



Included in Other assets at September
30, 2003 and 2002 is $700,000 and $900,000, respectively, of commercial and residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third parties as well as loans made directly 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.



10. Long-Term Debt



The Companys long-term debts are primarily comprised of the following
obligations: borrowings of $2.9 million from a margin account at a brokerage firm with a variable rate of interest (4.6% at September 30, 2003); a loan with a balance of $1.5 million collateralized by slot equipment with an interest rate of 7.5%,
monthly payments of $53,000 through April 2006; and a loan with a balance of $200,000 collateralized by real property with an interest rate of 13.5%, monthly payments of $8,000 through December 2006.



The scheduled maturities of long-term debt for the years ending September 30
are as follows:



|           |  |   |          
|---------- |  | - | ---------
|2004       |  | $ | 3,510,004
|2005       |  |   | 662,330  
|2006       |  |   | 396,625  
|2007       |  |   | 14,350   
|2008       |  |   | 0        
|Thereafter |  |   | 0        
|           |  |   |          
|Total      |  | $ | 4,583,309
|           |  |   |          



11. Non-Recourse Debt Obligations



The Company assumed $77.3 million of indebtedness,
consisting of approximately $75.1 million of first mortgage indebtedness and $2.1 million of indebtedness under Section 467 of the Code, in connection with its acquisition on March 2, 2001 of the



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commercial office building located in Dorchester, Massachusetts. The building is under a net lease through June 2019, which requires the tenant to make
higher semi-annual lease payments through June 2005 and lower semi-annual lease payments thereafter. The lease payments are applied to the outstanding indebtedness and are intended to reduce the first mortgage note balance to $31.2 million by June
2005. The portion of higher lease payments attributable to future periods is considered an advance of rent under section 467 of the Code. The first mortgage indebtedness is non-recourse and matures in June 2019 to coincide with the end of the lease
term. See Note 8



The Company issued approximately $55.4
million of first mortgage debt with a 7.01% interest rate per annum in connection with its acquisition of a commercial office building located in Gaithersburg, Maryland. The building is under lease through April 2014. The monthly lease payments are
applied against the outstanding indebtedness. Monthly principal and interest payments amortize the debt to approximately $22.3 million by the end of the lease in April 2014. See Note 8



The scheduled maturities of non-recourse debt for the years ending September 30 are as follows:



|           |  |   |            
|---------- |  | - | -----------
|2004       |  | $ | 6,414,729  
|2005       |  |   | 30,057,775 
|2006       |  |   | 1,915,478  
|2007       |  |   | 2,195,326  
|2008       |  |   | 2,490,198  
|Thereafter |  |   | 74,328,402 
|           |  |   |            
|Total      |  | $ | 117,401,908
|           |  |   |            



12. Obligations Under Lease



On December 29, 2000, the Company entered into the
Pioneer Transactions and agreed to lease and license the real and personal property (excluding gaming equipment) and intangible assets used by the Pioneer for up to 20 years, during which period the Company will operate the Pioneer. The
consideration for the Pioneer Transactions consisted of the assumption and repayment by the Purchaser of $32.5 million of debt owed by PHI to SFHI and the issuance of preferred stock of the Purchaser having a $1.0 million liquidation preference. See
Notes 4 and 7



The Company recorded the Pioneer Transactions in
accordance with Statement of Financial Accounting Standards No. 98, Accounting for Leases. As of September 30, 2003 and 2002, the Company has recorded $36.6 million and $35.4 million, respectively, as an Obligation under lease in
the accompanying Unaudited Consolidated Balance Sheets.



The
scheduled minimum lease payments of obligation under lease for the years ended September 30 are as follows:



|                                        |  |   |             |  
|--------------------------------------- |  | - | ----------- | -
|2004                                    |  | $ | 3,901,602   |  
|2005                                    |  |   | 4,155,248   |  
|2006                                    |  |   | 4,279,906   |  
|2007                                    |  |   | 4,408,303   |  
|2008                                    |  |   | 4,906,905   |  
|Thereafter                              |  |   | 87,582,476  |  
|                                        |  |   |             |  
|                                        |  |   | 109,234,440 |  
|Less amount representing interest       |  |   | (72,596,935 | )
|                                        |  |   |             |  
|Present value of minimum lease payments |  | $ | 36,637,505  |  
|                                        |  |   |             |  



Archon and SFHI
guaranteed the payments under the lease and license agreements and agreed to certain covenants, including restrictions on the payment of management fees, competing in the Laughlin, Nevada area and payment of dividends with respect to the Archon
preferred stock. In addition, Archon agreed to maintain consolidated liquidity (as defined in the agreements relating to the Pioneer Transactions) of not less than $25.0 million. At September 30, 2003, Archons consolidated liquidity was in
excess of $25.0 million. Archon has agreed to forgo all or a portion of the management fees payable by PHI if PHIs ratio of fixed charges to operating cash flow (fixed charges ratio) falls below 1.20 to 1.00. Further, Archon has
agreed to contribute capital to PHI and in certain events to deposit cash in restricted cash accounts in the event PHIs fixed charges ratio falls below 1.00 to 1.00 during any rolling four-quarter period, calculated on a quarterly basis. See
Notes 4 and 7



Specifically, if the fixed charges ratio was
less than 1.00 to 1.00 for any four-quarter period ending on or before December 31, 2003, the Company had been obligated to contribute capital to PHI in the amount of the deficiency and, if the fixed charges ratio was less than 1.00 to 1.00 for
three consecutive quarters during that period, to deposit additional cash to restricted cash accounts based upon a specified percentage of the stipulated loss value set forth in the lease, with payments ranging from $500,000 for the quarter



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ended June 30, 2003 to $2,000,000 for the quarter ending December 31, 2003. On November 13, 2003, the Company notified GE Capital that in accordance with
Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO was in the amount of $35.6 million and was paid from the following
monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.5 million from marketable securities.



Pursuant to the agreements relating to the Pioneer
Transactions, the Company has foregone the management fee otherwise payable to it since April 2001. PHIs fixed charges ratio was 0.61 to 1.00 for the four quarters ended September 30, 2003. As a result, the Company was required to make a
deposit to the restricted cash account in the amount of $983,000. A deposit in the amount of $489,000 was required for the quarter ended June 30, 2003, in which quarter the fixed charges ratio was 0.60 to 1.00. As a result of the EPO, the Company
did not make the deposits as all funds were paid to the lessor to satisfy the EPO. PHIs fixed charges ratio for the four quarters ended June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003 were 0.92 to 1.00, 0.87 to 1.00,
0.81 to 1.00 and 0.55 to 1.00, respectively. As a result, the Company made capital contributions to PHI in the amounts of approximately $375,000, $275,000, $314,000 and $1,372,000 with respect to the four-quarter periods ended June 30, September 30,
December 31, 2002 and March 31, 2003, respectively. Additionally, it deposited $484,000 and $487,000 in the restricted cash account for the four quarters ended December 31, 2002 and March 31, 2003, respectively.



Furthermore, the Company would have been required to make capital
contributions aggregating approximately $400,000 as a result of PHIs fixed charges ratios for the four quarters ended December 31, 2001 and March 31, 2002, in which the fixed charges ratio was 0.93 to 1.00, and 0.92 to 1.00, respectively.
However, in May 2002, the Company completed the purchase, for approximately $2.1 million, of leased gaming equipment with $1.9 million of cash from the restricted cash account and cash from operations. The elimination of the rent payments reduced
fixed charges in periods subsequent to the repurchase date. Giving effect to the gaming equipment purchase as if it had occurred at the beginning of the relevant four-quarter period, on a pro forma basis PHIs fixed charges ratio for the four
quarters ended December 31, 2001 and March 31, 2002 would have been 1.04 to 1.00 and 1.05 to 1.00, respectively. The Company advised the Purchaser that it was not making any capital contributions to PHI for the four-quarter periods ended December
31, 2001 and March 31, 2002 based on the pro forma fixed charges ratios giving effect to the May 2002 purchase of leased gaming equipment. Prior to the exercise of the EPO, the Purchaser had not advised the Company whether or not it agreed that the
Company had the right to calculate the ratios on a pro forma basis. If the Purchaser disagreed, the Company may have been required to make capital contributions with respect to the four-quarter periods ended December 31, 2001 and March 31, 2002 and
may have been required to deposit additional cash to the restricted cash account.



The agreements related to the Pioneer Transactions provide an option for the Company to purchase the assets under the lease and license agreements to PHI during the period from December 29, 2003 and December 31, 2007,
at purchase price amounts ranging between $35.5 million and $38.7 million, which, as of the date of the agreements, approximated estimated fair market value at the relevant purchase dates, and at the end of the lease term for fair market value. On
November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company would exercise its Early Purchase Option (EPO) on December 29, 2003. The
EPO was in the amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately
$12.6 million, and $2.5 million from marketable securities.



13. Leases



All non-cancelable leases have been classified as
operating leases. Under most leasing arrangements, the Company pays the taxes, insurance and the operating expenses related to the leased property. Amortization of assets leased under capital leases in prior years is included in depreciation and
amortization expense in the Unaudited Consolidated Statements of Operations.



At September 30, 2003, the Company had an operating lease for real property which expires in 2078 and operating leases for corporate offices. The Company had no property and equipment under capital leases, other than
the real and personal property described in Note 12.



Future
minimum lease payments as of September 30, 2003 are as follows:



|           |  |           |           
|---------- |  | --------- | ----------
|           |  | Operating
|2004       |  | $         | 934,210   
|2005       |  |           | 915,202   
|2006       |  |           | 861,316   
|2007       |  |           | 807,430   
|2008       |  |           | 807,430   
|Thereafter |  |           | 56,721,936
|           |  |           |           
|Total      |  | $         | 61,047,524
|           |  |           |           



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Included in future minimum operating lease payments are rental costs associated with the real
property under the lease at the Pioneer.



Rent expense was
$970,472, $1,457,869 and $1,338,048 for the years ended September 30, 2003, 2002 and 2001, respectively.



