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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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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, 2004



| ̈ | 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)                        



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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.    x  Yes ̈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 $33,037,304. The market value was computed by reference to the closing price of the common stock as of December 27, 2004.



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 27, 2004



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. ̈Yes    x  No



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ARCHON CORPORATION AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL

YEAR ENDED SEPTEMBER 30, 2004

TABLE
OF CONTENTS



|         |  |                                                                                                |  |     
|-------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                |  | Page
|PART I   |  | 1                                                                                             
|         |  |                                                                                               
|Item 1.  |  | Business                                                                                       |  | 1   
|         |  | General                                                                                        |  | 1   
|         |  | Hotel and Casino Operations                                                                    |  | 2   
|         |  | Investment Properties                                                                          |  | 4   
|         |  | Land Held for Development                                                                      |  | 4   
|         |  | Nevada Regulations and Licensing                                                               |  | 5   
|         |  |                                                                                               
|Item 2.  |  | Properties                                                                                     |  | 8   
|         |  |                                                                                               
|Item 3.  |  | Legal Proceedings                                                                              |  | 8   
|         |  |                                                                                               
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                            |  | 9   
|         | 
|PART II  |  | 10                                                                                            
|         |  |                                                                                               
|Item 5.  |  | Market for the Registrants Common Stock and Related Security Holders Matters                  |  | 10  
|         |  |                                                                                               
|Item 6.  |  | Selected Financial Data                                                                        |  | 11  
|         |  |                                                                                               
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 12  
|         |  |                                                                                               
|Item 7A. |  | Market Risk Disclosure                                                                         |  | 22  
|         |  |                                                                                               
|Item 8.  |  | Financial Statements                                                                           |  | 23  
|         |  |                                                                                               
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |  | 48  
|         |  |                                                                                               
|Item 9A. |  | Controls and Procedures                                                                        |  | 48  
|         | 
|PART III |  | 49                                                                                            
|         |  |                                                                                               
|Item 10. |  | Directors and Executive Officers of the Registrant                                             |  | 49  
|         |  |                                                                                               
|Item 11. |  | Executive Compensation                                                                         |  | 51  
|         |  |                                                                                               
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 54  
|         |  |                                                                                               
|Item 13. |  | Certain Relationships and Related Transactions                                                 |  | 54  
|         |  |                                                                                               
|Item 14. |  | Principal Accountant Fees and Services                                                         |  | 55  
|         | 
|PART IV  |  | 57                                                                                            
|         |  |                                                                                               
|Item 15. |  | Exhibits and Reports on Form 8-K                                                               |  | 57  



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PART I



Item 1. Business



General



Archon Corporation, (the
Company or Archon), is a Nevada corporation. The Companys primary business operations are conducted through a wholly-owned subsidiary corporation, Pioneer Hotel Inc. (PHI), which operates the Pioneer Hotel
& Gambling Hall (the Pioneer) in Laughlin, Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the Strip) in Las Vegas, Nevada, investment properties in Dorchester, Massachusetts and
Gaithersburg, Maryland, and through a wholly-owned subsidiary, Archon Sparks Management Company, formerly operated a casino in Sparks, Nevada, which was closed in December 2003.



In December 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 exercised on December 29, 2003 in the amount of $35.6 million and was paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming 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, a wholly-owned subsidiary of the Company, Santa Fe Holdings, Inc. (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 sale of the Companys
previously owned Santa Fe Hotel and Casino (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



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 obtained a use permit on the site for a master-planned development with certain
Federal Aviation Administration construction height approvals on the site up to 750 feet. The Company has not obtained any other critical approvals or permits and development of such site would require other significant regulatory approvals. There
is no assurance that the Company will obtain all land use, building or other regulatory approvals necessary for development of a hotel-casino resort project or other development projects for this site.



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The Company is evaluating development and construction of a hotel-casino project on the site and remains
in the predevelopment stage. There are no definitive plans or commitments for the site. The Company may elect to proceed with development, sell the site to other parties or continue to hold the site in its current state.



The Company cannot give any assurances that it will obtain financing on
acceptable terms for the project. A preliminary budget has not 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 Strip site was leased by an
operator of a water-themed amusement park. In September 2004, the lease was terminated although the tenant may remain on the property through January 2005 for the purpose of removing certain property and equipment. The Company has leased a small
portion of the site as a construction staging area for a neighboring development through at least February 2006.



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; (ii) the casino building, the hotel rooms, together with the meeting rooms, restaurants and associated facilities; and (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 million 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 acquired an $18.0 million note payable that is secured by certain land held for
development in Las Vegas.



Closing of Dukes
Casino. The Company ceased operating Dukes Casino in Sparks, Nevada on December 31, 2003. Dukes Casino was operated through Archon Sparks Management Company, a wholly-owned subsidiary of the Company. Certain of the furniture,
fixtures, gaming and non-gaming equipment and inventories have been transferred to the Pioneer. See Note 18 in the Consolidated Financial Statements.



Lone Mountain Property. The Company owned, through SFHI, an approximately 20-acre parcel of real property located next to the Companys
former hotel/casino property, the Santa Fe Hotel and Casino (the Santa Fe) (sold to a third party in fiscal 2001), 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 approximately $5.6 million and the sale of the property was completed in September 2004. $5.0 million of the net proceeds from the sale of the real property were used to reduce outstanding indebtedness to a bank.



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. Approximately 61/2acres of the 12 acres are leased pursuant to a 99-year ground lease (the 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 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.



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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 416 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 approximately 60.1%, 60.5% and 60.3% in 2004, 2003 and 2002, respectively, of total revenues. The Pioneer contributed approximately 99% in fiscal 2004 to total gaming revenues and approximately
96% and 100% in fiscal 2003 and 2002, respectively. As of September 30, 2004 the Pioneer had approximately 780 slot machines, nine blackjack tables (21), one craps table, 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 approximately 70%, 77% and 75%, respectively, in fiscal years 2004, 2003 and 2002, 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 outs, 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 cash, 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

As of September 30, 2004, the Company employed 14 executive and administrative personnel and the Pioneer employed approximately 500 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 Interstate-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 in excess of 100,000 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 2020 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 Sahara Las Vegas Corp. (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 was terminated September 30, 2004.



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 Strip property. The Company obtained a use permit on the site for a master-planned
development with certain FAA construction height approvals on the site up to 750 feet. The Company has not obtained any other critical approvals or permits and development of such site would require other significant regulatory approvals. There is
no assurance that the Company will obtain all land use, building or other regulatory approvals necessary for development of a hotel-casino resort project or other development projects for this site.



The Company is evaluating development and construction of a hotel-casino
project on the site and remains in the predevelopment stage. There are no definitive plans or commitments for the site. The Company may elect to proceed with development, sell the site to other parties or continue to hold the site in its current
state.



The Company cannot give any assurances that it will
obtain financing on acceptable terms for the project. A preliminary budget has not 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 Strip site
was leased by an operator of a water-themed amusement park. In September 2004, the lease was terminated and the tenant may remain on the property through January 2005 for the purpose of removing certain property and equipment. The Company has leased
to a non-related third party a small portion of the site as a construction staging area for a neighboring development at least through February 2006.



The Company owned, 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. The Company
then sold the property to a third party for approximately $5.6 million. The sale was completed in September 2004 with approximately $5.0 million of the net proceeds being used to reduce outstanding bank indebtedness.



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Any future development of the Strip property 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 property.



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



The Company has provided financial segment information in the Notes to
Consolidated Financial Statements, Note 21. 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 State 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.



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



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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.



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 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.



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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 Nevada Gaming 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.



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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 previously leased the Pioneer under a lease that expired in
December 2020, subject to two five-year options to extend the term. However, the Company exercised an early purchase option in December 2003 and no longer has a significant capital lease obligation at this property. 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 $0.5 million 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 2020 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. See Item 1. Business - Recent Developments and Land Held for Development.



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 in 1994, 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



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##### Table of Contents

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.



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 2004.



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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 price of the Common Stock on December 27, 2004 was $20.70 per
share. The tables below set forth the high and low closing prices by quarter for the fiscal years ended September 30, 2004 and 2003 of the common stock, as reported by the OTCBB.



|             |  |              |      |               |   |              |  |               |      |  |   |     
|------------ |  | ------------ | ---- | ------------- | - | ------------ |  | ------------- | ---- |  | - | ----
|             |  | FirstQuarter |      | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|Fiscal 2004: |  |              |      |               |   |              |  |               |      |  |   |     
|High         |  | $            | 7.00 |               | $ | 6.55         |  | $             | 6.60 |  | $ | 7.00
|Low          |  |              | 2.58 |               |   | 4.55         |  |               | 4.60 |  |   | 5.20
|             |  |              |      |              
|Fiscal 2003: |  |              |      |               |   |              |  |               |      |  |   |     
|High         |  | $            | 2.85 |               | $ | 3.70         |  | $             | 3.10 |  | $ | 3.00
|Low          |  |              | 2.15 |               |   | 2.70         |  |               | 2.65 |  |   | 2.71



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 700 common stockholders of record as of December 27, 2004.



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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, 2004, 2003, 2002, 2001 and 2000:



|                                              |  |                                                  |         |   |      |   |         |      |  |   |         |   |      |   |         |  |   |        
|--------------------------------------------- |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - | ---- | - | ------- |  | - | -------
|                                              |  | 2004                                             |         |   | 2003 |   |         | 2002 |  |   | 2001    |   | 2000
|                                              |  | (dollars in thousands, except per share amounts)
|Net operating revenues(1)                     |  | $                                                | 45,693  |   |      | $ | 46,161  |      |  | $ | 48,765  |   |      | $ | 48,003  |  | $ | 128,595
|Net income (loss), net of taxes(2)            |  |                                                  | (1,882  | ) |      |   | (7,847  | )    |  |   | (7,707  | ) |      |   | 89,182  |  |   | 15,124 
|Net income (loss) applicable to common shares |  |                                                  | (3,444  | ) |      |   | (9,374  | )    |  |   | (9,262  | ) |      |   | 87,231  |  |   | 12,802 
|per common share(2)                           |  |                                                  | (0.55   | ) |      |   | (1.51   | )    |  |   | (1.50   | ) |      |   | 14.11   |  |   | 2.07   
|Total assets                                  |  |                                                  | 206,932 |   |      |   | 237,390 |      |  |   | 242,086 |   |      |   | 249,485 |  |   | 145,596
|Long-term debt, less current portion          |  |                                                  | 93,985  |   |      |   | 148,698 |      |  |   | 153,029 |   |      |   | 157,667 |  |   | 350    
|Redeemable preferred stock(3)                 |  |                                                  | 9,674   |   |      |   | 9,926   |      |  |   | 10,866  |   |      |   | 10,963  |  |   | 18,953 

---

|(1) | Net operating revenues for fiscal year 2000 represent primarily the operations at the Santa Fe and Pioneer. Net operating revenues for fiscal years 2001 through 2004
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. In fiscal 2004
results, a gain of approximately $4.0 million is included principally from the sale of certain land previously owned by the Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The Company has not declared dividends on its preferred stock since fiscal 1996. Dividends of approximately $1.6 million, $1.5 million, $1.6 million, $2.0 million
and $2.3 million for fiscal 2004, 2003, 2002, 2001 and 2000, respectively, have not been declared and are in arrears. Total accumulated preferred stock dividends in arrears for the five preceding years ended on September 30, 2004 are $9.5 million,
$8.2 million, $7.3 million, $5.8 million and $7.5 million, respectively. Since October 17, 2001, the Company has repurchased and retired 879,357 shares of redeemable preferred stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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



General



Overview of Business Operations and Trends



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



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



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



Management believes the recent revenue and expense trends in its Laughlin
hotel/casino property may not change significantly over the next few years, but believes the opportunity to develop the Strip property could greatly enhance the Companys ability to generate future profitability, although the Company has no
definitive plans to develop the property.