14. Gain on Sale of Assets



The Company recorded a pre-tax gain on the SFHI Asset Sale of approximately $137.2 million in the quarter ended December 31, 2000. In connection with the sale, the Company, Paul W. Lowden, majority stockholder of the Company, and members of
the family of Paul W. Lowden entered into a three year non-compete agreement, in which they agreed not to compete through October 2, 2003 within a three mile radius of the Santa Fe. The Company and SFHI granted to the buyer a three-year option
through October 2003 to purchase for $5.0 million the approximately 20-acre parcel of undeveloped real property located at the corner of Rainbow and Lone Mountain Road adjacent to the Santa Fe. The buyer has declined to exercise the option purchase
the property. See Note 27.



15. Litigation Settlement, Net



On March 20, 2001 the Company agreed to settle the lawsuit titled Sahara
Gaming Corporation, et al. v. Francis L. Miller, et al., CV-S-94-01109-LRL, filed by the Company alleging, among other things, violations of the Securities Exchange Act of 1934. The terms of the settlement required that (i) the defendants
insurers pay the Company approximately $4.9 million and the Company dismiss with prejudice all its claims against all defendants, (ii) the Company pay Francis Miller approximately $900,000 and Francis Miller dismiss with prejudice all his
counterclaims and third-party claims against the Company, and (iii) plaintiffs and defendants cause the lawsuit and counterclaims to be dismissed with prejudice. The Company has reflected the net proceeds received in the settlement, net of legal
expenses incurred, as gain from litigation settlement in the accompanying Unaudited Consolidated Statements of Operations.



On April 20, 2001, the Company entered into a settlement agreement with David H. Lesser, Hudson Bay Partners, L.P. and certain of their affiliates. In
accordance with the settlement agreement, among other things: (i) the Company and its subsidiaries agreed to dismiss with prejudice pending litigation by the Company against HBP and Mr. Lesser styled Santa Fe Gaming Corporation v. Hudson Bay
Partners, L. P., et al., CV-5-99-00298-KJD (LRL) and Santa Fe Gaming Corporation v. Hudson Bay Partners L.P. and David H. Lesser, CV-5-99-00416 LDG (LRL), and Mr. Lesser agreed to dismiss with prejudice his application for reimbursement of
approximately $1.1 million in attorneys fees in connection with the PHI and PFC bankruptcies, pursuant to legal proceedings styled In re Pioneer Finance Corp., Case No. BK-S-99-11404-LBR and In re Pioneer Hotel Inc., Case No.
BK-S-99-12854-LBR; (ii) the Company received the 3,456,942 shares of the Companys preferred stock and 53,600 shares of common stock held by the Hudson Bay affiliates; (iii) Mr. Lesser agreed to forfeit options to acquire 12,500 shares of the
Companys common stock; (iv) Mr. Lesser forfeited his claim to director fees; (v) Mr. Lesser resigned from the Companys Board of Directors and withdrew his name as the nominee for election by preferred stockholders as a special director
at the Companys annual meeting held on May 11, 2001; and (vi) the Company paid Mr. Lesser $5.75 million.



The Company allocated the $5.75 million payment for financial reporting purposes to the preferred and common shares, based upon quoted market prices for
the preferred and common shares, with the remaining amount being recorded as Litigation settlement, net in the accompanying Unaudited Consolidated Statements of Operations.



16. Preferred Stock



The Company has outstanding redeemable exchangeable cumulative preferred stock (Preferred Stock). Prior to fiscal 1997, the Company satisfied
the semi-annual dividend payments on its Preferred Stock through the issuance of paid-in-kind dividends. Commencing in fiscal 1997, dividends paid on the Preferred Stock, to the extent declared, must be paid in cash. Pursuant to the terms of the
Certificate of Designation with respect to the Preferred Stock, dividends that are not declared are cumulative and accrue. The dividend rate per annum was equal to 8.0% of $2.14 for each share of preferred stock until September 30, 1998, at which
date the dividend rate increased to 11.0%. Beginning October 1, 1999, the dividend rate increased by an additional 50 basis points on each succeeding semi-annual dividend payment date up to a maximum of 16.0% per annum. The dividend rate is 16.0%
effective October 1, 2003. The accrued stock dividends have been recorded as an increase to the Preferred Stock account. As of September 30, 2003, the aggregate liquidation preference of the Preferred Stock was $18.1 million, or $3.90 per share.



At the election of the Company, the Preferred Stock is
redeemable, in whole or in part, at any time and from time to time at a redemption price equal to the per share liquidation preference of $2.14 plus an amount equal to all accrued but unpaid dividends, whether or not declared.



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At the election of the Company, shares of Preferred Stock may be exchanged from time to time for
junior subordinated notes of the Company. The principal amount of the junior subordinated notes, if issued, will be equal to the Liquidation Preference of the Preferred Stock for which such notes are exchanged. The junior subordinated notes would
mature on September 30, 2008, and would bear interest at an annual rate of 11.0%, payable semi-annually.



The Company has accrued, but not paid, dividends on the Preferred Stock since September 30, 1996. Dividends accrued but not paid were $8.2 million and
$7.3 million as of September 30, 2003 and 2002, respectively. Pursuant to the Certificate of Designation, because at least one full dividend payment has been accrued but not paid for two years, the holders of the Preferred Stock, as a separate
class, are entitled to elect two directors to the Companys board of directors. The two directors elected by Preferred Stockholders are in addition to the directors elected by the holders of the Companys Common Stock. The Preferred
Stockholders right to elect two directors will continue until all dividend arrearages have been paid. The agreements relating to the Pioneer Transactions prohibit the Company from paying dividends on the Preferred Stock.



17. Stock Option Plan



The Company has a Key Employee Stock Option Plan (the Stock Option Plan) providing 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. This Stock Option Plan was terminated as of September 30, 2003. As of September 30, 2003, there
were 508,860 options outstanding under the Stock Option Plan. During fiscal years 2002 and 2001, 68,175 and 6,500 options, respectively, were exercised. No options were exercised during the fiscal year 2003. During fiscal year 2002, options with
respect to 4,000 shares of common stock were granted. No options were granted during the fiscal years 2003 and 2001. The outstanding options have expiration dates through June 2010.



In December 1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (the Non-Employee Director
Plan) which provides 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. This Non-Employee Director Plan was terminated on March 21, 2002. As of September 30, 2003, there were 37,500 options outstanding under this plan. During
fiscal years 2003 and 2002, no options were granted. The outstanding options have an expiration date through February 2010.



SFHI, 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, the Company and any subsidiaries of the Company or Subsidiaries 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 September 30, 2003, no options had been granted under any Subsidiary Plans.



Accounting for Stock-Based Compensation



Statement of Financial Accounting Standard No. 123, Accounting for
Stock-Based Compensation (SFAS 123), encourages an entity to measure compensation by applying the fair value method of accounting for employee stock-based compensation arrangements, it permits an entity to continue to account
for employee stock-based compensation arrangements under the provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25).



The Company has elected to continue to account for stock-based compensation
in accordance with APB 25. Under APB 25, generally only stock options that have intrinsic value at the date of grant are considered compensatory. Intrinsic value represents the excess, if any, of the market price of the stock at the grant date over
the exercise price of the option. Under SFAS 123, all stock option grants are considered compensatory. Compensation cost is measured at the date of grant based on the estimated fair value of the options determined using an option pricing model. The
model takes into account the stock price at the grant date, the exercise price, the expected life of the option, the volatility of the stock, expected dividends on the stock and the risk-free interest rate over the expected life of the option.



SFAS 123 requires the Company to disclose pro forma net income
and net income per share assuming compensation cost for employee stock options had been determined using the fair value-based method. The weighted average assumptions used in estimating the fair value of each option grant on the date of grant using
the Black-Scholes option pricing model, and the estimated weighted average fair value of the options granted should also be disclosed. No such stock options were granted in 2001, and therefore, no information has been included for that year.



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The model assumes no expected future dividend payments on Archon Corporations Common Stock for
the options granted in 2002 (dollars in thousands, except per share data).



|                                 |  |      |  |       |   |  |     
|-------------------------------- |  | ---- |  | ----- | - |  | ----
|                                 |  | 2003 |  | 2002  |   |  | 2001
|Weighted average assumptions:    |  |      |  |       |   |  |     
|Expected stock price volatility  |  | N/A  |  | 100.0 | % |  | N/A 
|Risk-free interest rate          |  | N/A  |  | 4.35  | % |  | N/A 
|Expected option lives (in years) |  | N/A  |  | 5.00  |   |  | N/A 
|Estimated fair value of options  |  | N/A  |  | 2.64  |   |  | N/A 



18. Federal Income Taxes



The Company accounts for income taxes under SFAS 109. In
accordance with SFAS 109, deferred income taxes reflect the net effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b)
operating loss and tax credit carryforwards. The expense (benefit) for income taxes attributable to pre-tax income (loss) consisted of:



|                        |  |                        |        |   |      |   |        |      |  |   |       
|----------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------
|                        |  | 2003                   |        |   | 2002 |   |        | 2001
|                        |  | (dollars in thousands)
|Current                 |  | $                      | 0      |   |      | $ | 0      |      |  | $ | 0     
|Deferred                |  |                        | (3,948 | ) |      |   | (1,133 | )    |  |   | 46,284
|                        |  |                        |        |   |      |   |        |      |  |   |       
|Total expense (benefit) |  | $                      | (3,948 | ) |      | $ | (1,133 | )    |  | $ | 46,284
|                        |  |                        |        |   |      |   |        |      |  |   |       



The expense (benefit)
for income taxes attributable to pre-tax income (loss) differs from the amount computed at the federal income tax statutory rate as a result of the following:



|                         |  |                        |        |   |      |   |        |      |  |   |         |  
|------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------- | -
|                         |  | 2003                   |        |   | 2002 |   |        | 2001 | 
|                         |  | (dollars in thousands) |       
|Amount at statutory rate |  | $                      | (3,990 | ) |      | $ | (3,094 | )    |  | $ | 47,413  |  
|Goodwill                 |  |                        | 0      |   |      |   | 0      |      |  |   | (17,843 | )
|Goodwill reserve         |  |                        | 0      |   |      |   | 1,925  |      |  |   | 16,691  |  
|Valuation allowance      |  |                        | 0      |   |      |   | 0      |      |  |   | 0       |  
|Other                    |  |                        | 42     |   |      |   | 36     |      |  |   | 23      |  
|                         |  |                        |        |   |      |   |        |      |  |   |         |  
|Total                    |  | $                      | (3,948 | ) |      | $ | (1,133 | )    |  | $ | 46,284  |  
|                         |  |                        |        |   |      |   |        |      |  |   |         |  



The Company recorded a
valuation allowance in fiscal 1999 to reduce the carrying value of the net deferred tax assets due to the uncertainty surrounding the utilization of the net operating losses. The valuation allowance was reversed in fiscal 2000 due to the sale of
substantially all of the assets of SFHI in October 2000 resulting in a federal income tax benefit for the 2000 fiscal year of $11.0 million:



The components of the net deferred tax liability consisted of the following:



|                                                     |  |                        |         |   |      |   |         |  
|---------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2003                   |         |   | 2002 |  
|                                                     |  | (dollars in thousands) |        
|Deferred tax liabilities:                            |  |                        |         |   |      |   |         |  
|Prepaid expenses                                     |  | $                      | 445     |   |      | $ | 361     |  
|Fixed asset cost, depreciation and amortization, net |  |                        | 31,949  |   |      |   | 33,152  |  
|Other                                                |  |                        | 3,356   |   |      |   | 3,057   |  
|                                                     |  |                        |         |   |      |   |         |  
|Gross deferred tax liabilities                       |  |                        | 35,750  |   |      |   | 36,570  |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax assets:                                 |  |                        |         |   |      |   |         |  
|Net operating loss carryforward                      |  |                        | 22,449  |   |      |   | 18,541  |  
|Reserves for accounts and contracts receivable       |  |                        | 115     |   |      |   | 240     |  
|Other                                                |  |                        | 537     |   |      |   | 663     |  
|Deferred payroll                                     |  |                        | 170     |   |      |   | 199     |  
|Tax credits                                          |  |                        | 952     |   |      |   | 1,452   |  
|                                                     |  |                        |         |   |      |   |         |  
|Gross deferred tax assets                            |  |                        | 24,223  |   |      |   | 21,095  |  
|                                                     |  |                        |         |   |      |   |         |  
|Net deferred tax (liability) before goodwill reserve |  |                        | (11,527 | ) |      |   | (15,475 | )
|Goodwill reserve                                     |  |                        | (18,616 | ) |      |   | (18,616 | )
|                                                     |  |                        |         |   |      |   |         |  
|Net deferred tax (liability)                         |  | $                      | (30,143 | ) |      | $ | (34,091 | )
|                                                     |  |                        |         |   |      |   |         |  



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At September 30, 2003, the Company had a net operating loss carryforward for regular income tax
purposes of approximately $64.0 million, which will fully expire by the year 2024.



19. Benefit Plans



The Company has a savings
plan (the Plan) qualified under Section 401(k) of the Code. The Plan covers substantially all of the Companys employees. The Companys matching contributions paid in 2003, 2002 and 2001 were $54,000, $59,000 and $67,000,
respectively.



20. Related Parties



The Company has entered into a Patent Rights and Royalty Agreement with
David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect to the technology incorporated into gaming
devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect to the technology, which will be
automatically renewed for additional two-year terms unless the Company terminates the agreement within thirty days prior to the renewal or the agreement is otherwise earlier terminated in accordance with its terms. The Company also has an
understanding with David Lowden that it will pay for the costs of commercial development of the technology. As of September 30, 2003, the Company had expended $245,000 for commercial development of the technology.



In fiscal 2001, the Company purchased for $100,000 Class B member interests
in Dukes-Sparks (Dukes), a Nevada limited liability company that developed Dukes Casino, a restricted slot operation, restaurant and entertainment facility in Sparks, Nevada. Christopher Lowden, son of Paul W. Lowden,
is a limited partner in the company that is the managing member of Dukes.



On October 8, 2002 the Company entered into a Subordinated Loan Agreement (the Dukes Loan Agreement) with Dukes. Under the Dukes Loan Agreement, Dukes was entitled to borrow up to
$1.1 million for construction, equipment, furnishings and other costs related to the completion and opening of Dukes Casino. The loan, which is secured on a subordinated basis by the real property on which Dukes is located (the
Dukes Real Property) and on a senior basis by non-gaming equipment and certain other personal property, matures on October 8, 2009 and bears interest at an annual rate of 15%, plus additional interest at an annual rate of 10% until
such time as the option described in the following sentence is exercised. In connection with the Dukes Loan Agreement, the Company received an option to acquire 70% of the equity in the entity that owns Dukes. Dukes borrowed the
entire $1.1 million available under the Dukes Loan Agreement by December 31, 2002. Furthermore, the Company has advanced Dukes an additional approximately $333,000 on an unsecured basis, which advances are evidenced by a promissory note
payable on demand.



The Companys advances to Dukes under
the Dukes Loan Agreement are subordinate to a senior loan in the amount of $4.0 million, which is secured on a senior basis by the Dukes Real Property (the Dukes Senior Loan). Dukes is in default under both the
Dukes Senior Loan and the Companys loans to Dukes pursuant to the Dukes Loan Agreement and the promissory note. Both the senior lender and the Company recorded notices of default and elections to sell the Dukes Real
Property and provided notice of such recordation to Dukes and other parties in interest as required by Nevada law. On August 13, 2003, the trustee under the deed of trust with respect to the Dukes Senior Loan held a foreclosure sale of
the property. In the foreclosure sale, the senior lender acquired the Dukes Real Property in partial satisfaction of the Dukes Senior Loan, as a result of which the Companys security interest in the Dukes Real Property was
extinguished. Pursuant to the terms of the Companys loan agreement with Dukes, Dukes is prohibited from making payments on the Companys loans until the Dukes Senior Loan is paid in full or the senior lender waives the
requirement. As a result, the Company recorded a reserve of $1.1 million against investment and receivable from Dukes.



The Company and the senior lender had agreed in principle that the senior lender would sell the Dukes Real Property to the Company for $3.7 million
payable no later than June 1, 2007, subject to an increase to $3.8 million if not paid in full by June 1, 2005. The purchase price would have been evidenced by a promissory note which would have bore interest during the first 36 months of the loan
at the rate of 1.75% plus the senior lenders actual cost of funds (currently the prime rate less 25 basis points) increasing to a rate of 2.5% plus the senior lenders cost of funds for months 37 through 48. Interest was to accrue
monthly, commencing as of June 1, 2003, and be payable on a monthly basis. All principal and accrued but unpaid interest was to be payable on or before June 1, 2007. The promissory note was to be secured by a deed of trust on the Dukes Real
Property. Consummation of the purchase was subject to the execution of a mutually acceptable purchase and sale agreement, promissory note, security agreement and related closing documents. Additionally, the purchase was subject to approval of the
Board of Directors of the Company. Until such time as a final agreement was reached with the senior lender with respect to the purchase of the Dukes Real Property and the Company acquired the Dukes Real Property, the Company had expected
to continue to operate Dukes on the same terms as provided in the Dukes-Sparks Lease described below. If the Company and the senior lender were unable to reach agreement and the Company did not acquire the Dukes Real Property, the
Dukes-Sparks Lease would be voided. As a result of the foreclosure of the Dukes Real Property and



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continuing default under the Dukes Senior Loan, and the Companys loans to Dukes, the Company established a reserve in the amount of $1.0
million with respect to its loans to Dukes. In addition, the Company wrote-off its $100,000 initial investment in Dukes.



On October 4, 2002, a subsidiary of the Company entered into a lease (the Dukes-Sparks Lease) with Dukes, with respect to the
Dukes Casino. The Dukes-Sparks Lease provide that it would commence on the first day of the month (the Commencement Date) following the month in which the Companys subsidiary obtained all required gaming regulatory
approvals to conduct gaming activities at Dukes, provided that the Commencement Date will not occur until all the remodeling work being performed by Dukes at the facility had been substantially completed and the City of Sparks has issued
a certificate of occupancy for the facility, and that it will expire on the date which is the earlier of three years after the Commencement Date or the date which is the first day of the month which immediately follows the month in which Dukes
receives the necessary regulatory approvals to operate the casino. The Dukes-Sparks Lease provides for monthly base rent in the amount of $81,216. The required gaming regulatory approvals were obtained by the Companys subsidiary on
January 24, 2003, and the Company began operating Dukes on February 7, 2003. However, the remodeling of the facility was not substantially complete, so the Company had not paid any rent to Dukes. Until such time as a final agreement is
reached with the senior lender with respect to the Companys purchase of the Dukes Real Property and the Company acquired the Dukes Real Property, the senior lender had agreed that the Company would continue to operate Dukes
on the same terms as provided in the Dukes-Sparks Lease. Because the Company and the senior lender did not reached an agreement and the Company did not acquired the Dukes Real Property, the Dukes-Sparks Lease was terminated on
September 2, 2003. However, the Company continued to operate Dukes Casino on a month to month basis, with no rent payable. The Company owns and had installed approximately 190 slot and video poker machines in Dukes Casino valued at
approximately $1.7 million. On December 31, 2003, the Company ceased operations at Dukes. All of the furniture, fixtures, gaming and non-gaming equipment and inventories have been transferred to the Pioneer.



See Note 9 for information regarding transactions between the Company and J
& J Mortgage.



21. Contingencies



Litigation:



The Company is subject to various lawsuits relating to routine matters incidental to its business. The Company does not
believe that the outcome of such litigation, in the aggregate, will have a material adverse effect on the Company.



Poulos v. Caesars World, Inc., et al. and Ahern v. Caesars World, Inc., et al.



The Company is a defendant in a class action lawsuit originally filed in the
United States District Court of Florida, Orlando Division, entitled Poulos v. Caesars World, Inc., et al., Ahern v. Caesars World, Inc., et al. and Schrier v. Caesars World, Inc., et al., along with a fourth action
against cruise ship gaming operators and which have been consolidated in a single action now pending in the United States District Court, District of Nevada (the Court). Also named as defendants in these actions are many of the largest
gaming companies in the United States and certain gaming equipment manufacturers. Each complaint is identical in its material allegations. The actions allege that the defendants have engaged in fraudulent and misleading conduct by inducing people to
play video poker machines and electronic slot machines based on false beliefs concerning how the machines operate and the extent to which there is actually an opportunity to win on a given play. The complaints allege that the defendants acts
constitute violations of the Racketeer Influenced and Corrupt Organizations Act and also give rise to claims for common law fraud and unjust enrichment, and seek compensatory, special consequential, incidental and punitive damages of several billion
dollars.