Critical Accounting Policies and
Estimates



Managements Discussion and Analysis of
Financial Condition and Results of Operations discuss Archons 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 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.



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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 2004 Compared to Fiscal 2003



General



During fiscal 2004, the Company experienced a marginal decline in net operating revenues of 1%. However, due to certain reductions of personnel costs
primarily at the Pioneer and due to the closure of Dukes Casino, the Company reduced its operating expenses, before provisions for receivable and investment, by approximately $1.0 million. Additionally, the Company incurred less operating
expenses in fiscal 2004 as compared to fiscal 2003 as an income statement provision, principally because a receivable from and investment in Dukes LLC, of approximately $1.7 million, was recorded. Similar charges of approximately $0.2 million
in 2004 were recorded. Overall, the Companys operating income improved in fiscal 2004 as compared to fiscal 2003 by approximately $2.0 million.



As previously noted, the Company purchased and retired certain lease obligations of approximately $37 million in December 2003. As a result of this
transaction, interest expense declined significantly for the Company resulting in decreased interest expense in fiscal 2004 as compared to fiscal 2003 of approximately $3.5 million. This improvement in reduced interest expense was offset, in part,
by a decrease in interest income from marketable securities in fiscal 2004 compared to fiscal 2003 of approximately $0.6 million. A significant portion of marketable securities was sold to assist in the purchase of the Pioneer assets in December
2003.



The Company does not anticipate significant changes to
its operating results or recourse debt structure in the near term, although no assurances to such can be given.



Consolidated



Net Operating Revenues. Consolidated net operating revenues for the year ended September 30, 2004 were $45.7 million, a $0.5 million, or 1%,
decrease from $46.2 million for the year ended September 30, 2003. Income from investment properties was $12.4 million in each of the fiscal years. Revenues increased approximately $0.3 million to $32.2 million during fiscal 2004 at the Pioneer
compared to $31.9 million for the 2003 fiscal year. Archon Sparks Management Company (ASMC), which began operating Dukes Casino in February 2003, had revenues of $0.4 million in the 2004 fiscal year compared to $1.3 million for the
2003 fiscal year.



In fiscal 2004, 70% of the Companys
net revenues were derived from the Pioneer and 27% from investment properties. The Companys business strategy at the Pioneer emphasizes slot and video poker machine play. For fiscal 2004, approximately 84% of the Pioneers net revenues
were derived from casino operations. Approximately 88% of gaming revenues at the Pioneer were derived from slot and video poker machines, while 10% of such revenues were from table games and 2% was from other gaming activities such as keno.



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##### Table of Contents

Operating Expenses. Total operating expenses decreased approximately $2.5 million, or 6%,
to $40.7 million for the year ended September 30, 2004 from $43.2 million for the year ended September 30, 2003. Total operating expenses as a percentage of net revenues decreased to 89% for the year ended September 30, 2004 from 94% for the year
ended September 30, 2003. The decline of approximately $2.5 million in operating expenses was principally attributable to i) a reserve for receivables and investment in fiscal 2003 related principally to Dukes casino of approximately $1.7
million compared to approximately $0.2 million in fiscal 2004, ii) the inclusion in fiscal 2003 of approximately $2.2 million of additional operating expenses at Dukes casino compared to approximately $0.7 million in fiscal 2004, iii) a
decrease in operating expenses of approximately $0.4 million, or approximately 1%, at the Pioneer, in fiscal 2004 and iv) an increase in general corporate expenses in fiscal 2004 of approximately $1.0 million, principally the result of increased
legal, accounting/auditing and payroll expenses.



Operating Income. Consolidated operating income for the year ended September 30, 2004 was $5.0 million, a $2.1 million, or 70%, increase from $2.9 million for the year ended September 30, 2003. Operating income improved by
$0.7 million at the Pioneer. Including a charge in fiscal 2003 principally for a receivable and investment of approximately $1.7 million, ASMC had an operating loss of $0.5 million and $2.7 million for the fiscal years ended September 30, 2004 and
2003, respectively.



Gain on Sale of Assets. The
gain on sale of assets of approximately $4.0 million represents primarily a gain from the sale of certain land held for development during the year ended September 30, 2004 partially offset by a loss on disposal of assets by ASMC.



Interest Expense. Consolidated interest expense for the year
ended September 30, 2004 was $12.9 million, a $3.5 million decrease compared to $16.4 million for the year ended September 30, 2003. Interest expense decreased $2.6 million at the Pioneer due to the purchase of the Pioneer assets of approximately
$36 million in December 2003, and the resulting termination of capital leases, which bore interest at approximately 14%. The capital lease obligations of approximately $37 million were replaced by the acquisition of certain debt in December 2003 of
approximately $18 million, bearing interest at prime plus 1%.



Interest Income. Interest income for the year ended September 30, 2004 was $0.9 million, a decrease of $0.6 million from $1.5 million for the year ended September 30, 2003 due to a decrease in marketable equity securities in
the 2004 fiscal year. A significant portion of marketable securities was sold in December 2003, the proceeds of which were used for the purchase of the Pioneer assets.



Other Income. Other income was $0.3 million in fiscal 2004 and is comprised primarily of $0.1 million from net
gains on sales of marketable securities and $0.2 million of income from other investments. In fiscal 2003, the Company reported no similar income from these sources.



Loss Before Income Tax. Consolidated loss before income tax for the year ended September 30, 2004 was $2.8
million, a $9.2 million improvement compared to a consolidated loss before income taxes of $12.0 million for the year ended September 30, 2003. This improvement is principally attributable to the aforementioned improvements in operating losses,
other income of approximately $4.0 million from a gain on sale of certain assets and a decline in interest expense due to the retirement of certain obligations under capital leases.



Federal Income Tax. The Company recorded a federal income tax benefit of approximately $0.9 million (an
approximate 33% effective tax rate) for the year ended September 30, 2004 compared to $4.2 million (an approximate 35% tax rate) for the year ended September 30, 2003.



Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders
equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred stock. However, dividends of approximately $1.6 million and $1.5 million for fiscal years 2004 and 2003, respectively, accrued on the
preferred stock for purposes of calculating net loss applicable to common shares. The dividend rate increased to 16.0% effective October 1, 2003 from 15.5% beginning on April 1, 2003. The accrued dividend rate increases 50 basis points at each
semi-annual dividend payment date, subject to a maximum of 16.0%.



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Net Loss. Consolidated net loss applicable to common shares was $3.4 million, or $0.55 per
common share, for the year ended September 30, 2004 compared to net loss applicable to common shares of $9.4 million, or $1.51 per common share, for the year ended September 30, 2003.



Pioneer



General. Casino, hotel and food/beverage revenues and expenses at the Pioneer comprise the majority of consolidated casino,
hotel and food/beverage revenues and expenses included in the Companys consolidated statements of operations and are discussed separately below. There are other insignificant casino and food/beverage revenues and expenses in 2004 and 2003 from
ASMC which are not discussed separately below.



Net
Operating Revenues. Revenues at the Pioneer increased $0.3 million, or 1%, to $32.2 million for the year ended September 30, 2004 from $31.9 million for the year ended September 30, 2003.



Gross casino revenues increased approximately $0.3 million, or 1%, to $27.1
million for the year ended September 30, 2004 from $26.8 million for the year ended September 30, 2003. Slot and video poker revenues increased approximately $0.7 million, or 3%, to $23.9 million for the year ended September 30, 2004 from $23.2
million for the year ended September 30, 2003. Management believes that the increase resulted from an upgrade of certain slot machines during fiscal 2004. Other gross gaming revenues, including table games, decreased approximately $0.4 million, or
12%, due primarily to decreased table game win. Management believes fewer table game casino and hotel patrons contributed to this decline. Casino promotional allowances increased to approximately $7.8 million in the fiscal year 2004 compared to $6.7
million for the year ended September 30, 2003 due to marketing promotions and system enhancements implemented to increase business volume.



Hotel revenues increased approximately $0.4 million, or 16%, to approximately $3.1 million for the year ended September 30, 2004 from approximately $2.7
million in fiscal 2003, as a decrease in occupancy rate from 77.3% in 2003 to 69.8% in 2004 was offset by an increase in the average daily room rate of approximately 30%. Management believes its efforts to improve the quality and condition of many
of its rooms through repairs attributed greatly to its ability to raise room rates. Food and beverage revenues increased approximately $1.2 million, or 17%, to $8.3 million for the year ended September 30, 2004 from $7.1 million for the year ended
September 30, 2003, due principally to the renovations during the fourth quarter of 2003 to the Pioneers main food outlet. Other revenues decreased approximately $0.5 million, or 26%, to approximately $1.5 million for the year ended September
30, 2004 from $2.0 million for the year ended September 30, 2003, 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 approximately
$0.4 million, or 1%, to $32.5 million for the year ended September 30, 2004 from $32.9 million for the year ended September 30, 2003. Operating expenses as a percentage of net revenues decreased to 101% in fiscal 2004 from 103% in fiscal 2003.



Casino expenses decreased approximately $0.5 million, or 3%,
to $14.8 million for the year ended September 30, 2004 from $15.3 million for the year ended September 30, 2003, primarily related to reductions in payroll. Casino expenses as a percentage of casino revenues decreased to 55% for the year ended
September 30, 2004 from 57% for the year ended September 30, 2003. Hotel expenses were relatively unchanged at $0.7 million for the years ended September 30, 2004 and 2003. Food and beverage expenses increased approximately $1.0 million, or 31%, to
$4.3 million in fiscal 2004 from $3.3 million in fiscal 2003. Management believes this increase was due principally to the closure, for several months, of the main food outlet in fiscal 2003 for renovations. Food and beverage expenses as a
percentage of food and beverage revenues increased to 52% for the year ended September 30, 2004 from 46% for the year ended September 30, 2003. Management believes an increase in the quality of food product contributed to this increase. Other
expenses decreased approximately $0.7 million, or 39%, to $1.1 million for the year ended September 30, 2004 compared to $1.8 million for the year ended September 30, 2003, due to the decrease in retail sales. Other expenses as a percentage of other
revenues decreased to 75% for the year ended September 30, 2003 from 90% for the year ended September 30, 2003.



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##### Table of Contents

Selling, general and administrative expenses decreased $0.4 million, or 6%, to $4.8 million for the year
ended September 30, 2004 compared to $5.2 million for the year ended September 30, 2003, primarily due to reductions in payroll, supplies and outside services. Selling, general and administrative expenses as a percentage of revenues decreased to 15%
for the year ended September 30, 2004 from 16% for the year ended September 30, 2003. 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 remained materially unchanged at approximately $4.3 million for the year ended September 30, 2004 and $4.2 million for the year ended September 30, 2003. Utilities and property expenses as a percentage
of revenues remained unchanged at 13% for the years ended September 30, 2004 and 2003.



Interest Expense. Interest expense decreased $2.6 million, or 53%, to $2.3 million for the year ended September 30, 2004 from $4.9 million for the year ended September 30, 2003, due to the purchase of
the Pioneer assets and elimination of the $33.5 million lease obligation. The $33.5 million interest-bearing lease obligation had an effective interest rate of approximately 14% and was replaced with approximately $18 million of debt bearing
interest annually at the rate of prime plus 1%.



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 in fiscal 2003 at the Pioneer compared to $35.5 million in fiscal 2002. 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. 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 were derived from slot and video poker machines,
while 11.9% of such revenues were from table games and 1.7% was from other gaming activities such as keno.



Operating Expenses. Total operating expenses increased approximately $1.0 million, or 2.3%, to $43.2 million for the year ended September
30, 2003 from $42.2 million for the year ended September 30, 2002. Total operating expenses as a percentage of revenue increased to 93.7% for the year ended September 30, 2003 from 86.6% for the year ended September 30, 2002. Operating expenses
decreased $2.3 million, or 6.5%, at the Pioneer, by $0.3 million at the investment properties and by $0.1 million 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 in the prior year period. ASMC had operating expenses of $2.2 million. The
Company recorded a $1.5 million reserve for its receivable from and investment in Dukes Casino and $0.2 million for impairment of other assets in the current year.



Operating Income. Consolidated operating income for the year ended September 30, 2003 was $2.9 million, a $3.6
million, or 55.1%, decrease from $6.5 million for the year ended September 30, 2002. Operating income decreased by $1.3 million at the Pioneer and increased $0.3 million at the investment properties. ASMC had an operating loss of approximately $2.7
million, which includes a charge of approximately $1.7 million for a receivable from and investment in Dukes.



Interest Expense. Consolidated interest expense for the year ended September 30, 2003 was $16.4 million, a $0.2 million decrease compared to
$16.6 million for the year ended September 30, 2002. Interest expense from the investment properties decreased $0.5 million due to a reduction through principal payments of outstanding debt. Interest expense increased $0.1 million at the Pioneer due
to an increase in outstanding debt through negative amortization of debt. ASMC had $0.1 million in interest expense.



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##### Table of Contents

Interest Income. Interest income for the year ended September 30, 2003 was $1.5 million, an
increase of $0.2 million 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 $12.0 million, a $3.2 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 $4.2
million (an approximate 35% effective tax rate) for the year ended September 30, 2003 compared to $1.1 million (an approximate 13% tax rate) for the year ended September 30, 2002. The effective tax rate for 2002 was less than the statutory tax rate
as the Company recorded a reserve in the form of a valuation adjustment to its deferred tax accounts.



Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders equity section of the balance
sheet as the Company may elect at its sole discretion whether to redeem its preferred stock. However, dividends of approximately $1.5 million and $1.6 million for fiscal years 2003 and 2002, respectively, accrued on the preferred stock for purposes
of calculating net loss applicable to common shares. 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. Covenants in financing agreements for the Pioneer have prohibited the Company from paying dividends on the preferred stock.



Net Loss. Consolidated net loss applicable to common shares was
$9.4 million, or $1.51 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



General.Casino, hotel and food/beverage revenues and expenses at the Pioneer comprised the majority of
consolidated casino, hotel and food/beverage revenues and expenses included in the Companys consolidated statements of operations during the year ended September 30, 2003 and are discussed separately below. There were other insignificant
casino and food/beverage revenues and expenses in 2003 from ASMC which are not discussed separately below.



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 $0.3 million, or 7.2%, due primarily
to decreased table game win of $0.2 million, 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 $0.7 million, 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 $0.3 million, 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.



17



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##### Table of Contents

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.



Casino expenses decreased $0.7 million, 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 $0.7 million for the year ended September 30, 2003 and $0.8 million for the year ended September 30, 2002. Food and beverage expenses decreased $0.8
million, 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 $0.2 million, 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 $0.3 million, 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 $0.7 million, 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 $0.5 million, 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 $0.1 million, 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.



18



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##### Table of Contents

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



Contractual Obligations and Commitments



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



|                    |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|------------------- |  | ----------------------- | ------ | ---- | - | ----- |  | ---- | ------ | ---- | - | ------------------ |  | ----- | ----- |  | - | ------ |  | - | -------
|                    |  | Payments Due By Periods
|                    |  | 2005                    |        | 2006 |   | 2007  |  | 2008 |        | 2009 |   | 2010 andThereafter |  | Total
|                    |  | (dollars in thousands) 
|Non-recourse debt:  |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|Gaithersburg        |  | $                       | 1,658  |      | $ | 1,915 |  | $    | 2,195  |      | $ | 2,490              |  | $     | 2,828 |  | $ | 40,302 |  | $ | 51,388 
|Sovereign           |  |                         | 28,400 |      |   | 0     |  |      | 0      |      |   | 0                  |  |       | 0     |  |   | 31,199 |  |   | 59,599 
|Long-term debt:     |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|Building            |  |                         | 70     |      |   | 80    |  |      | 14     |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 164    
|Equipment           |  |                         | 727    |      |   | 603   |  |      | 418    |      |   | 13                 |  |       | 0     |  |   | 0      |  |   | 1,761  
|Mortgage obligation |  |                         | 752    |      |   | 796   |  |      | 11,131 |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 12,679 
|Operating leases:   |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|Ground lease        |  |                         | 302    |      |   | 302   |  |      | 302    |      |   | 302                |  |       | 302   |  |   | 20,951 |  |   | 22,461 
|Corporate offices   |  |                         | 155    |      |   | 100   |  |      | 22     |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 277    
|                    |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|                    |  | $                       | 32,064 |      | $ | 3,796 |  | $    | 14,082 |      | $ | 2,805              |  | $     | 3,130 |  | $ | 92,452 |  | $ | 148,329
|                    |  |                         |        |      |   |       |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        



The Company is
required to make the following cash interest payments related to the above debt obligations: (i) Non-recourse debt - $10.2 million (2005), $7.3 million (2006), $7.1 million (2007), $7.0 million (2008), $6.8 million (2009), and $52.8 million (2010
and thereafter), and (ii) Long-term debt - $0.8 million (2005), $0.7 million (2006), $0.2 million (2007), $0 (2008), $0 (2009) and $0 (2010 and thereafter).



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.



A non-recourse obligation related to the Massachusetts property of approximately $25.7 million matures during the three months ending June 30, 2005. The
tenant of the property is required to make this payment subject to a lease agreement, and the payment is also guaranteed by another company. Based upon the financial condition of the tenant, management does not foresee any problems in the timely
satisfaction of this obligation by third parties.



Liquidity and Capital
Resources



As of September 30, 2004, the Company held cash
and cash equivalents of $3.4 million compared to $5.9 million at September 30, 2003. In addition, the Company had $5.4 million in investment in marketable securities at September 30, 2004 compared to $7.3 million at September 30, 2003. Management
believes that through cash flow generated from its casino operations and its long-term investments, the Company will have sufficient available cash and cash resources to meet its cash requirements through the twelve-month period ending September 30,
2005. The investment properties were structured such that future tenants payments cover future required mortgage payments.



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##### Table of Contents

Cash Flows from Operating Activities. The Companys cash provided by operations was
approximately $4.7 million for the year ended September 30, 2004 as compared to approximately $2.4 million for the year ended September 30, 2003. This increase was primarily due to an improvement in the net loss, (before a gain on the sale of assets
of approximately $4.0 million), of approximately $2.0 million, and an increase in cash provided by changes in operating assets and liabilities of approximately $1.3 million offset, in part, by a decrease in depreciation and the negative amortization
of debt in 2004 of approximately $1.2 million.



Cash
Flows from Investing Activities. Cash provided by investing activities was $21.2 million during the year ended September 30, 2004, compared to cash provided by investing activities of $3.0 million during the year ended September 30, 2003.
The primary components of cash provided by investing activities were a decrease in restricted cash balances of approximately $13.9 million, proceeds from the sale of certain land and assets of approximately $5.8 million and proceeds from net
marketable securities transactions of approximately $2.5 million. Capital expenditures for the current year were $1.0 million. In the prior year, the Company generated $5.5 million, net, in marketable securities transactions and expended $2.0
million in capital expenditures.



Cash Flows from
Financing Activities. Cash used in financing activities was $28.4 million in the year ended September 30, 2004 compared to $8.1 million during the prior year. During fiscal 2004, the Company paid approximately $36 million to purchase the
Pioneer assets. Additionally, principal payments of over $6 million were made on non-recourse debt, the Company paid in excess of $5 million of its $18 million of debt acquired in December 2003 and certain other debt obligations of approximately $4
million were made. The Company also collected approximately $4.9 million of notes receivable included in other assets within its consolidated balance sheets.



The Companys primary source of operating cash is from the Pioneers operations and from interest income on available cash and cash equivalents
and investments in marketable securities. From time to time, transactions involving the sale of certain land or other assets also contribute to the Companys cash balances. 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. The Companys 27-acre parcel of real property on the Strip was previously subject to a lease with a water theme park operator. The Company generates minimal cash from the lease agreement after payment of property costs. This lease was
terminated in September 2004, although a third party has agreed to a short-term lease for less than 10% of the property which will generate approximately the same amount of net cash generated from the terminated lease.



The Companys primary use of funds is for operations of Archon, which
includes costs of executive and administrative personnel, administrative functions and costs to explore development opportunities. As previously noted, the Company had the option to acquire the Pioneer during the period from December 29, 2003 to
December 31, 2007. In December 2003, the Company exercised the Early Purchase Option (the EPO). 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. Obligations under lease of approximately $37.0 million were retired
upon the exercise of the EPO. Accordingly, the Company recorded a reduction of its carrying value of property and equipment at the Pioneer of approximately $1.4 million in connection with this transaction.



Pioneer



Pioneers principal uses of cash are for payments of, rent and capital expenditures to maintain the facility and
administrative expenses incurred in operating a casino. The Company has implemented changes in personnel and promotional programs and installed new slot equipment to address the decreases in revenues and operating income. One of managements
main focuses is to recapture market share in the Laughlin market. Management believes this will be partially achieved by capital improvements to the Pioneers food and beverage and other retail outlets, certain of which were completed in
October 2003. The capital expenditures totaled approximately $0.9 million and were mainly funded with cash from Pioneers restricted cash accounts. As a result of the Companys exercise of the EPO to retire the leases, there are no longer
any restrictions on the use of the Pioneers cash nor are there any other operational restrictions or requirements which otherwise existed prior to the exercise.



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##### Table of Contents

Payments of obligations under lease were $0.9 million and $3.4 million, for the fiscal years ended
September 30, 2004 and 2003, respectively, and rent expense was approximately $0.7 million and $0.8 million for fiscal years ended September 30, 2004 and 2003, respectively. Capital expenditures to maintain the facility in fiscal 2004 were
approximately $0.9 million.



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



Dukes Casino



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



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



Preferred Stock



The Companys preferred
stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semi-annual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company
has not declared the semi-annual preferred stock dividends since October 1, 1996. The dividend rate per annum was equal to 8% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11%; the
dividend rate continued to increase by an additional 50 basis points on each succeeding semi-annual 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 not
been recorded as an increase to the preferred stock account. As of September 30, 2004, the aggregate liquidation preference of the preferred stock was approximately $19.2 million, or $4.24 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. Accordingly, two of the Companys current six board members have been elected by the
preferred shareholders.



The Board of Directors of the Company
authorized an increase in the amount of cash that may be used to purchase preferred stock to $2.5 million. As of December 27, 2004, the Company had purchased 879,559 shares of preferred stock for $1,406,399 under this program. During the year ended
September 30, 2004, the Company purchased 118,069 preferred shares at a cost of approximately $249,000.



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##### Table of Contents

Recently Issued Accounting Standards



FIN 46. In January 2003, the Financial Accounting Standards Board (the FASB) issued FASB
Interpretation No. (FIN) 46, Consolidation of Variable Interest Entities(VIEs). In December 2003, the FASB reissued Interpretation No. 46 (FIN 46R) with certain modifications and clarifications.
Application of FIN 46R is effective for interests in certain variable interest entities for periods ending after March 15, 2004 unless FIN 46 was previously applied. FIN 46R establishes standards for determining under what circumstances VIEs should
be consolidated with their primary beneficiary, including those in which the usual condition for consolidation does not apply. FIN 46R also requires disclosures about unconsolidated VIEs in which the Company has a significant variable interest. The
consolidation requirements of FIN 46R apply immediately to VIEs created after January 31, 2003 and were effective beginning in the Companys second quarter ended March 31, 2004. The Company has evaluated its relationships and does not believe
it has any significant, consolidatable VIEs. As such, the adoption of this Interpretation had no impact on the Companys results of operations and financial position.