In response to the complaints, all of the defendants,
including the Company, filed motions attacking the pleadings for failure to state a claim, seeking to dismiss the complaints for lack of personal jurisdiction and venue. As a result of those motions, the Court has required the Plaintiffs in the four
consolidated cases to file a single consolidated amended complaint. Subsequent to Plaintiffs filing of their consolidated amended complaint, the defendants refiled numerous motions attacking the amended complaint upon many of the bases as the
prior motions. The Court heard the arguments on those motions and ultimately denied the motions. Plaintiffs then filed their motion to certify a class. Defendants have vigorously opposed the motion. On June 26, 2002, the court denied the motion to
certify the class. Plaintiffs then sought discretionary review by the Ninth Circuit of the order denying class certification. On August 15, 2002, the Ninth Circuit granted review. The briefing is complete, an oral hearing took place on January 15,
2004 and the defendants are waiting for a court ruling.



Local Joint
Executive Board et al.



The Company was the
defendant in an action titled Local Joint Executive Board, et al. v. Santa Fe Gaming Corporation et al., No. CV-S-01-0233-RLH. The plaintiffs instituted the action on or about February 28, 2001 in the United States District Court for the



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District of Nevada, alleging that the Company violated the Worker Adjustment Retraining and Notification Act, (WARN Act), by improperly providing
notification of the closing of the Santa Fe. The plaintiffs sought damages in the amount provided for by the statute. The plaintiffs filed a motion for class certification, and the Company stipulated to the certification. On October 12, 2001, Archon
filed a motion for summary judgment to dismiss the complaint in its entirety. Plaintiffs filed a memorandum in opposition to defendants motion for summary judgment, as well as a counter-motion for summary judgment alleging the WARN Act notices
sent by Archon were invalid. On February 1, 2002 a hearing was held on the motions and the court denied both the plaintiffs and Archons motions for summary judgment. However, the court subsequently narrowed the scope of the case, and set
the case for trial to commence October 21, 2002. On October 1, 2002, the parties participated in a settlement conference with the magistrate judge assigned to the case. A settlement was reached whereby the Company agreed to pay the plaintiffs the
total lump sum of $202,000 in exchange for a dismissal of the lawsuit with prejudice and a full release of all claims relating to the closure of the Santa Fe. The class action settlement was approved by the court on October 24, 2002. The Company
accrued the settlement payment in September 2002 and made the payment in December 2002.



In addition, the Company is subject to various lawsuits relating to routine matters incidental to its business. The Company does not believe that the outcome of such litigation, in the aggregate, will have a material
effect on the Company.



22. Supplemental Statement of Cash Flows Information



Supplemental statement of cash flows information for the
years ended September 30, 2003, 2002 and 2001 consisted of:



|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---- | - | ------ |  | - | ------ | -
|                                                                                      |  | 2003                   |        | 2002 |   | 2001   | 
|                                                                                      |  | (dollars in thousands) |       
|Operating activities:                                                                 |  |                        |        |      |   |        |  |   |        |  
|Cash paid during the year for interest                                                |  | $                      | 14,920 |      | $ | 15,388 |  | $ | 9,999  |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Cash paid during the year for income taxes                                            |  | $                      | 0      |      | $ | 0      |  | $ | 698    |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Investing and financing activities:                                                   |  |                        |        |      |   |        |  |   |        |  
|Non-recourse debt assumed with the acquisition of investment properties               |  | $                      | 0      |      | $ | 0      |  | $ | 77,255 |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Long-term debt incurred in connection with the acquisition of machinery and equipment |  | $                      | 1,584  |      | $ | 104    |  | $ | 0      |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Preferred stock dividends at liquidation value: Accrued                               |  | $                      | 1,526  |      | $ | 1,555  |  | $ | 1,950  |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Negative amortization of obligation under lease                                       |  | $                      | 1,272  |      | $ | 1,117  |  | $ | 748    |  
|                                                                                      |  |                        |        |      |   |        |  |   |        |  
|Unrealized gain (loss) on marketable securities                                       |  | $                      | 940    |      | $ | 312    |  | $ | (407   | )
|                                                                                      |  |                        |        |      |   |        |  |   |        |  



23. 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, which were acquired in
March 2001. Other and Eliminations below includes financial information for the Companys corporate operations and Archon Sparks Management Company, adjusted to reflect eliminations upon consolidation.



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Segment information for the years ended September 30, 2003 2002 and 2001 consisted of:



|                              |  |                        |         |   |      |   |         |  |   |        
|----------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- |  | - | -------
|                              |  | 2003                   |         |   | 2002 |   | 2001   
|                              |  | (dollars in thousands)
|Pioneer Hotel                 |  |                        |         |   |      |   |         |  |   |        
|Operating revenues            |  | $                      | 31,919  |   |      | $ | 35,468  |  | $ | 40,020 
|                              |  |                        |         |   |      |   |         |  |   |        
|Operating income (loss)       |  | $                      | (1,017  | ) |      | $ | 251     |  | $ | 1,483  
|Depreciation and amortization |  |                        | 2,481   |   |      |   | 2,001   |  |   | 2,075  
|Interest income               |  |                        | 23      |   |      |   | 17      |  |   | 95     
|                              |  |                        |         |   |      |   |         |  |   |        
|EBITDA(1)                     |  | $                      | 1,487   |   |      | $ | 2,269   |  | $ | 3,653  
|                              |  |                        |         |   |      |   |         |  |   |        
|Interest expense              |  | $                      | 4,897   |   |      | $ | 4,760   |  | $ | 4,370  
|                              |  |                        |         |   |      |   |         |  |   |        
|Capital expenditures          |  | $                      | 1,416   |   |      | $ | 4,143   |  | $ | 752    
|                              |  |                        |         |   |      |   |         |  |   |        
|Identifiable assets(2)        |  | $                      | 37,072  |   |      | $ | 37,099  |  | $ | 36,070 
|                              |  |                        |         |   |      |   |         |  |   |        
|Investment Properties (3)     |  |                        |         |   |      |   |         |  |   |        
|Operating revenues            |  | $                      | 12,402  |   |      | $ | 12,402  |  | $ | 7,204  
|                              |  |                        |         |   |      |   |         |  |   |        
|Operating income              |  | $                      | 8,998   |   |      | $ | 8,709   |  | $ | 5,508  
|Depreciation and amortization |  |                        | 3,404   |   |      |   | 3,693   |  |   | 1,696  
|Interest income               |  |                        | 0       |   |      |   | 0       |  |   | 0      
|                              |  |                        |         |   |      |   |         |  |   |        
|EBITDA(1)                     |  | $                      | 12,402  |   |      | $ | 12,402  |  | $ | 7,204  
|                              |  |                        |         |   |      |   |         |  |   |        
|Interest expense              |  | $                      | 11,322  |   |      | $ | 11,772  |  | $ | 7,297  
|                              |  |                        |         |   |      |   |         |  |   |        
|Capital expenditures          |  | $                      | 0       |   |      | $ | 0       |  | $ | 145,019
|                              |  |                        |         |   |      |   |         |  |   |        
|Identifiable assets(2)        |  | $                      | 144,301 |   |      | $ | 147,077 |  | $ | 150,019
|                              |  |                        |         |   |      |   |         |  |   |        



|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|----------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                              |  | 2003                   |         |   | 2002 |   |         | 2001 | 
|                              |  | (dollars in thousands) |        
|Other and Eliminations        |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues            |  | $                      | 1,840   |   |      | $ | 895     |      |  | $ | 779     |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating loss                |  | $                      | (4,685  | ) |      | $ | (2,676  | )    |  | $ | (3,019  | )
|Depreciation and amortization |  |                        | 575     |   |      |   | 341     |      |  |   | 361     |  
|Interest income               |  |                        | 1,466   |   |      |   | 1,272   |      |  |   | 1,927   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | (2,644  | ) |      | $ | (1,063  | )    |  | $ | (731    | )
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | (36     | ) |      | $ | (119    | )    |  | $ | (527    | )
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures          |  | $                      | 2,191   |   |      | $ | 313     |      |  | $ | 421     |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 56,617  |   |      | $ | 57,910  |      |  | $ | 63,396  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Total                         |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues            |  | $                      | 46,161  |   |      | $ | 48,765  |      |  | $ | 48,003  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income              |  | $                      | 3,296   |   |      | $ | 6,284   |      |  | $ | 3,972   |  
|Depreciation and amortization |  |                        | 6,460   |   |      |   | 6,035   |      |  |   | 4,132   |  
|Interest income               |  |                        | 1,489   |   |      |   | 1,289   |      |  |   | 2,022   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | 11,245  |   |      | $ | 13,608  |      |  | $ | 10,126  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | 16,183  |   |      | $ | 16,413  |      |  | $ | 11,140  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures          |  | $                      | 3,607   |   |      | $ | 4,456   |      |  | $ | 146,192 |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 237,990 |   |      | $ | 242,086 |      |  | $ | 249,485 |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  



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



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



|(3) | During fiscal 2001, the Company acquired investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland. The payments received under lease agreements
with respect to both properties are applied to debt service payments on non-recourse indebtedness secured by the respective properties.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

See Note Regarding Status of Delivery of Auditors Report



27. Subsequent Events



Lone Mountain Property. The Company owns, through SFHI, an approximately 20-acre parcel of real property
located next to the Santa Fe at the intersection of Rainbow and Lone Mountain. The Company and SFHI had granted to the buyer of the SFHI assets an option to purchase the property for $5.0 million through October 2003. The buyer declined to exercise
the option to purchase the property. As a result, the Company entered into an agreement on October 24, 2003 to sell the property for $5.7 million contingent on City zoning approvals.