Effects of Inflation



The Company has been generally successful in recovering costs associated with inflation through price adjustments in its hotel room rates. 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 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. Excluding its non-recourse debt, the Company has total
interest-bearing debt of approximately $15 million, of which approximately $13 million bears interest at a variable rate (approximately 5.75% on September 30, 2004). Therefore, the Company maintains certain market rate risk related to this debt. A
change in the interest rates of 1% would cause an approximate $130,000 change in the amount of interest the Company would incur based on the amount of variable debt outstanding for the year ended September 30, 2004. Any future borrowings related to
this debt will be exposed to this same market rate risk.



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



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##### Table of Contents

Item 8. Financial Statements



INDEX

TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2004, 2003 and 2002



|                                                                                                      |  |     
|----------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                      |  | Page
|Report of Independent Registered Public Accounting Firm                                               |  | 24  
|                                                                                                      | 
|Consolidated Balance Sheets as of September 30, 2004 and 2003                                         |  | 25  
|                                                                                                      | 
|Consolidated Statements of Operations for the Years Ended September 30, 2004, 2003 and 2002           |  | 27  
|                                                                                                      | 
|Consolidated Statements of Stockholders Equity for the Years Ended September 30, 2004, 2003 and 2002 |  | 28  
|                                                                                                      | 
|Consolidated Statements of Cash Flows for the Years Ended September 30, 2004, 2003 and 2002           |  | 29  
|                                                                                                      | 
|Notes to Consolidated Financial Statements                                                            |  | 30  



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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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Stockholders of Archon Corporation:



We have audited the
accompanying consolidated balance sheets of Archon Corporation and subsidiaries (the Company) as of September 30, 2004 and 2003, and the related consolidated statements of operations, stockholders equity and cash flows for each of
the three years in the period ended September 30, 2004. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Archon Corporation and subsidiaries as of September 30, 2004 and 2003, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 2004, in conformity with accounting principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP

Las Vegas, Nevada

December 23, 2004



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets

as of September 30, 2004 and 2003



|                                    |  |      |             |   |      |   |             |  
|----------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                    |  | 2004 |             |   | 2003 |  
|ASSETS                              |  |      |             |   |      |   |             |  
|Current assets:                     |  |      |             |   |      |   |             |  
|Cash and cash equivalents           |  | $    | 3,442,418   |   |      | $ | 5,852,354   |  
|Investment in marketable securities |  |      | 5,398,441   |   |      |   | 7,262,208   |  
|Accounts receivable, net            |  |      | 3,286,668   |   |      |   | 3,178,143   |  
|Inventories                         |  |      | 294,162     |   |      |   | 288,947     |  
|Prepaid expenses and other          |  |      | 805,578     |   |      |   | 755,537     |  
|                                    |  |      |             |   |      |   |             |  
|Total current assets                |  |      | 13,227,267  |   |      |   | 17,337,189  |  
|Property and equipment:             |  |      |             |   |      |   |             |  
|Land held for development           |  |      | 21,504,400  |   |      |   | 23,109,400  |  
|Property held for investment, net   |  |      | 133,708,401 |   |      |   | 136,824,589 |  
|Land used in operations             |  |      | 8,125,589   |   |      |   | 8,125,589   |  
|Buildings and improvements          |  |      | 35,309,806  |   |      |   | 35,639,920  |  
|Machinery and equipment             |  |      | 9,840,218   |   |      |   | 11,515,818  |  
|Accumulated depreciation            |  |      | (22,113,300 | ) |      |   | (20,587,802 | )
|                                    |  |      |             |   |      |   |             |  
|Property and equipment, net         |  |      | 186,375,114 |   |      |   | 194,627,514 |  
|Restricted cash                     |  |      | 0           |   |      |   | 13,898,971  |  
|Other assets                        |  |      | 7,329,354   |   |      |   | 11,526,516  |  
|                                    |  |      |             |   |      |   |             |  
|Total assets                        |  | $    | 206,931,735 |   |      | $ | 237,390,190 |  
|                                    |  |      |             |   |      |   |             |  



See the accompanying Notes to
Consolidated Financial Statements.



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets  (continued)

as of September 30, 2004 and
2003



|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                                                                                                                                                        |  | 2004 |             |   | 2003 |  
|LIABILITIES and STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                                                    |  |      |             |   |      |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                                                                    |  |      |             |   |      |   |             |  
|Accounts payable                                                                                                                                                                                                                                                                                                        |  | $    | 2,138,077   |   |      | $ | 2,668,187   |  
|Interest payable                                                                                                                                                                                                                                                                                                        |  |      | 1,939,750   |   |      |   | 2,249,954   |  
|Accrued and other liabilities                                                                                                                                                                                                                                                                                           |  |      | 3,220,391   |   |      |   | 3,071,867   |  
|Current portion of debt                                                                                                                                                                                                                                                                                                 |  |      | 1,548,231   |   |      |   | 3,510,004   |  
|Current portion of non-recourse debt                                                                                                                                                                                                                                                                                    |  |      | 30,057,775  |   |      |   | 6,414,729   |  
|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                                                                                                                                                                                               |  |      | 38,904,224  |   |      |   | 17,914,741  |  
|Debt - less current portion                                                                                                                                                                                                                                                                                             |  |      | 13,055,445  |   |      |   | 1,073,305   |  
|Non-recourse debt - less current portion                                                                                                                                                                                                                                                                                |  |      | 80,929,404  |   |      |   | 110,987,179 |  
|Obligation under capital lease                                                                                                                                                                                                                                                                                          |  |      | 0           |   |      |   | 36,637,505  |  
|Deferred income taxes                                                                                                                                                                                                                                                                                                   |  |      | 29,748,077  |   |      |   | 29,939,408  |  
|Other liabilities                                                                                                                                                                                                                                                                                                       |  |      | 21,902,820  |   |      |   | 16,586,096  |  
|Commitments and contingencies (see Note 19)                                                                                                                                                                                                                                                                             |  |      |             |   |      |   |             |  
|Stockholders equity:                                                                                                                                                                                                                                                                                                   |  |      |             |   |      |   |             |  
|Common stock, $.01 par value; authorized-100,000,000 shares; issued and outstanding  6,221,431 shares on September 30, 2004 and
2003                                                                                                                                                                                   |  |      | 62,214      |   |      |   | 62,214      |  
|Preferred stock, exchangeable, redeemable 16.0% cumulative, stated at $2.14 liquidation value, authorized-10,000,000 shares; issued and
outstanding  4,520,352 shares on September 30, 2004 and 4,638,421 shares on September 30, 2003 with cumulative dividends in arrears of $9,504,266 and $8,164,317, respectively |  |      | 9,673,553   |   |      |   | 9,926,221   |  
|Additional paid-in capital                                                                                                                                                                                                                                                                                              |  |      | 54,582,364  |   |      |   | 54,529,070  |  
|Accumulated deficit                                                                                                                                                                                                                                                                                                     |  |      | (42,830,615 | ) |      |   | (40,948,873 | )
|Accumulated other comprehensive income                                                                                                                                                                                                                                                                                  |  |      | 992,023     |   |      |   | 844,841     |  
|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Subtotal                                                                                                                                                                                                                                                                                                                |  |      | 22,479,539  |   |      |   | 24,413,473  |  
|Less stock subscriptions receivable                                                                                                                                                                                                                                                                                     |  |      | 0           |   |      |   | (73,743     | )
|Less treasury common stock  4,875 shares, at cost                                                                                                                                                                                                                                                                      |  |      | (87,774     | ) |      |   | (87,774     | )
|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                                                                                                                                                                                                                              |  |      | 22,391,765  |   |      |   | 24,251,956  |  
|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                                                              |  | $    | 206,931,735 |   |      | $ | 237,390,190 |  
|                                                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  



See the accompanying Notes to
Consolidated Financial Statements.



26



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Operations

For the Years Ended September 30, 2004, 2003 and 2002



|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                        |  | 2004 |             |   | 2003 |   |             | 2002 | 
|Revenues:                                               |  |      |             |   |      |   |             |      |  |   |             |  
|Casino                                                  |  | $    | 27,470,751  |   |      | $ | 27,948,767  |      |  | $ | 29,415,497  |  
|Hotel                                                   |  |      | 3,125,408   |   |      |   | 2,689,656   |      |  |   | 2,659,335   |  
|Food and beverage                                       |  |      | 8,381,094   |   |      |   | 7,385,940   |      |  |   | 7,831,579   |  
|Investment properties                                   |  |      | 12,402,247  |   |      |   | 12,402,246  |      |  |   | 12,402,247  |  
|Other                                                   |  |      | 2,166,278   |   |      |   | 2,576,058   |      |  |   | 3,197,838   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Gross revenues                                          |  |      | 53,545,778  |   |      |   | 53,002,667  |      |  |   | 55,506,496  |  
|Less casino promotional allowances                      |  |      | (7,853,205  | ) |      |   | (6,841,198  | )    |  |   | (6,741,025  | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Net operating revenues                                  |  |      | 45,692,573  |   |      |   | 46,161,469  |      |  |   | 48,765,471  |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Operating expenses:                                     |  |      |             |   |      |   |             |      |  |   |             |  
|Casino                                                  |  |      | 15,126,830  |   |      |   | 16,337,894  |      |  |   | 15,978,110  |  
|Hotel                                                   |  |      | 669,411     |   |      |   | 733,436     |      |  |   | 816,471     |  
|Food and beverage                                       |  |      | 4,382,641   |   |      |   | 3,567,409   |      |  |   | 4,084,003   |  
|Other                                                   |  |      | 1,133,699   |   |      |   | 1,828,325   |      |  |   | 1,988,276   |  
|Selling, general and administrative                     |  |      | 4,375,537   |   |      |   | 4,806,533   |      |  |   | 5,062,358   |  
|Corporate expenses                                      |  |      | 3,800,474   |   |      |   | 2,796,269   |      |  |   | 2,815,467   |  
|Utilities and property expenses                         |  |      | 5,088,568   |   |      |   | 5,236,325   |      |  |   | 5,701,546   |  
|Depreciation and amortization                           |  |      | 5,980,476   |   |      |   | 6,227,593   |      |  |   | 5,803,042   |  
|Provision for receivable and investment                 |  |      | 162,225     |   |      |   | 1,700,000   |      |  |   | 0           |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Total operating expenses                                |  |      | 40,719,861  |   |      |   | 43,233,784  |      |  |   | 42,249,273  |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Operating income                                        |  |      | 4,972,712   |   |      |   | 2,927,685   |      |  |   | 6,516,198   |  
|Interest expense                                        |  |      | (12,880,017 | ) |      |   | (16,415,615 | )    |  |   | (16,645,141 | )
|Gain on sale of assets                                  |  |      | 3,953,148   |   |      |   | 0           |      |  |   | 0           |  
|Interest income                                         |  |      | 860,165     |   |      |   | 1,489,483   |      |  |   | 1,288,887   |  
|Other income                                            |  |      | 298,763     |   |      |   |             |      |  |   |             |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Loss before income tax benefit                          |  |      | (2,795,229  | ) |      |   | (11,998,447 | )    |  |   | (8,840,056  | )
|Federal income tax benefit                              |  |      | 913,487     |   |      |   | 4,151,668   |      |  |   | 1,133,000   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Net loss                                                |  |      | (1,881,742  | ) |      |   | (7,846,779  | )    |  |   | (7,707,056  | )
|Dividends accrued on preferred shares                   |  |      | (1,562,171  | ) |      |   | (1,526,611  | )    |  |   | (1,555,246  | )
|                                                        |  |      |            
|Net loss applicable to common shares                    |  | $    | (3,443,913  | ) |      | $ | (9,373,390  | )    |  | $ | (9,262,302  | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Average common shares outstanding                       |  |      | 6,221,431   |   |      |   | 6,221,431   |      |  |   | 6,180,152   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Average common and common equivalent shares outstanding |  |      | 6,221,431   |   |      |   | 6,221,431   |      |  |   | 6,180,152   |  
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  
|Basic and diluted loss per common share                 |  | $    | (0.55       | ) |      | $ | (1.51       | )    |  | $ | (1.50       | )
|                                                        |  |      |             |   |      |   |             |      |  |   |             |  



See the accompanying Notes to
Consolidated Financial Statements.



27



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Stockholders Equity

For the Years Ended September 30, 2004, 2003 and 2002



|                                         |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   |            |  
|---------------------------------------- |  | ----------- | ------ | -------------- | - | ---------- | ------------------------ |  | ------------------- | ---------- |  | --------------------------------------------- | ----------- | - | ------------------------------ | - | -------- | -------------- |  | - | ------- | - |  | - | ------- | - |  | - | ---------- | -
|                                         |  | CommonStock |        | PreferredStock |   |            | AdditionalPaid-InCapital |  | Accumulated Deficit |            |  | Accumulated Other Comprehensive Income/(Loss) |             |   | Stock Subscriptions Receivable |   |          | Treasury Stock |  |   | Total   |  
|Balances, October 1, 2001                |  | $           | 61,533 |                | $ | 10,963,395 |                          |  | $                   | 53,630,047 |  | $                                             | (25,395,038 | ) |                                | $ | (406,701 | )              |  | $ | 0       |   |  | $ | (87,774 | ) |  | $ | 38,765,462 |  
|Net loss                                 |  |             |        |                |   |            |                          |  |                     |            |  |                                               | (7,707,056  | ) |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (7,707,056 | )
|Preferred stock purchased                |  |             |        |                |   | (97,074    | )                        |  |                     | 21,953     |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (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 |                |   | 10,866,321 |                          |  |                     | 53,725,743 |  |                                               | (33,102,094 | ) |                                |   | (94,678  | )              |  |   | (73,743 | ) |  |   | (87,774 | ) |  |   | 31,295,989 |  
|Net loss                                 |  |             |        |                |   |            |                          |  |                     |            |  |                                               | (7,846,779  | ) |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (7,846,779 | )
|Preferred stock purchased                |  |             |        |                |   | (940,100   | )                        |  |                     | 310,963    |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (629,137   | )
|Capital contributions                    |  |             |        |                |   |            |                          |  |                     | 492,364    |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | 492,364    |  
|Unrealized gain on marketable securities |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   | 939,519  |                |  |   |         |   |  |   |         |   |  |   | 939,519    |  
|                                         |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   |            |  
|Balances, September 30, 2003             |  |             | 62,214 |                |   | 9,926,221  |                          |  |                     | 54,529,070 |  |                                               | (40,948,873 | ) |                                |   | 844,841  |                |  |   | (73,743 | ) |  |   | (87,774 | ) |  |   | 24,251,956 |  
|Net loss                                 |  |             |        |                |   |            |                          |  |                     |            |  |                                               | (1,881,742  | ) |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (1,881,742 | )
|Preferred stock purchased                |  |             |        |                |   | (252,668   | )                        |  |                     | 3,294      |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | (249,374   | )
|Stock-based compensation expense         |  |             |        |                |   |            |                          |  |                     | 50,000     |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   | 50,000     |  
|Unrealized gain on marketable securities |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   | 147,182  |                |  |   |         |   |  |   |         |   |  |   | 147,182    |  
|Stock subscriptions received             |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   |          |                |  |   | 73,743  |   |  |   |         |   |  |   | 73,743     |  
|                                         |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   |            |  
|Balances, September 30, 2004             |  | $           | 62,214 |                | $ | 9,673,553  |                          |  | $                   | 54,582,364 |  | $                                             | (42,830,615 | ) |                                | $ | 992,023  |                |  | $ | 0       |   |  | $ | (87,774 | ) |  | $ | 22,391,765 |  
|                                         |  |             |        |                |   |            |                          |  |                     |            |  |                                               |             |   |                                |   |          |                |  |   |         |   |  |   |         |   |  |   |            |  



See the accompanying Notes to
Consolidated Financial Statements.



28



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended September 30, 2004, 2003 and 2002



|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                |  | 2004 |             |   | 2003 |   |            | 2002 | 
|Cash flows from operating activities:                                           |  |      |             |   |      |   |            |      |  |   |            |  
|Net loss                                                                        |  | $    | (1,881,742  | ) |      | $ | (7,846,779 | )    |  | $ | (7,707,056 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |      |             |   |      |   |            |      |  |   |            |  
|Depreciation and amortization                                                   |  |      | 5,980,476   |   |      |   | 6,227,593  |      |  |   | 5,803,042  |  
|Interest expense from amortization of debt issuance costs                       |  |      | 342,934     |   |      |   | 231,996    |      |  |   | 231,996    |  
|Stock-based compensation expense                                                |  |      | 50,000      |   |      |   | 0          |      |  |   | 0          |  
|Provision for doubtful receivables                                              |  |      | 31,220      |   |      |   | 40,999     |      |  |   | 35,714     |  
|Gain on sale of assets                                                          |  |      | (3,953,148  | ) |      |   | 0          |      |  |   | 0          |  
|Negative amortization of debt                                                   |  |      | 344,685     |   |      |   | 1,272,197  |      |  |   | 1,117,411  |  
|Change in assets and liabilities:                                               |  |      |             |   |      |   |            |      |  |   |            |  
|Accounts receivable, net                                                        |  |      | (139,745    | ) |      |   | 6,802      |      |  |   | (201,631   | )
|Inventories                                                                     |  |      | (5,215      | ) |      |   | (2,362     | )    |  |   | (12,542    | )
|Prepaid expenses and other                                                      |  |      | (50,041     | ) |      |   | 219,661    |      |  |   | (5,629     | )
|Deferred income taxes                                                           |  |      | (725,498    | ) |      |   | (4,151,668 | )    |  |   | (633,000   | )
|Other assets                                                                    |  |      | (592,659    | ) |      |   | (341,946   | )    |  |   | (1,846,292 | )
|Accounts payable                                                                |  |      | 175,273     |   |      |   | 741,383    |      |  |   | 922,826    |  
|Interest payable                                                                |  |      | (310,204    | ) |      |   | (35,294    | )    |  |   | (91,770    | )
|Accrued and other liabilities                                                   |  |      | 5,465,248   |   |      |   | 6,027,592  |      |  |   | 3,987,202  |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Net cash provided by operating activities                                       |  |      | 4,731,584   |   |      |   | 2,390,174  |      |  |   | 1,600,271  |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Cash flows from investing activities:                                           |  |      |             |   |      |   |            |      |  |   |            |  
|Proceeds from sale of assets                                                    |  |      | 5,770,000   |   |      |   | 0          |      |  |   | 0          |  
|Decrease (increase) in restricted cash                                          |  |      | 13,898,971  |   |      |   | (483,814   | )    |  |   | 2,485,305  |  
|Capital expenditures                                                            |  |      | (989,102    | ) |      |   | (2,022,838 | )    |  |   | (4,352,497 | )
|Marketable securities purchased                                                 |  |      | (272,214    | ) |      |   | (1,067,096 | )    |  |   | (7,314,325 | )
|Marketable securities sold                                                      |  |      | 2,817,330   |   |      |   | 6,531,199  |      |  |   | 5,262,028  |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Net cash provided by (used in) investing activities                             |  |      | 21,224,985  |   |      |   | 2,957,451  |      |  |   | (3,919,489 | )
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Cash flows from financing activities:                                           |  |      |             |   |      |   |            |      |  |   |            |  
|Proceeds from long-term debt                                                    |  |      | 18,565,751  |   |      |   | 2,867,171  |      |  |   | 0          |  
|Paid on long-term debt and obligation under capital lease                       |  |      | (51,203,512 | ) |      |   | (5,956,780 | )    |  |   | (5,203,337 | )
|Note receivable                                                                 |  |      | 4,884,301   |   |      |   | (4,884,301 | )    |  |   | 0          |  
|Debt issuance costs                                                             |  |      | (437,414    | ) |      |   | 0          |      |  |   | 0          |  
|Preferred stock acquired                                                        |  |      | (249,374    | ) |      |   | (629,137   | )    |  |   | (75,121    | )
|Capital contributions                                                           |  |      | 0           |   |      |   | 492,364    |      |  |   | 0          |  
|Stock subscription received                                                     |  |      | 73,743      |   |      |   | 0          |      |  |   | 0          |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Net cash used in financing activities                                           |  |      | (28,366,505 | ) |      |   | (8,110,683 | )    |  |   | (5,278,458 | )
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Decrease in cash and cash equivalents                                           |  |      | (2,409,936  | ) |      |   | (2,763,058 | )    |  |   | (7,597,676 | )
|                                                                                |  |      |            
|Cash and cash equivalents, beginning of year                                    |  |      | 5,852,354   |   |      |   | 8,615,412  |      |  |   | 16,213,088 |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  
|Cash and cash equivalents, end of year                                          |  | $    | 3,442,418   |   |      | $ | 5,852,354  |      |  | $ | 8,615,412  |  
|                                                                                |  |      |             |   |      |   |            |      |  |   |            |  

See the accompanying Notes to Consolidated Financial Statements.



29



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##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended September 30, 2004, 2003 and 2002



1. Basis of Presentation and General Information



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



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 would 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
exercised 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.



2. Summary of Significant Accounting Policies



Principles of Consolidation



The
accompanying 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 significant 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. 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, 2004 and 2003 include investments in government obligations and corporate securities.



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. Realized gains and losses are determined on a specific identification method. At September 30, 2004 and 2003, equity securities available-for-sale included investments in common and preferred stock.



30



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##### Table of Contents

The Company recorded approximately $147,000, $940,000 and $312,000 of other comprehensive gain associated
with unrealized gains or losses on these securities during the years ended September 30, 2004, 2003 and 2002, respectively.



The following is a summary of available-for-sale marketable securities as of September 30, 2004 and 2003:



|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|--------------------------------- |  | ---- | --------- | -------------- | - | ---------------- |  | ------------------- | ------ |  | - | ---------
|                                  |  | 2004
|                                  |  | Cost |           | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Government and agency obligations |  | $    | 0         |                | $ | 0                |  | $                   | 0      |  | $ | 0        
|Other debt securities             |  |      | 2,600,000 |                |   | 104,120          |  |                     | 0      |  |   | 2,704,120
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|Total debt securities             |  |      | 2,600,000 |                |   | 104,120          |  |                     | 0      |  |   | 2,704,120
|Equity securities                 |  |      | 1,272,251 |                |   | 1,483,145        |  |                     | 61,075 |  |   | 2,694,321
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|Total                             |  | $    | 3,872,251 |                | $ | 1,587,265        |  | $                   | 61,075 |  | $ | 5,398,441
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          



|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|--------------------------------- |  | ---- | --------- | -------------- | - | ---------------- |  | ------------------- | ------ |  | - | ---------
|                                  |  | 2003
|                                  |  | Cost |           | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Government and agency obligations |  | $    | 0         |                | $ | 0                |  | $                   | 0      |  | $ | 0        
|Other debt securities             |  |      | 4,272,917 |                |   | 191,918          |  |                     | 5,578  |  |   | 4,459,257
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|Total debt securities             |  |      | 4,272,917 |                |   | 191,918          |  |                     | 5,578  |  |   | 4,459,257
|Equity securities                 |  |      | 1,938,835 |                |   | 922,430          |  |                     | 58,314 |  |   | 2,802,951
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          
|Total                             |  | $    | 6,211,752 |                | $ | 1,114,348        |  | $                   | 63,892 |  | $ | 7,262,208
|                                  |  |      |           |                |   |                  |  |                     |        |  |   |          



The cost and estimated
fair value of debt securities as of September 30, 2004 and 2003 by contractual maturity are shown below:



|                                       |  |      |           |            |   |          
|-------------------------------------- |  | ---- | --------- | ---------- | - | ---------
|                                       |  | 2004
|                                       |  | 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 |  |      | 0         |            |   | 0        
|Due after ten years                    |  |      | 2,600,000 |            |   | 2,704,120
|                                       |  |      |           |            |   |          
|Total                                  |  | $    | 2,600,000 |            | $ | 2,704,120
|                                       |  |      |           |            |   |          



|                                       |  |      |           |            |   |          
|-------------------------------------- |  | ---- | --------- | ---------- | - | ---------
|                                       |  | 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 |  |      | 759,167   |            |   | 779,650  
|Due after ten years                    |  |      | 3,513,750 |            |   | 3,679,607
|                                       |  |      |           |            |   |          
|Total                                  |  | $    | 4,272,917 |            | $ | 4,459,257
|                                       |  |      |           |            |   |          



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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.