PDS Gaming Note. On December 19, 2003, the Company received a $2.5 million payment on the note receivable from
PDS Gaming. The Company anticipates receiving the remaining balance of the note within sixty days after December 29, 2003.



28. Quarterly Results of Operations (Unaudited)



|                           |  |                                          |        |   |      |   |        |  
|-------------------------- |  | ---------------------------------------- | ------ | - | ---- | - | ------ | -
|                           |  | 2003                                     |        |   | 2002 |  
|                           |  | (dollars in thousands, except per share) |       
|Revenues:                  |  |                                          |        |   |      |   |        |  
|First Quarter              |  | $                                        | 11,300 |   |      | $ | 12,406 |  
|Second Quarter             |  |                                          | 13,075 |   |      |   | 14,027 |  
|Third Quarter              |  |                                          | 11,482 |   |      |   | 11,383 |  
|Fourth Quarter             |  |                                          | 10,304 |   |      |   | 10,949 |  
|                           |  |                                          |        |   |      |   |        |  
|                           |  | $                                        | 46,161 |   |      | $ | 48,765 |  
|                           |  |                                          |        |   |      |   |        |  
|Operating income (loss):   |  |                                          |        |   |      |   |        |  
|First Quarter              |  | $                                        | 1,211  |   |      | $ | 1,586  |  
|Second Quarter             |  |                                          | 1,976  |   |      |   | 2,717  |  
|Third Quarter              |  |                                          | (173   | ) |      |   | 1,072  |  
|Fourth Quarter             |  |                                          | 282    |   |      |   | 909    |  
|                           |  |                                          |        |   |      |   |        |  
|                           |  | $                                        | 3,296  |   |      | $ | 6,284  |  
|                           |  |                                          |        |   |      |   |        |  
|Net loss:                  |  |                                          |        |   |      |   |        |  
|First Quarter              |  | $                                        | (1,482 | ) |      | $ | (1,369 | )
|Second Quarter             |  |                                          | (1,295 | ) |      |   | (827   | )
|Third Quarter              |  |                                          | (2,410 | ) |      |   | (3,683 | )
|Fourth Quarter             |  |                                          | (2,264 | ) |      |   | (1,828 | )
|                           |  |                                          |        |   |      |   |        |  
|                           |  | $                                        | (7,451 | ) |      | $ | (7,707 | )
|                           |  |                                          |        |   |      |   |        |  
|Net loss per common share: |  |                                          |        |   |      |   |        |  
|First Quarter              |  | $                                        | (0.30  | ) |      | $ | (0.28  | )
|Second Quarter             |  |                                          | (0.27  | ) |      |   | (0.20  | )
|Third Quarter              |  |                                          | (0.45  | ) |      |   | (0.66  | )
|Fourth Quarter             |  |                                          | (0.42  | ) |      |   | (0.36  | )
|                           |  |                                          |        |   |      |   |        |  
|                           |  | $                                        | (1.44  | ) |      | $ | (1.50  | )
|                           |  |                                          |        |   |      |   |        |  





43



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##### Table of Contents

|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------



Not applicable.



PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------



Directors and Executive Officers



The following is a list of the current executive officers and directors of the Company:



|                        |  |                                                                                  
|----------------------- |  | ---------------------------------------------------------------------------------
|Name                    |  | Position with the Company                                                        
|Paul W. Lowden          |  | Chairman of the Board, President and Chief Executive Officer                     
|Charles W. Sandefur     |  | Director, Senior Vice President and Chief Financial Officer, Secretary, Treasurer
|Suzanne Lowden          |  | Director, Executive Vice President, Assistant Secretary                          
|John W. Delaney(1)(2)   |  | Director                                                                         
|William J. Raggio(1)(2) |  | Director                                                                         
|Howard E. Foster(1)     |  | Preferred Stockholder Special Director                                           
|Jay Parthemore          |  | Preferred Stockholder Special Director                                           

---



|(1) | Member of the Audit Committee of the Company.
|--- | ---------------------------------------------



|(2) | Member of the Compensation Committee of the Company.
|--- | ----------------------------------------------------



The age, present position with the Company, and principal occupation during the past five years of each director and executive officer named above is set
forth below:



Paul W. Lowden



Paul Lowden is 60 years old and has served as President, Chairman of the
Board and Chief Executive Officer of the Company since its formation in September 1993. Mr. Lowden held the same positions with the Companys predecessor, Sahara Resorts, from 1982 through September 1993. Mr. Lowden is married to Suzanne
Lowden. Mr. Lowdens term as a director of the Company expires at the annual meeting of stockholders in 2005.



Charles W. Sandefur



Charles W. Sandefur is 32 years old and joined the Company in May 2002 as Senior Vice President, Chief Financial Officer, Secretary, and Treasurer of the
Company. Mr. Sandefur was appointed to the Board of Directors in December 2002. Prior to joining the Company, Mr. Sandefur was the chief financial officer of PostNet International Franchise Corporation, where he was employed from September 1999
through September 2001. Mr. Sandefur was the chief financial officer of Binions Horseshoe casino from September 1998 to September 1999 and, financial controller and director of finance with two other casinos in Las Vegas from 1995 through
1998. In addition, he worked for a Big Four accounting firm from 1993 to 1995 and obtained his CPA license in 1995. Mr. Sandefurs term as a director of the Company expires at the annual meeting of stockholders in 2004.



44



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##### Table of Contents

Suzanne Lowden



Suzanne Lowden is 51 years old and has served as a director and Executive Vice President of the Company since its formation, and had served as a director
of Sahara Resorts since 1987. Mrs. Lowden was elected Vice President of Sahara Resorts in July 1992. She is also a founding board member of Commercial Bank of Nevada. Mrs. Lowden served as a Nevada State Senator from November 1992 through 1996. She
worked for the CBS affiliate in Las Vegas from 1977 to 1987 as an anchorwoman, reporter, writer and producer of television news. Mrs. Lowden is married to Paul W. Lowden. Mrs. Lowdens term as a director of the Company expires at the annual
meeting of stockholders in 2006.



John W. Delaney



John W. Delaney is 55 years old and has served as a director of the Company
since January 1997. Mr. Delaney is currently president and chief executive officer of Cityfed Mortgage Co., a mortgage banking firm, where he has been employed since 1978. Mr. Delaneys term as a director of the Company expires at the annual
meeting of stockholders in 2006.



William J. Raggio



William J. Raggio is 77 years old and served as a director, Vice President,
Secretary and Corporate Counsel of the Company since its formation in September 1993 until May 1999. Mr. Raggio held the same position with Sahara Resorts from 1982 until September 1993. Mr. Raggio resigned his position on the boards of directors of
the Company and certain of its subsidiaries in May 1999 due to a potential conflict caused by his position on the board of another gaming company, a position that Mr. Raggio no longer holds. Mr. Raggio was reappointed to the board of directors of
the Company in December 2000. Mr. Raggio is a shareholder and member of the law firm Jones Vargas of Reno, Nevada. Since 1972 he has been a Nevada State Senator. Mr. Raggio is also a director of Sierra Health Services, Inc., a Nevada corporation.
Mr. Raggios term as a director of the Company expires at the annual meeting of stockholders in 2005.



Howard E. Foster



Howard E. Foster is 59 years old and has served as a special director of the Company elected by holders of the Companys Exchangeable, Redeemable Preferred Stock since May 2000. Since 1980, Mr. Foster has been the President of Howard
Foster and Company, an investment advisor firm specializing in small capitalization stocks, turnaround situations and financially distressed companies. Prior to that time, Mr. Foster served as chief financial officer of two publicly-held companies,
Associated Products and Bio-Rad Laboratories, and previously worked in the audit, tax and management consulting divisions of Arthur Andersen & Co. Mr. Foster has served on the boards of directors of Bio-Rad Laboratories, Barringer Technologies
and Nevada National Bancorporation, where he served as a director elected by preferred stockholders of Nevada National Bancorporation. Mr. Fosters term as a special director of the Company expires at the annual meeting of stockholders in 2006,
or, if earlier, the date on which all dividend arrearages on the Exchangeable Redeemable Preferred Stock have been paid.



Jay Parthemore



Jay Parthemore is 61 years old and has served as a special director of the Companys Exchangeable, Redeemable Preferred Stock since February 2003,
when he was elected by the Board of Directors to fill a vacancy. Mr. Parthemore is currently director of Channel Management for AT&T Corp., where he is responsible for AT&T Business Services Channel Management Revenue. Over a thirty-three
year career, Mr. Parthemore has held worldwide marketing executive positions with AT&T and IBM. Mr. Parthemores term as a special director of the Company expires at the annual meeting of stockholders in 2004, or, if earlier, the date on
which all dividend arrearages on the Exchangeable Redeemable Preferred Stock have been paid.



45



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##### Table of Contents

Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Companys executive officers and directors, and persons who own more than 10% of a registered class of the Companys equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission.
People who are subject to the reporting obligations of Section 16(a) are required by SEC regulations to furnish the Company with copies of all forms they file pursuant to Section 16(a).



Based solely on our review of the copies of the reports we received and written representations from the Companys
executive officers, directors and holders of 10% of the common stock, that no other reports were required for them, the Company believes that, during fiscal year 2003, the Companys executive officers, directors and 10% common stockholders
complied with all Section 16(a) filing requirements applicable to them.



|Item 11. | Executive Compensation
|-------- | ----------------------



Set forth below is information concerning compensation for services in all capacities to the Company and its affiliates for the fiscal years ended September 30, 2003, 2002 and 2001 of Paul W. Lowden, the Chief Executive Officer and Charles
W. Sandefur, the Chief Financial Officer. There were no other executive officers serving as such at the end of the Companys fiscal year ended September 30, 2003 that earned a total annual salary and bonus in excess of $100,000 during the
fiscal year ended September 30, 2003.