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 for buildings and improvements is 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.



Slot Club Liability



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 cash, free gifts, food and beverages and additional points redeemable
for free play. Included in accrued liabilities is approximately $600,000 and $450,000 at September 30, 2004 and 2003, respectively, for estimated redemption value of points accumulated by patrons. This value is estimated based on historical amounts
of free gift costs redeemed.



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.



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##### Table of Contents

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 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):



|                  |  |      |       |      |   |       |  |   |      
|----------------- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                  |  | 2004 |       | 2003 |   | 2002 
|Food and beverage |  | $    | 5,217 |      | $ | 4,661 |  | $ | 4,530
|Hotel             |  |      | 855   |      |   | 893   |  |   | 825  
|Other             |  |      | 138   |      |   | 78    |  |   | 72   
|                  |  |      |       |      |   |       |  |   |      
|Total             |  | $    | 6,210 |      | $ | 5,632 |  | $ | 5,427
|                  |  |      |       |      |   |       |  |   |      



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 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 loss per share and diluted net loss per share. Basic per share amounts are computed by dividing net 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 not included in diluted calculations during fiscal years 2004, 2003 and 2002 since the Company incurred a net loss. Dilutive
stock options of approximately 450,000 for the years ended September 30, 2004, 2003 and 2002, respectively, have not been included in the computation of diluted net loss per share as their effect would be antidilutive.



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



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##### Table of Contents

|                                                                                                                                            |  |                           |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                                            |  | Years Ended September 30, |       
|                                                                                                                                            |  | 2004                      |        |   | 2003 |   |        | 2002 | 
|Net loss applicable to common shares                                                                                                        |  | $                         | (3,444 | ) |      | $ | (9,373 | )    |  | $ | (9,262 | )
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                           | (1     | ) |      |   | (1     | )    |  |   | (13    | )
|                                                                                                                                            |  |                           |        |   |      |   |        |      |  |   |        |  
|Pro forma net loss applicable to common shares                                                                                              |  | $                         | (3,445 | ) |      | $ | (9,374 | )    |  | $ | (9,275 | )
|                                                                                                                                            |  |                           |        |   |      |   |        |      |  |   |        |  
|Loss per common share:                                                                                                                      |  |                           |        |   |      |   |        |      |  |   |        |  
|Basic and diluted  as reported                                                                                                             |  | $                         | (0.55  | ) |      | $ | (1.51  | )    |  | $ | (1.50  | )
|                                                                                                                                            |  |                           |        |   |      |   |        |      |  |   |        |  
|Basic and diluted  pro forma                                                                                                               |  | $                         | (0.55  | ) |      | $ | (1.51  | )    |  | $ | (1.50  | )
|                                                                                                                                            |  |                           |        |   |      |   |        |      |  |   |        |  



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



FIN 46.    In January 2003, the FASB issued FASB Interpretation No. (FIN) 46, Consolidation of Variable
Interest Entities(VIEs). In December 2003, the FASB reissued Interpretation No. 46 (FIN 46R) with certain modifications and clarifications. Application of FIN 46R was effective for interests in certain variable interest
entities for periods ending after March 15, 2004 unless FIN 46 was previously applied. FIN 46R establishes standards for determining under what circumstances VIEs should be consolidated with their primary beneficiary, including those in which the
usual condition for consolidation does not apply. FIN 46R also requires disclosures about unconsolidated VIEs in which the Company has a significant variable interest. The consolidation requirements of FIN 46R apply immediately to VIEs created after
January 31, 2003 and were effective beginning in the Companys second quarter ended March 31, 2004. The Company has evaluated its relationships and does not believe it has any significant, consolidatable VIEs. As such, the adoption of this
Interpretation had no impact on the Companys results of operations and financial position.



Fair Value of Financial Instruments



The Company estimates the fair value of its preferred stock to be approximately $10.4 million at September 30, 2004 based upon available market prices. The Company estimates that its debt and all other financial
instruments have a fair value that materially approximates their recorded value, except for its non-recourse debt associated with an investment property owned in Massachusetts. The debt, which bears interest at rates of 10% and 12% on two notes, has
a fair market value approximately $15.5 million greater than its cost at September 30, 2004 of approximately $59.6 million. The interest rate used to discount the notes and estimate the fair value was 7%, the same interest rate that is associated
with similar non-recourse debt of the Company.



Other Income



Other income consists of gains from the same of
marketable securities and income from investments in unconsolidated entities.



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##### Table of Contents

Comprehensive Loss



Comprehensive loss is the total of net loss and all other non-stockholder changes in stockholders equity.
Comprehensive loss for each of the three years ended September 30, 2004, 2003 and 2002 is as follows (in thousands):



|                                         |  |      |        |   |      |   |        |      |  |   |        |  
|---------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                         |  | 2004 |        |   | 2003 |   |        | 2002 | 
|Net loss                                 |  | $    | (1,882 | ) |      | $ | (7,847 | )    |  | $ | (7,707 | )
|Unrealized gain on marketable securities |  |      | 147    |   |      |   | 940    |      |  |   | 312    |  
|                                         |  |      |        |   |      |   |        |      |  |   |        |  
|Comprehensive loss                       |  | $    | (1,735 | ) |      | $ | (6,907 | )    |  | $ | (7,395 | )
|                                         |  |      |        |   |      |   |        |      |  |   |        |  



Reclassifications



Certain reclassifications have been made in the prior
years consolidated financial statements to conform to the presentations used in 2004.



3. Cash and Cash Equivalents



At September 30, 2004, the Company held cash and cash equivalents of $3.4 million compared to $5.9 million at September 30, 2003. Approximately $0 and $2.1 million was held by PHI as of September 30, 2004 and 2003, respectively, 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. See Note 12.



4.
Restricted Cash



At September 30, 2003, approximately
$13.9 million was held by SFHI, Inc. (SFHI), restricted in use and pledged to secure SFHIs guaranty of PHIs lease and license obligations. As these obligations were retired in December 2003, in part by using the restricted
cash, the Company no longer has restrictions on any of its cash accounts.



5. Accounts Receivable, Net



Accounts
receivable at September 30, 2004 and 2003 consisted of the following:



|                                      |  |      |           |   |      |   |           |  
|------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                      |  | 2004 |           |   | 2003 |  
|Casino and hotel                      |  | $    | 460,981   |   |      | $ | 485,202   |  
|Rental properties                     |  |      | 3,021,562 |   |      |   | 3,021,562 |  
|Other                                 |  |      | 0         |   |      |   | 258,016   |  
|                                      |  |      |           |   |      |   |           |  
|                                      |  |      | 3,482,543 |   |      |   | 3,764,780 |  
|Less: allowance for doubtful accounts |  |      | (195,875  | ) |      |   | (586,637  | )
|                                      |  |      |           |   |      |   |           |  
|Total                                 |  | $    | 3,286,668 |   |      | $ | 3,178,143 |  
|                                      |  |      |           |   |      |   |           |  



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##### Table of Contents

Changes in the allowance for doubtful accounts for the years ended September 30, 2004, 2003, and 2002
were as follows:



|                           |  |      |          |   |      |   |         |      |  |   |           |  
|-------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | --------- | -
|                           |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Balance, beginning of year |  | $    | 586,637  |   |      | $ | 606,599 |      |  | $ | 1,495,859 |  
|Provision                  |  |      | 31,220   |   |      |   | 40,999  |      |  |   | 35,714    |  
|Accounts written-off       |  |      | (421,982 | ) |      |   | (60,961 | )    |  |   | (924,974  | )
|                           |  |      |          |   |      |   |         |      |  |   |           |  
|Balance, end of year       |  | $    | 195,875  |   |      | $ | 586,637 |      |  | $ | 606,599   |  
|                           |  |      |          |   |      |   |         |      |  |   |           |  



6. Land Held for Development



In October 1995, the Company acquired an approximately
27-acre parcel on Las Vegas Boulevard South which was recorded at approximately $21.5 million. The Company assumed an operating lease under which a water theme park operated on the 27-acre parcel. The lease was terminated by the Company in September
2004 and the tenant has until January 2005 to vacate the premises. Under the terms of the lease, as amended, the water theme park remitted a base rent of approximately $19,000 monthly plus an annual rent payment based on gross receipts. Subsequent
to September 30, 2004, the Company entered into an agreement to lease a small portion of this property for 16 months at a rate of approximately $42,000 per month.



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 and the property was sold in September 2004 to a third party for approximately $5.6 million. A gain of approximately $4.2 million was recorded in the fourth fiscal quarter ended September 30, 2004 and is included in
Gain on sale of assets in the accompanying consolidated statements of operations.



7. Property and Equipment, Net



Included in Property and equipment, net in the accompanying Consolidated Balance Sheets at September 30, 2004 and 2003 are certain assets held under lease at the Pioneer with a net carrying value of approximately $0 and $27.2 million,
respectively.



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 $0.5 million 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 2020 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 loan issue costs incurred to acquire the property recorded in Other assets in the accompanying
Consolidated Balance Sheets are being amortized over the remaining loan period. Deferred rent at September 30, 2004 and 2003 in the amount of $21.9 million and $16.6 million, respectively, is included in Other liabilities on the accompanying
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



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##### Table of Contents

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 (approximately $2.7 million) are recorded in Other assets in the accompanying Consolidated Balance Sheets and are being amortized over the remaining loan period. Deferred rent
at September 30, 2004 and 2003 in the amount of $2.3 million and $1.8 million, respectively, is included in Other assets on the accompanying Consolidated Balance Sheets. See Note 11



9. Other Assets



Included in Other assets at September 30, 2004 and 2003 are unamortized loan issue costs, which were incurred during the acquisition of certain rental
property and certain debt, and deferred rents of approximately $4.7 million and $4.4 million, respectively, and amounts due from PDS Gaming, Inc. of $0 and $4.9 million, respectively. The unamortized loan issue costs are being amortized on the
straight-line basis over the loan period, which closely approximates the effective interest method, and the deferred rents are being amortized on the straight-line basis over the lease period.



Additionally, Other assets at September 30, 2004 and 2003 include $0.4
million and $0.7 million, respectively, of commercial and residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third parties as well as loans made directly to J & J Mortgage under a master loan
agreement. The loans purchased by the Company were purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under the master loan agreement bear interest at the prime rate plus 2%. J & J Mortgage is
owned by Lowden Investment Company (LICO), which in turn is wholly-owned by Paul W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W. Delaney, a director of the Company, is the president of J
& J Mortgage.



Other assets also include amounts for the
cash surrender value of life insurance of approximately $0.6 million and $0.5 million on September 30, 2004 and 2003, respectively, and investments in unconsolidated entities of approximately $0.9 million and $0.4 million on September 30, 2004 and
2003, respectively.



10. Debt



As of September 30, 2004, the Companys long-term debt was comprised
primarily of the following obligations: a loan with a balance of approximately $12.7 million, secured by land held for development on the Las Vegas Strip, monthly payments of approximately $120,000, including interest of prime plus 1% (5.75% at
September 30, 2004) with a balloon payment of approximately $10.9 million in December 2006; a loan with a balance of $1.8 million collateralized by slot equipment with an interest rate of 7.25%, monthly principal payments of approximately $50,000
through October 2007; and a loan with a balance of $160,000 collateralized by real property with an interest rate of 13.5%, monthly payments of $8,000 through November 2006.