Summary Compensation
Table



|                            |  |                     |  |            |         |           |   |         |                                 |  |                           |   |  |   |        |    
|--------------------------- |  | ------------------- |  | ---------- | ------- | --------- | - | ------- | ------------------------------- |  | ------------------------- | - |  | - | ------ | ---
|                            |  | Annual Compensation |  |            |        
|Name and Principal Position |  | FiscalYear          |  | Salary ($) |         | Bonus ($) |   |         | Other AnnualCompensation ($)(1) |  | All OtherCompensation ($) |  
|Paul W. Lowden              |  | 2003                |  | $          | 550,000 |           | $ | 200,000 | (2)                             |  | $                         | 0 |  | $ | 4,511  | (3)
|President, Chairman         |  | 2002                |  | $          | 550,000 |           | $ | 243,750 | (2)                             |  | $                         | 0 |  | $ | 31,772 | (3)
|of the Board and CEO        |  | 2001                |  | $          | 550,000 |           | $ | 243,750 | (2)                             |  | $                         | 0 |  | $ | 42,627 | (3)
|                            |  |                     |  |            |        
|Charles W. Sandefur(5)      |  | 2003                |  | $          | 100,000 |           | $ | 1,083   |                                 |  | $                         | 0 |  | $ | 317    | (4)
|Senior Vice President,      |  | 2002                |  | $          | 48,077  |           | $ | 0       |                                 |  | $                         | 0 |  | $ | 0      |    
|CFO, Secretary and          |  | 2001                |  | $          | 0       |           | $ | 0       |                                 |  | $                         | 0 |  | $ | 0      |    
|Treasurer                   |  |                     |  |            |         |           |   |         |                                 |  |                           |   |  |   |        |    

---

|(1) | The Company provides perquisites and other personal benefits, including automobiles to its senior executives and provides such persons complimentary privileges at
the restaurants and bars of the Companys hotel-casino. It is impractical to ascertain the extent to which such privileges are utilized for personal rather than business purposes. However, after reasonable inquiry, the Company believes the
value of all such perquisites and other personal benefits is less than the lesser of $50,000 or 10% of the total salary and bonus reported for the persons named above.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | See Compensation Arrangements with Mr. Lowden.
|--- | ------------------------------------------------



|(3) | All Other Compensation for Paul W. Lowden in fiscal 2003 includes $1,511 of group term life insurance paid by the Company for the benefit of Mr. Lowden,
and $3,000 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Lowden. All Other Compensation for Paul W. Lowden in fiscal 2002 includes $29,022 of life insurance premiums paid by
the Company for the benefit of Mr. Lowden, and $2,750 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Lowden. All Other Compensation for Paul W. Lowden in fiscal 2001 includes
$40,002 of life insurance premiums paid by the Company for the benefit of Mr. Lowden, and $2,625 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Lowden.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | All Other Compensation for Charles W. Sandefur in fiscal 2003 includes $48 of group term life insurance paid by the Company for the benefit of Mr.
Sandefur, and $269 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Sandefur.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(5) | Mr. Sandefur began his employment in May 2002, and therefore, the amounts reflected above for 2002 represent only the period from the commencement of his employment
through the end of that year.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compensation Arrangements with
Mr. Lowden



The Compensation Committee approved Mr.
Lowdens compensation package for fiscal year 2003, which provided for an annual base salary of $550,000. Additionally, in recognition of Mr. Lowdens efforts, the Compensation Committee approved a bonus in the amount of $200,000 payable
in bi-weekly installments throughout fiscal year 2003.



Compensation of
Directors



Directors who are not employees of the Company
or its affiliates receive $24,000 annually and $1,000 per board meeting attended, $800 per committee meeting attended as a member and $900 per committee meeting attended as Chairman.



Prior to March 31, 2002, upon first being elected to the board of directors, each non-employee director received options to
purchase 12,500 shares of common stock at an exercise price equal to the fair market value of the common stock on the date of grant. Such options fully vested at the date of grant. The non-employee director stock option plan pursuant to which such
options were granted was terminated in March 2002.



The Company
requires all members of the board of directors to comply with all Company policies prior to attending a newly elected directors first meeting of the board of directors. These requirements include filing a gaming application with the Nevada
Gaming Authorities and executing a confidentiality agreement, as well as compliance and disclosure statements. Until such time as an elected individual has complied with these requirements, he or she is not entitled to the benefits of the
directorship position, including any director fees or stock option awards that would otherwise be paid or granted.



Compensation Plans



Stock Option Plan



The Company had a Key
Employee Stock Option Plan (the Stock Option Plan) which provided for the grant of options up to an aggregate of 1,239,070 shares of its common stock to key employees as determined by the Compensation Committee. The Stock Option Plan
provided for both incentive stock options and non-qualified stock options. This Stock Option Plan was terminated as of September 30, 2003. As of September 30, 2003, there were 508,860 options outstanding under the Stock Option Plan. No stock options
were awarded to, and no stock options were exercised by, the executive officers set forth in Item 11 of this Annual Report in the fiscal year ended September 30, 2003.



1998 Subsidiary Stock Option Plans



The Company and certain of its subsidiaries, SFHI, Inc., Sahara Las Vegas Corp., and Pioneer Hotel Inc. (each a Subsidiary and collectively,
the Subsidiaries), have adopted various 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, the Company and any
subsidiaries of the Company or Subsidiaries 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. Certain of
the agreements under which the Companys long-term debt is issued provide that if the Company ceases to own, directly or indirectly, 100% of the outstanding capital stock of specified Subsidiaries, an event of default will occur or an offer to
repurchase the debt must be made. As a result, the Subsidiary Plans provide that options granted under the Subsidiary Plans may not be exercised if the exercise would result in a default, or require an offer to repurchase the outstanding debt, under
any agreement with respect to long-term debt of the Company or any of its Subsidiaries. As of September 30, 2003, no options had been granted under any Subsidiary Plans.



47



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##### Table of Contents

Savings Plan



The Company has adopted a savings plan qualified under Section 401(k) of the Code (the Savings Plan). The Savings Plan covers substantially
all employees, including the Companys executive officers. Employee contributions to the Savings Plan are discretionary. The Savings Plan allows eligible employees to contribute, on a pre-tax basis, up to 6% of their gross salary to the plan;
the Company matches 25% of such employee contributions made. Employees may also contribute, on a pre-tax basis, up to an additional 9% of their gross salary, and, on a post-tax basis, up to an additional 10% of their salary. Such contributions are
not matched by the Company. The matching expense in fiscal 2003 was $54,000 of which $3,000, $269 and $525 were contributed by the Company to the account of Mr. Lowden, Mr. Sandefur and all other executive officers as a group, respectively, as
matches for employee contributions made.



Compensation Committee Interlocks
and Insider Participation



The members of the compensation
committee, John W. Delaney and William J. Raggio, are non-employee directors. Mr. Delaney has never been an officer of the Company or of any of its subsidiaries. Mr. Delaney is the president of J & J Mortgage, a mortgage banking company of which
Paul W. Lowden is a director and sole stockholder. During fiscal 2003, the Company purchased from J & J Mortgage an aggregate of $700,000 of commercial and residential loans originally funded by J & J Mortgage to unaffiliated third parties.
See Item 13, Certain Relationships and Related Transactions. William J. Raggio, who from 1982 to 1999 served as Vice President, Secretary and General Counsel of the Company and its predecessors, is a shareholder and a member of the law
firm of Jones Vargas. During fiscal year 2003, the Company retained Jones Vargas to advise the Company regarding various legal matters, and the Company continues to engage Jones Vargas for legal representation.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------



The following sets forth information regarding beneficial ownership of the common stock and the exchangeable redeemable preferred stock of the Company, as
of January 14, 2004, by (i) each person known to be the beneficial owner of more than 5% of the outstanding common stock or preferred stock; (ii) each director of the Company; and (iii) all directors and officers of the Company as a group.



|                                                  |  |                       |     |  |         |   |  |                           |     |  |         |  
|------------------------------------------------- |  | --------------------- | --- |  | ------- | - |  | ------------------------- | --- |  | ------- | -
|Named Beneficial Owner                            |  | Shares ofCommon Stock |     |  | Percent |   |  | Shares of Preferred Stock |     |  | Percent |  
|Paul W. Lowden(1)                                 |  | 4,980,144             | (2) |  | 75.7    | % |  | 810,000                   | (3) |  | 17.6    | %
|Suzanne Lowden                                    |  | 4,792                 | (4) |  | *       |   |  | 2,524                     | (5) |  | *       |  
|Charles W. Sandefur                               |  | 2,000                 | (6) |  | *       |   |  | 0                         |     |  | 0       |  
|John W. Delaney                                   |  | 13,750                | (7) |  | *       |   |  | 0                         |     |  | 0       |  
|William J. Raggio                                 |  | 17,972                | (7) |  | *       |   |  | 5,472                     |     |  | *       |  
|Howard Foster                                     |  | 12,500                | (7) |  | *       |   |  | 128,126                   |     |  | 2.8     | %
|Jay Parthemore                                    |  | 150,007               |     |  | 2.4     | % |  | 200                       |     |  | *       |  
|All Directors and Officers as a group (7 persons) |  | 5,181,165             |     |  | 78.9    | % |  | 946,322                   |     |  | 20.6    | %

* Less than 1.0%

---

|(1) | The address for Paul W. Lowden is c/o Archon Corporation, 3993 Howard Hughes Parkway, Suite 630, Las Vegas, Nevada 89109. The shares owned by each person, or by the
group, and the shares included in the total number of shares outstanding have been adjusted, and the percentage owned (where such percentage exceeds 1%) has been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of
1934.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes 1,528,970 shares held by LICO, which is wholly owned by Mr. Lowden.
|--- | ----------------------------------------------------------------------------



|(3) | Includes 804,941 shares held by LICO, which is wholly owned by Mr. Lowden.
|--- | --------------------------------------------------------------------------



|(4) | Includes 4,521 shares held by Mrs. Lowden as custodian for a child and excludes shares beneficially owned by Mr. Lowden reflected in the table.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(5) | Includes 1,262 shares held by Mrs. Lowden as custodian for a child and excludes shares
beneficially owned by Mr. Lowden reflected in the table.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Represents outstanding stock options with respect to 2,000 shares held by Mr. Sandefur.
|--- | ---------------------------------------------------------------------------------------



|(7) | Includes 12,500 shares that may be acquired upon the exercise of outstanding stock options.
|--- | -------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



We believe that all transactions mentioned below are on terms at least as favorable to the Company as would have been obtained from an unrelated third
party.



Paul W. Lowden and Suzanne Lowden are married to one
another.



In December 2000, in connection with the Pioneer
Transactions, PHI formed Pioneer LLC, a limited liability company (PLLC), to which PHI transferred 100% of its real and personal property (excluding gaming equipment) and intangible assets, valued at approximately $1.0 million, net of
$32.5 million of debt secured by the assets of Pioneer, for a 100% interest in PLLC. Subsequently, PLLC admitted LICO as a 10% minority interest member, in exchange for a capital contribution of $100,000 (the Minority Member). PLLC
subsequently transferred the assets contributed by PHI to the Purchaser in exchange for preferred stock of the Purchaser with a liquidation preference of $1.0 million and the assumption and immediate repayment by the Purchaser of $32.5 million of
indebtedness owed to SFHI. The investment by the Minority Member is reflected as Other liabilities in the accompanying Consolidated Balance Sheets as of September 30, 2001. In October 2001, PLLC acquired LICOs minority interest for $100,000
plus 10% of PLLCs net income through September 30, 2001.



The Company has entered into a Patent Rights and Royalty Agreement with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay
certain royalty payments with respect to the technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January
2007 in the United States with respect to the technology, which will be automatically renewed for additional two-year terms unless Archon terminates the agreement within thirty days prior to the renewal or the agreement is otherwise earlier
terminated in accordance with its terms. The Company also has an understanding with David Lowden that it will pay for the costs of commercial development of the technology. As of September 30, 2003, the Company had expended $245,000 for commercial
development of the technology.



In fiscal 2001, the Company
purchased for $100,000 Class B member interests in Dukes-Sparks (Dukes), a Nevada limited liability company that developed Dukes Casino, a restricted slot operation, restaurant and entertainment facility in Sparks,
Nevada. Christopher Lowden, son of Paul W. Lowden, is a limited partner in the company that is the managing member of Dukes.



On October 8, 2002 the Company entered into a Subordinated Loan Agreement (the Dukes Loan Agreement) with Dukes. Under the
Dukes Loan Agreement, Dukes was entitled to borrow up to $1.1 million for construction, equipment, furnishings and other costs related to the completion and opening of Dukes Casino. The loan, which is secured on a subordinated
basis by the real property on which Dukes is located (the Dukes Real Property) and on a senior basis by non-gaming equipment and certain other personal property, matures on October 8, 2009 and bears interest at an annual rate
of 15%, plus additional interest at an annual rate of 10% until such time as the option described in the following sentence is exercised. In connection with the Dukes Loan Agreement, the Company received an option to acquire 70% of the equity
in the entity that owns Dukes. Dukes borrowed the entire $1.1 million available under the Dukes Loan Agreement by December 31, 2002. Furthermore, the Company has advanced Dukes an additional approximately $333,000 on an
unsecured basis, which advances are evidenced by a promissory note payable on demand.



The Companys advances to Dukes under the Dukes Loan Agreement are subordinate to a senior loan in the amount of $4.0 million, which is secured on a senior basis by the Dukes Real Property (the
Dukes Senior Loan). Dukes is in default under both the Dukes Senior Loan and the Companys loans to Dukes pursuant to the Dukes Loan Agreement and the promissory note. Both the senior lender and the
Company recorded notices of default and elections to sell the Dukes Real Property and provided notice of such recordation to Dukes and other parties in interest as required by Nevada law. On August 13, 2003, the trustee under the deed of
trust with respect to the Dukes Senior Loan held a foreclosure sale of the property. In the foreclosure sale, the senior lender acquired the Dukes Real Property in partial satisfaction of the Dukes Senior Loan, as a result of which
the Companys security interest in the Dukes Real Property was extinguished. Pursuant to the terms of the Companys loan agreement with Dukes, Dukes is prohibited from making payments on the Companys loans until the
Dukes Senior Loan is paid in full or the senior lender waives the requirement. As a result, the Company recorded a reserve of $1.1 million against investment and receivable from Dukes.



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The Company and the senior lender had agreed in principle that the senior lender would sell the
Dukes Real Property to the Company for $3.7 million payable no later than June 1, 2007, subject to an increase to $3.8 million if not paid in full by June 1, 2005. The purchase price would have been evidenced by a promissory note which would
have bore interest during the first 36 months of the loan at the rate of 1.75% plus the senior lenders actual cost of funds (currently the prime rate less 25 basis points) increasing to a rate of 2.5% plus the senior lenders cost of
funds for months 37 through 48. Interest was to accrue monthly, commencing as of June 1, 2003, and be payable on a monthly basis. All principal and accrued but unpaid interest was to be payable on or before June 1, 2007. The promissory note was to
be secured by a deed of trust on the Dukes Real Property. Consummation of the purchase was subject to the execution of a mutually acceptable purchase and sale agreement, promissory note, security agreement and related closing documents.
Additionally, the purchase was subject to approval of the Board of Directors of the Company. Until such time as a final agreement was reached with the senior lender with respect to the purchase of the Dukes Real Property and the Company
acquired the Dukes Real Property, the Company had expected to continue to operate Dukes on the same terms as provided in the Dukes-Sparks Lease described below. If the Company and the senior lender were unable to reach agreement
and the Company did not acquire the Dukes Real Property, the Dukes-Sparks Lease would be voided. As a result of the foreclosure of the Dukes Real Property and continuing default under the Dukes Senior Loan, and the
Companys loans to Dukes, the Company established a reserve in the amount of $1.0 million with respect to its loans to Dukes. In addition, the Company wrote-off its $100,000 initial investment in Dukes.



On October 4, 2002, a subsidiary of the Company entered into a lease (the
Dukes-Sparks Lease) with Dukes, with respect to the Dukes Casino. The Dukes-Sparks Lease provided that it would commence on the first day of the month (the Commencement Date) following the month in
which the Companys subsidiary obtained all required gaming regulatory approvals to conduct gaming activities at Dukes, provided that the Commencement Date will not occur until all the remodeling work being performed by Dukes at the
facility had been substantially completed and the City of Sparks has issued a certificate of occupancy for the facility, and that it will expire on the date which is the earlier of three years after the Commencement Date or the date which is the
first day of the month which immediately follows the month in which Dukes receives the necessary regulatory approvals to operate the casino. The Dukes-Sparks Lease provides for monthly base rent in the amount of $81,216. The required
gaming regulatory approvals were obtained by the Companys subsidiary on January 24, 2003, and the Company began operating Dukes on February 7, 2003. However, the remodeling of the facility was not substantially complete, so the Company
had not paid any rent to Dukes. Until such time as a final agreement was reached with the senior lender with respect to the Companys purchase of the Dukes Real Property and the Company acquired the Dukes Real Property, the
senior lender had agreed that the Company would continue to operate Dukes on the same terms as provided in the Dukes-Sparks Lease. Because the Company and the senior lender did not reach an agreement and the Company did not acquire the
Dukes Real Property, the Dukes-Sparks Lease was terminated on September 2, 2003. However, the Company continued to operate Dukes Casino on a month to month basis, with no rent payable. The Company owns and had installed
approximately 190 slot and video poker machines in Dukes Casino valued at approximately $1.7 million. On December 31, 2003, the Company ceased operations at Dukes. All of the furniture, fixtures, gaming and non-gaming equipment and
inventories have been transferred to the Pioneer.



During
fiscal 2003, the Company purchased an aggregate of $700,000 of commercial and residential loans originally funded by J & J Mortgage to unaffiliated third parties. The loans were purchased by the Company for the principal amount, plus accrued
interest, if any. J & J Mortgage is owned by LICO, which in turn is owned by Paul W. Lowden. John W. Delaney is the president of J & J Mortgage.



William J. Raggio, a director of the Company, is a shareholder and member of the law firm of Jones Vargas. During fiscal year 2003, the Company retained
Jones Vargas to advise the Company regarding various legal matters, and the Company continues to engage Jones Vargas for legal representation.



See Executive Compensation  Compensation Arrangements with Mr. Lowden for information regarding certain bonus arrangements for Mr.
Lowden and obligations of LICO, a company wholly-owned by Mr. Lowden, owed to the Company.



|Item 14. | Controls and Procedures
|-------- | -----------------------



The Companys Audit Committee is currently reviewing the Companys internal disclosure controls and procedures in light of the facts set forth
in Item 1. BusinessRecent DevelopmentsStatus of Delivery of Auditors Report and Consent. Subject to the foregoing, based on their evaluation, as of a date within 90 days of the filing of this Form 10-K/A, the
Companys Chief Executive Officer and Chief Financial Officer have concluded the Companys disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been
no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material
weaknesses.



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##### Table of Contents

|Item 15. | Principal Accountant Fees and Services
|-------- | --------------------------------------



The following fees were billed by Deloitte & Touche LLP for services provided to the Company for the fiscal years ended September 30, 2003 and 2002:



|                                                                                                              |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                                              |  | 2003 |         | 2002
|Audit Fees:                                                                                                   |  | $    | 115,000 |      | $ | 100,000
|                                                                                                              |  |      |         |      |   |        
|Financial Information Systems Design and Implementation Fees (pursuant to Regulation S-X Rule 2-01(c)(4)(ii)) |  | $    | 0       |      | $ | 0      
|                                                                                                              |  |      |         |      |   |        
|All Other Fees:                                                                                               |  | $    | 33,684  |      | $ | 109,445
|                                                                                                              |  |      |         |      |   |        



Audit fees are the
aggregate fees billed for professional services rendered in connection with the engagement to audit the Companys annual financial statements for the fiscal year ended September 30, 2003 and the reviews of the financial statements included in
the Companys Forms 10-Q for that fiscal year.



Financial
information systems design and implementation fees are the aggregate fees billed for services such as the operation or supervision of the Companys information system or for the design or implementation of a hardware or software system that
aggregates source data underlying the financial statements or generates information that is significant to the Companys financial statements rendered by the principal accountant for the most recent fiscal year.



All other fees are the aggregate fees billed for services rendered by the
principal accountant, other than audit and financial information systems design and implementation services. All other fees in fiscal 2003 consisted of audit related fees of approximately $12,000 for audit work on the Companys retirement plan,
and fees of approximately $21,684 for other miscellaneous work incurred by the Company.