The Companys long-term debts at September 30, 2003 were primarily comprised of the following obligations: borrowings
of $2.9 million from a margin account (collateralized by securities owned by the Company) 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 November 2006.



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##### Table of Contents

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



|      |  |   |           
|----- |  | - | ----------
|2005  |  | $ | 1,548,231 
|2006  |  |   | 1,478,909 
|2007  |  |   | 11,563,526
|2008  |  |   | 13,010    
|      |  |   |           
|Total |  | $ | 14,603,676
|      |  |   |           



11. Non-Recourse Debt Obligations



The Company assumed $77.3 million of indebtedness,
consisting of approximately $75.1 million of first mortgage indebtedness, $43.9 million with an interest rate of 10.2% and $31.2 million with an interest rate of 12.18% and $2.1 million of indebtedness under Section 467 of the Code, in connection
with its acquisition on March 2, 2001 of the commercial office building located in Dorchester, Massachusetts. The building is under a net lease through June 2020, 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 2020 to coincide with the end of the lease term. See Note 8



A non-recourse obligation related to the Massachusetts property of
approximately $25.7 million matures during the three months ending June 30, 2005. The tenant of the property is required to make this payment subject to a lease agreement, and the payment is also guaranteed by another company. Based upon the
financial condition of the tenant, management does not foresee any problems in the timely satisfaction of this obligation by third parties.



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. The Company anticipates that the future tenant payments related to the net leases will be sufficient to fund required payments under the first mortgage notes and Section 467 debt.
See Note 8



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



|           |  |   |            
|---------- |  | - | -----------
|2005       |  | $ | 30,057,775 
|2006       |  |   | 1,915,478  
|2007       |  |   | 2,195,326  
|2008       |  |   | 2,490,198  
|2009       |  |   | 2,828,304  
|Thereafter |  |   | 71,500,098 
|           |  |   |            
|Total      |  | $ | 110,987,179
|           |  |   |            



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 would 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. In
December 2003, the



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##### Table of Contents

Company exercised its rights pursuant to an early purchase option related to the leases and retired its obligations under
lease by purchasing the assets for approximately $35.6 million. As part of the EPO exercise, whereby the Company paid approximately $1.4 million less than its recorded book value of capital lease obligations, the Company reduced its carrying value
of property and equipment by $1.4 million in accordance with Financial Interpretation No. 26, Accounting for Purchase of a Leased Asset By the Lessee During the Term of the Lease, An Interpretation of FASB Statement No. 13. See
Notes 4 and 7



The Company recorded the Pioneer Transactions in
accordance with SFAS No. 98, Accounting for Leases. As of September 30, 2004, the Company no longer has outstanding obligations under capital leases as amounts previously owed were retired in December 2003 related to the purchase
of certain assets at the Pioneer. As of September 30, 2003, the Company had recorded $36.6 million as an Obligation under lease in the accompanying Consolidated Balance Sheets.



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 Consolidated Statements of Operations.



At September 30, 2004, the Company had an operating lease for real property
that expires in 2078 and operating leases for corporate offices. The Company had no significant property and equipment under capital leases at September 30, 2004.



Future minimum lease payments as of September 30, 2004 are as follows:



|           |  |   |           
|---------- |  | - | ----------
|2005       |  | $ | 457,479   
|2006       |  |   | 402,561   
|2007       |  |   | 324,676   
|2008       |  |   | 302,500   
|2009       |  |   | 302,500   
|Thereafter |  |   | 20,948,122
|           |  |   |           
|Total      |  | $ | 22,737,838
|           |  |   |           



Rent expense was
$1,084,533, $970,472 and $1,457,869 for the years ended September 30, 2004, 2003 and 2002, respectively.



14. 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 not been recorded as an
increase to the Preferred Stock account. As of September 30, 2004, the aggregate liquidation preference of the Preferred Stock was $19.2 million, or $4.24 per share.



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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.



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 not declared dividends on the Preferred Stock since September 30, 1996. Cumulative dividends in arrears were approximately $9.5 million and $8.2 million as of September 30, 2004 and 2003, respectively.
Pursuant to the Certificate of Designation, because at least one full dividend payment had not been declared for two years, the holders of the Preferred Stock, as a separate class, were entitled to elect two directors to the Companys board of
directors. The two directors elected by Preferred Stockholders were 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 prohibited the Company from paying dividends on the Preferred Stock.



15. Stock Option Plan



The Companys Stock Option Plan provided for the grant of up to 1.2 million shares of its common stock to key employees. The Stock Option Plan
provided for both incentive stock options and non-qualified stock options. Stock option grants vest over a three-year period from the employees hire date. The Stock Option Plan ceased granting options as of September 30, 2003. As of September
30, 2004, 2003 and 2002, there were approximately 450,000 options outstanding and exercisable under the Stock Option Plan. During fiscal year 2002, 68,175 options were exercised. No options were exercised during the fiscal years 2004 and 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 2004 and 2003. The outstanding options have expiration dates through 2012 and have an average remaining life
of approximately 3 years. The average exercise price of the outstanding options at September 30, 2004 is approximately $1.10.



In December 1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (the Non-Employee Director Plan) that 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. Stock option grants vest immediately. The Non-Employee Director Plan ceased granting options on March 21, 2002. As of September 30, 2004, 2003 and 2002, there were 37,500 options outstanding and
exercisable under this plan. During fiscal years 2004, 2003 and 2002, no options were granted or exercised. The outstanding options have an expiration date through February 2010 and have an average remaining life of approximately 3 years. The
average exercise price of the outstanding options at September 30, 2004 is approximately $2.30.



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 and the Company to attract, retain and motivate their employees, non-employee directors, consultants and affiliates by providing for or increasing
the proprietary interest of such persons in the Subsidiaries. As of September 30, 2004, no options had been granted under any of the Subsidiary Plans.



40



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Accounting for Stock-Based Compensation



SFAS 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, but it permits an entity to continue to account for employee stock-based compensation arrangements under the provisions of APB
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 loss and net loss 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 2004 or 2003, and therefore, no information has been included for those years.



The model assumes no expected future dividend payments on the Companys common stock for the options granted in 2002
(dollars in thousands, except per share data).



|                                 |  |      |  |      |  |        |  
|-------------------------------- |  | ---- |  | ---- |  | ------ | -
|                                 |  | 2004 |  | 2003 |  | 2002   |  
|Weighted average assumptions:    |  |      |  |      |  |        |  
|Expected stock price volatility  |  | N/A  |  | N/A  |  | 100.00 | %
|Risk-free interest rate          |  | N/A  |  | N/A  |  | 4.35   | %
|Expected option lives (in years) |  | N/A  |  | N/A  |  | 5.00   |  
|Expected dividend yield          |  | N/A  |  | N/A  |  | None   |  
|Estimated fair value of options  |  | N/A  |  | N/A  |  | 2.64   |  



16. Federal Income Taxes



The Company accounts for income taxes under SFAS No. 109,
Accounting for Income Taxes (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 benefit for income taxes attributable to pre-tax loss consisted of:



|              |  |                        |      |   |      |   |        |      |  |   |        |  
|------------- |  | ---------------------- | ---- | - | ---- | - | ------ | ---- |  | - | ------ | -
|              |  | 2004                   |      |   | 2003 |   |        | 2002 | 
|              |  | (dollars in thousands) |     
|Current       |  | $                      | 0    |   |      | $ | 0      |      |  | $ | 0      |  
|Deferred      |  |                        | (913 | ) |      |   | (4,152 | )    |  |   | (1,133 | )
|              |  |                        |      |   |      |   |        |      |  |   |        |  
|Total benefit |  | $                      | (913 | ) |      | $ | (4,152 | )    |  | $ | (1,133 | )
|              |  |                        |      |   |      |   |        |      |  |   |        |  



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



|                         |  |                        |      |   |      |   |        |      |  |   |        |  
|------------------------ |  | ---------------------- | ---- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                         |  | 2004                   |      |   | 2003 |   |        | 2002 | 
|                         |  | (dollars in thousands) |     
|Amount at statutory rate |  | $                      | (978 | ) |      | $ | (4,194 | )    |  | $ | (3,094 | )
|Valuation allowance      |  |                        | 0    |   |      |   | 0      |      |  |   | 1,925  |  
|Other                    |  |                        | 65   |   |      |   | 42     |      |  |   | 36     |  
|                         |  |                        |      |   |      |   |        |      |  |   |        |  
|Total                    |  | $                      | (913 | ) |      | $ | (4,152 | )    |  | $ | (1,133 | )
|                         |  |                        |      |   |      |   |        |      |  |   |        |  



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



|                                                     |  |                        |         |   |      |   |         |  
|---------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2004                   |         |   | 2003 |  
|                                                     |  | (dollars in thousands) |        
|Deferred tax liabilities:                            |  |                        |         |   |      |   |         |  
|Prepaid expenses                                     |  | $                      | 459     |   |      | $ | 445     |  
|Fixed asset cost, depreciation and amortization, net |  |                        | 31,526  |   |      |   | 31,949  |  
|Other                                                |  |                        | 3,014   |   |      |   | 3,356   |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax liabilities                             |  |                        | 34,999  |   |      |   | 35,750  |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax assets:                                 |  |                        |         |   |      |   |         |  
|Net operating loss carryforward                      |  |                        | 3,640   |   |      |   | 4,037   |  
|Reserves for accounts and contracts receivable       |  |                        | 69      |   |      |   | 115     |  
|Other                                                |  |                        | 849     |   |      |   | 537     |  
|Deferred payroll                                     |  |                        | 168     |   |      |   | 170     |  
|Tax credits                                          |  |                        | 525     |   |      |   | 952     |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax assets                                  |  |                        | 5,251   |   |      |   | 5,811   |  
|                                                     |  |                        |         |   |      |   |         |  
|Net deferred tax (liability)                         |  | $                      | (29,748 | ) |      | $ | (29,939 | )
|                                                     |  |                        |         |   |      |   |         |  



At September 30, 2004,
the Company had a net operating loss carryforward for regular income tax purposes of approximately $63 million, which will fully expire by the year 2025 and begins expiring in 2011. Included in this amount is approximately $54 million that was
reserved due to the Pioneer Transactions for which the Company has not taken benefit for on its financial statements until the uncertainty related to tax accounting is resolved.



17. Benefit Plans



The Company has a savings plan (the Savings Plan) qualified under Section 401(k) of the Code. The Plan covers substantially all employees,
including the Companys executive officers. Employee contributions to the Plan are discretionary. The 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
Companys matching contributions paid in 2004, 2003 and 2002 were $48,000, $54,000 and $59,000, respectively.



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18. 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, 2004 and 2003, the Company had expended approximately $250,000 for commercial development of the technology, all of which was expensed in fiscal 2002.



During fiscal 2003, the Company operated Dukes casino (Dukes) in Sparks, Nevada. The Company
operated Dukes through its subsidiary, Archon Sparks Management Corporation. One of Dukes partners is Christopher Lowden, son of Paul W. Lowden. The Company invested $100,000 in Dukes and loaned Dukes approximately $1.4
million. In December 2003, Dukes closed its casino operations. The Company has written-off its investment in Dukes and has recorded a reserve for its receivable from Dukes of approximately $1.5 million during its fiscal year ended
September 30, 2003 and has no further asset exposure from Dukes. The Company made the determination to reserve the entire amount invested in and owed from Dukes as the collateral value securing the receivable was deemed insignificant
subsequent to the closure of the casino.



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



19. Contingencies and Commitments



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 in 1994, 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 filed 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.
The Company has not recorded a reserve under the provisions of SFAS No. 5 for this matter, as management does not believe that it is probable that a liability has been incurred.