Audit fees are the aggregate fees billed for professional services rendered for the audit of the Companys annual financial statements for the fiscal year ended September 30, 2002 and the reviews of the financial
statements included in the Companys Forms 10-Q for that fiscal year.



Financial information systems design and implementation fees are the aggregate fees billed for services such as the operation or supervision of the Companys information system or for the design or implementation
of a hardware or software system that aggregates source data underlying the financial statements or generates information that is significant to the Companys financial statements rendered by the principal accountant for the fiscal year ended
2002.



All other fees are the aggregate fees billed for
services rendered by the principal accountant, other than audit and financial information systems design and implementation services. All other fees in fiscal 2002 consisted of audit related fees of approximately $10,000 for audit work on the
Companys retirement plan, fees of approximately $60,000 for work related to preparing the Companys federal tax return and tax consultations and fees of approximately $39,000 for internal audit regulatory compliance procedures. The audit
committee has considered whether the provision by Deloitte & Touche LLP of non-audit services is compatible with maintaining the auditors independence.



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##### Table of Contents

PART IV



|Item 16. | Exhibits, Financial Statement Schedules and Reports on Form 8-K
|-------- | ---------------------------------------------------------------



|(a) | 1. and 2. Financial Statements and Schedules
|--- | --------------------------------------------



The financial statements filed as part of this report are listed in the Index to Unaudited Consolidated Financial Statements under Item 8.



|(b) | Reports on Form 8-K filed during the fourth fiscal quarter of 2003.
|--- | -------------------------------------------------------------------



None



|(c) | Exhibits
|--- | --------



The following are filed as Exhibits to this Annual Report on Form 10-K/A:



|              |  |                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                                                                                                                            
|              | 
|3.1           |  | Articles of Incorporation and Bylaws of the Company (Previously filed with the Securities and Exchange Commission as an exhibit to the Companys S-4 (No. 33-67864) Registration Statement
on Form 10-K dated June 15, 1982 and incorporated herein by reference.)
|              | 
|3.2           |  | Certificate of Designation for Exchangeable Redeemable Preferred Stock. (Previously filed with the Securities and Exchange Commission as an exhibit to the Companys Registration
Statement on Form S-4 (No. 33-67864) and incorporated herein by reference.)     
|              | 
|3.3           |  | Amended and Restated By-laws of Santa Fe Gaming Corporation. (12)                                                                                                                                                                                                 
|              | 
|10.1          |  | Notes secured by liens on office building in Las Vegas, Nevada in the original principal amounts of $301,598.05, $23,337.96 and $649,063.99 bearing interest at 10%, 11% and 13 1/2% per annum, respectively. (1)                                                 
|              | 
|10.2          |  | Key Employee Stock Option Plan. (2)                                                                                                                                                                                                                               
|              | 
|10.3          |  | Lease Modification Letter dated August 24, 1995 by and between Wet N Wild Nevada, Inc. and Sahara Corporation. (3)                                                                                                                                               
|              | 
|10.4          |  | Employment Agreement by and among Santa Fe Gaming Corporation and Thomas K. Land dated October 1, 1999. (4)                                                                                                                                                       
|              | 
|10.5          |  | First amendment to the Employment Agreement, dated October 1, 1998 by and among Santa Fe Gaming Corporation and Thomas K. Land. (4)                                                                                                                               
|              | 
|10.6          |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998. (5)                                                                                                                                              
|              | 
|10.7          |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI. (6)                                                                                                                                                             
|              | 
|10.8          |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (6)                                                                                                                                                   
|              | 
|10.9          |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (6)                                                                                                                                
|              | 
|10.10         |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden. (7)                                                                                                                       
|              | 
|10.11         |  | Asset Purchase Agreement dated June 12, 2000 by and among Santa Fe Hotel Inc., Santa Fe Gaming Corporation and Station Casinos, Inc. (8)                                                                                                                          
|              | 
|10.12         |  | Credit Agreement dated as of June 12, 2000 by and between Pioneer Hotel Inc. and Station Casinos, Inc. (8)                                                                                                                                                        
|              | 
|10.13         |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000. (9)                                                                                                                                              
|              | 
|10.14         |  | Guaranty by Santa Fe Gaming Corporation, guarantor; Pioneer Hotel Inc., tenant and guarantor and Santa Fe Hotel Inc., guarantor dated December 29, 2000. (9)                                                                                                      
|              | 
|10.15         |  | Exchange Agreement among Pioneer LLC, as transferor; Pioneer Hotel Inc., as tenant; HAHF Pioneer LLC as transferee and Heller Affordable House of Florida, Inc., dated December 29, 2000.
(9)                                                                     



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                    
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.16 |  | Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000. (9)                                                                                                                                            
|      | 
|10.17 |  | Lease Schedule No. 1 to Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000. (9)                                                                                                                    
|      | 
|10.18 |  | Guaranty by and between PDS Gaming Corporation-Nevada and Santa Fe Gaming Corporation dated December 29, 2000. (9)                                                                                                                                                 
|      | 
|10.19 |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001. (10)                                                                                                                 
|      | 
|10.20 |  | Promissory Note dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc. (10)                                                                                         
|      | 
|10.21 |  | Deed of Trust and Security Agreement dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.
(10)                                                                    
|      | 
|10.22 |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999. (10)                                                                                                                               
|      | 
|10.23 |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC. (10)                                                                                                                                                 
|      | 
|10.24 |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc. (10)                                                                                                                                                                
|      | 
|10.25 |  | First Amendment dated December 26, 2000 to Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc. (10)                                                                                                                     
|      | 
|10.26 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005. (10)                                                                                                                                                                         
|      | 
|10.27 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020. (10)                                                                                                                                                                         
|      | 
|10.28 |  | Mortgage, Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing financing Statement dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and
First Security Bank, National Association as Indenture Trustee. (10)
|      | 
|10.29 |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank. (10)                                                                                                                                                       
|      | 
|10.30 |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee. (10)                                                                                                             
|      | 
|10.31 |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden. (11)                                                                                                                                                   
|      | 
|10.32 |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Dukes-Sparks, LLC. (13)                                                                                                                                                          
|      | 
|10.33 |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino. (13)                                                                                                                                                                                     
|      | 
|10.34 |  | Option Agreement dated October 8, 2002 between Endeavors North LLC and Archon Corporation. (13)                                                                                                                                                                    
|      | 
|10.35 |  | Loan Agreement dated December 15, 2003 between Colonial Bank, Archon Corporation and Sahara Las Vegas Corp. (14)                                                                                                                                                   
|      | 
|10.36 |  | Security Agreement and Second Deed of Trust Dated October 8, 2002 (15)                                                                                                                                                                                             
|      | 
|10.37 |  | Demand Note dated February 6, 2003 in favor of Archon Corporation. (16)                                                                                                                                                                                            
|      | 
|21    |  | Subsidiaries of Archon Corporation (17)                                                                                                                                                                                                                            
|      | 
|31.1  |  | Intentionally not Furnished                                                                                                                                                                                                                                        
|      | 
|31.2  |  | Intentionally not Furnished                                                                                                                                                                                                                                        
|      | 
|32.0  |  | Intentionally not Furnished                                                                                                                                                                                                                                        

---



FOOTNOTES TO EXHIBITS



|(1) | Previously filed with the Securities and Exchange Commission as an exhibit to the Registration Statement on Form S-1 (No. 33-13214) of Sahara Casino Partners, L.P. and incorporated
herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(2) | Previously filed with the Securities and Exchange Commission as an exhibit to Sahara Gaming Corporations Annual Report on Form 10-K for the year ended September 30, 1993 and
incorporated herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Previously filed with the Securities and Exchange Commission as an exhibit to Sahara Gaming Corporations Report on Form 10-K for the year ended September 30, 1995 and
incorporated herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 10-Q for the quarter ended March 30, 1999 and
incorporated herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 10-Q for the quarter ended June 30, 1999 and
incorporated herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 8-K dated November 15, 1999 and incorporated herein
by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 10-Q for the quarter ended June 30, 2000 and
incorporated herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 8-K dated June 12, 2000 and incorporated herein by
reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Previously filed with the Securities and Exchange Commission as an exhibit to Santa Fe Gaming Corporations Report on Form 8-K dated December 29, 2000 and incorporated herein
by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-Q for the quarter ended March 31, 2001 and incorporated
herein by reference.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-Q for the quarter ended June 30, 2002 and incorporated
herein by reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-Q dated August 20, 2003 and incorporated herein by
reference.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(13) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-K dated December 30, 2002 and incorporated herein by
reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(14) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 8-K dated January 13, 2004 and incorporated herein by
reference.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(15) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-Q dated August 20, 2003 and incorporated herein by
reference.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(16) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-Q dated February 14, 2003 and incorporated herein by
reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(17) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Report on Form 10-K/A (Amendment No. 1) dated January 23, 2004 and
incorporated herein by reference.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) 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
|                 |  |  | 
|January 28, 2004 |  |  |  | By:                |  | /s/ Paul W. Lowden
|                 |  |  |  |                    |  |                    | 
|                 |  |  |  |                    |  |                    |  | Paul W. Lowden, President



Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



|                                                                                        |  |                                                                                   |  |                 
|--------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | ----------------
|Signature                                                                               |  | Title                                                                             |  | Date            
|                                                                                        |  |                                                                                  
|/s/ Paul W. LowdenPaul W. Lowden (Principal Executive Officer)                          |  | Chairman of the Board and President (Principal Executive Officer)                 |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ John DelaneyJohn Delaney                                                            |  | Director                                                                          |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ Suzanne LowdenSuzanne Lowden                                                        |  | Director                                                                          |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ William J. RaggioWilliam J. Raggio                                                  |  | Director                                                                          |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ Charles W. SandefurCharles W. Sandefur (Principal Financial and Accounting Officer) |  | Director and Chief Financial Officer (Principal Accounting and Financial Officer) |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ Howard E. FosterHoward E. Foster                                                    |  | Special Director                                                                  |  | January 28, 2004
|                                                                                        |  |                                                                                  
|/s/ Jay ParthemoreJay Parthemore                                                        |  | Special Director                                                                  |  | January 28, 2004



55