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20. Supplemental Statement of Cash Flows Information



Supplemental statement of cash flows information for the years ended
September 30, 2004, 2003 and 2002 consisted of:



|                                                                                      |  |                        |        |      |   |        |  |   |       
|------------------------------------------------------------------------------------- |  | ---------------------- | ------ | ---- | - | ------ |  | - | ------
|                                                                                      |  | 2004                   |        | 2003 |   | 2002  
|                                                                                      |  | (dollars in thousands)
|Operating activities:                                                                 |  |                        |        |      |   |        |  |   |       
|Cash paid during the year for interest                                                |  | $                      | 12,502 |      | $ | 14,920 |  | $ | 15,388
|                                                                                      |  |                        |        |      |   |        |  |   |       
|Investing and financing non-cash activities:                                          |  |                        |        |      |   |        |  |   |       
|Long-term debt incurred in connection with the acquisition of machinery and equipment |  | $                      | 267    |      | $ | 1,584  |  | $ | 104   
|                                                                                      |  |                        |        |      |   |        |  |   |       
|Accounts payable converted to debt                                                    |  | $                      | 407    |      | $ | 0      |  | $ | 0     
|                                                                                      |  |                        |        |      |   |        |  |   |       
|Reduction of property and equipment from the acquisition of capital leases            |  | $                      | 1,412  |      | $ | 0      |  | $ | 0     
|                                                                                      |  |                        |        |      |   |        |  |   |       
|Reduction of accounts payable from disposal of machinery and equipment                |  | $                      | 299    |      | $ | 0      |  | $ | 0     
|                                                                                      |  |                        |        |      |   |        |  |   |       
|Unrealized gain on marketable securities                                              |  | $                      | 147    |      | $ | 940    |  | $ | 312   
|                                                                                      |  |                        |        |      |   |        |  |   |       



21. 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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##### Table of Contents

Segment information for the years ended September 30, 2004 2003 and 2002 consisted of:



|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|----------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                              |  | 2004                   |         |   | 2003 |   |         | 2002 | 
|                              |  | (dollars in thousands) |        
|Pioneer Hotel                 |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues, net       |  | $                      | 32,188  |   |      | $ | 31,919  |      |  | $ | 35,468  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income (loss)       |  | $                      | (302    | ) |      | $ | (1,017  | )    |  | $ | 251     |  
|Depreciation and amortization |  |                        | 2,507   |   |      |   | 2,481   |      |  |   | 2,001   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | 2,205   |   |      | $ | 1,464   |      |  | $ | 2,252   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | 2,298   |   |      | $ | 4,897   |      |  | $ | 4,760   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest income               |  | $                      | 15      |   |      | $ | 23      |      |  | $ | 17      |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(4)       |  | $                      | 2,460   |   |      | $ | 1,416   |      |  | $ | 4,143   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 34,539  |   |      | $ | 37,072  |      |  | $ | 37,099  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Investment Properties(3)      |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues, net       |  | $                      | 12,402  |   |      | $ | 12,402  |      |  | $ | 12,402  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income              |  | $                      | 9,230   |   |      | $ | 9,230   |      |  | $ | 8,941   |  
|Depreciation and amortization |  |                        | 3,172   |   |      |   | 3,172   |      |  |   | 3,461   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | 12,402  |   |      | $ | 12,402  |      |  | $ | 12,402  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | 10,660  |   |      | $ | 11,554  |      |  | $ | 12,004  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest income               |  | $                      | 0       |   |      | $ | 0       |      |  | $ | 0       |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(4)       |  | $                      | 0       |   |      | $ | 0       |      |  | $ | 0       |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 141,401 |   |      | $ | 144,301 |      |  | $ | 147,077 |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Other and Eliminations        |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues, net       |  | $                      | 1,103   |   |      | $ | 1,840   |      |  | $ | 895     |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating loss                |  | $                      | (3,955  | ) |      | $ | (5,285  | )    |  | $ | (2,676  | )
|Depreciation and amortization |  |                        | 301     |   |      |   | 575     |      |  |   | 341     |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | (3,654  | ) |      | $ | (4,710  | )    |  | $ | (2,335  | )
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | (78     | ) |      | $ | (36     | )    |  | $ | (119    | )
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest income               |  | $                      | 845     |   |      | $ | 1,466   |      |  | $ | 1,272   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(4)       |  | $                      | (1,204  | ) |      | $ | 2,191   |      |  | $ | 313     |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 30,992  |   |      | $ | 56,017  |      |  | $ | 57,910  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Total                         |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating revenues, net       |  | $                      | 45,693  |   |      | $ | 46,161  |      |  | $ | 48,765  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income              |  | $                      | 4,973   |   |      | $ | 2,928   |      |  | $ | 6,516   |  
|Depreciation and amortization |  |                        | 5,980   |   |      |   | 6,228   |      |  |   | 5,803   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|EBITDA(1)                     |  | $                      | 10,953  |   |      | $ | 9,156   |      |  | $ | 12,319  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense              |  | $                      | 12,880  |   |      | $ | 16,415  |      |  | $ | 16,645  |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest income               |  | $                      | 860     |   |      | $ | 1,489   |      |  | $ | 1,289   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(4)       |  | $                      | 1,256   |   |      | $ | 3,607   |      |  | $ | 4,456   |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(2)        |  | $                      | 206,932 |   |      | $ | 237,390 |      |  | $ | 242,086 |  
|                              |  |                        |         |   |      |   |         |      |  |   |         |  



45



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##### Table of Contents

---

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

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

|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes acquisition of capital through non-cash activities.
|--- | ------------------------------------------------------------



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23. Quarterly Results of Operations (Unaudited)



|                                               |  |                                          |        |   |      |   |        |  
|---------------------------------------------- |  | ---------------------------------------- | ------ | - | ---- | - | ------ | -
|                                               |  | 2004                                     |        |   | 2003 |  
|                                               |  | (dollars in thousands, except per share) |       
|Revenues:                                      |  |                                          |        |   |      |   |        |  
|First Quarter                                  |  | $                                        | 11,683 |   |      | $ | 11,300 |  
|Second Quarter                                 |  |                                          | 12,860 |   |      |   | 13,075 |  
|Third Quarter                                  |  |                                          | 11,078 |   |      |   | 11,482 |  
|Fourth Quarter                                 |  |                                          | 10,072 |   |      |   | 10,304 |  
|                                               |  |                                          |        |   |      |   |        |  
|Total                                          |  | $                                        | 45,693 |   |      | $ | 46,161 |  
|                                               |  |                                          |        |   |      |   |        |  
|Operating income (loss):                       |  |                                          |        |   |      |   |        |  
|First Quarter                                  |  | $                                        | 1,223  |   |      | $ | 1,269  |  
|Second Quarter                                 |  |                                          | 2,361  |   |      |   | 2,034  |  
|Third Quarter                                  |  |                                          | 1,151  |   |      |   | (115   | )
|Fourth Quarter                                 |  |                                          | (9     | ) |      |   | (260   | )
|                                               |  |                                          |        |   |      |   |        |  
|Total                                          |  | $                                        | 4,973  |   |      | $ | 2,928  |  
|                                               |  |                                          |        |   |      |   |        |  
|Net income (loss):                             |  |                                          |        |   |      |   |        |  
|First Quarter                                  |  | $                                        | (1,513 | ) |      | $ | (1,482 | )
|Second Quarter                                 |  |                                          | (428   | ) |      |   | (1,295 | )
|Third Quarter                                  |  |                                          | (807   | ) |      |   | (2,410 | )
|Fourth Quarter                                 |  |                                          | 866    |   |      |   | (2,660 | )
|                                               |  |                                          |        |   |      |   |        |  
|Total                                          |  | $                                        | (1,882 | ) |      | $ | (7,847 | )
|                                               |  |                                          |        |   |      |   |        |  
|Net income (loss) applicable to common shares: |  |                                          |        |   |      |   |        |  
|First Quarter                                  |  | $                                        | (1,907 | ) |      | $ | (1,861 | )
|Second Quarter                                 |  |                                          | (823   | ) |      |   | (1,673 | )
|Third Quarter                                  |  |                                          | (1,188 | ) |      |   | (2,796 | )
|Fourth Quarter                                 |  |                                          | 474    |   |      |   | (3,043 | )
|                                               |  |                                          |        |   |      |   |        |  
|Total                                          |  | $                                        | (3,444 | ) |      | $ | (9,373 | )
|                                               |  |                                          |        |   |      |   |        |  
|Net income (loss) per common share:            |  |                                          |        |   |      |   |        |  
|First Quarter                                  |  | $                                        | (0.31  | ) |      | $ | (0.30  | )
|Second Quarter                                 |  |                                          | (0.13  | ) |      |   | (0.27  | )
|Third Quarter                                  |  |                                          | (0.19  | ) |      |   | (0.45  | )
|Fourth Quarter                                 |  |                                          | 0.08   |   |      |   | (0.49  | )
|                                               |  |                                          |        |   |      |   |        |  
|Total                                          |  | $                                        | (0.55  | ) |      | $ | (1.51  | )
|                                               |  |                                          |        |   |      |   |        |  



Operating income
(loss) amounts have been adjusted to reflect a reclassification of amortization of loan issue costs from depreciation and amortization to interest expense for all quarters shown.



47



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##### Table of Contents

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



Not applicable.



Item 9A. Controls and Procedures



Evaluation of Disclosure Controls and Procedures



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



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



No change in the Companys internal control
over financial reporting occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



Changes in Internal Controls



There have not been any changes in the Companys internal controls or
in other factors that materially affected, or are reasonably likely to materially affect, the Companys controls as of the end of the period covered by this report.



48



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##### Table of Contents

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 |  | 
|Suzanne Lowden          |  | Director, Executive Vice President, and Assistant Secretary  |  | 
|John W. Delaney(2)      |  | Director                                                     |  | 
|William J. Raggio(1)(2) |  | Director                                                     |  | 
|Howard E. Foster(1)     |  | Preferred Stockholder Special Director                       |  | 
|Jay Parthemore(1)       |  | Preferred Stockholder Special Director                       |  | 
|John M. Garner          |  | Chief Financial Officer, Secretary, and Treasurer            |  | 

---

|(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, 61, 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.



Suzanne Lowden



Suzanne
Lowden, 52, 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 2007.



John W. Delaney



John W. Delaney, 56, 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.



49



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##### Table of Contents

William J. Raggio



William J. Raggio, 78, has 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 board 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, 60, 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.



The Board of
Directors of the Company considers Mr. Foster to be a financial expert within the meaning of Item 401 (h) (2) of Regulation S-K, which generally means the Company believes Mr. Foster has an understanding of generally accepted accounting principles;
the ability to assess the general application of such principles; experience preparing, auditing, analyzing, or evaluating financial statements similar to the Companys; an understanding of internal control over financial reporting; and an
understanding of audit committee functions.



Jay Parthemore



Jay Parthemore, 61, 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 retired. Over a thirty-three year career, Mr. Parthemore 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 2007, or, if earlier, the date on which all dividend arrearages on the Exchangeable
Redeemable Preferred Stock have been paid.



John M. Garner



John Garner, 45, was appointed Chief Financial Officer, Treasurer and
Secretary in February 2004. Prior to joining the Company, Mr. Garner, a Certified Public Accountant, served as Chief Financial Officer and Treasurer of Mikohn Gaming Corporation from August 2002 to January 2004 and Director of Finance from July 2001
to August 2002; served as Chief Financial Officer and Treasurer of Paul-Son Gaming Corporation from July 1998 to July 2001 and served as Corporate Controller-Vice President of Finance of Alliance Gaming Corporation/Bally Gaming, Inc. from 1989
through 1998. Prior to these positions, Mr. Garner practiced public accounting with Ernst & Young and Peat Marwick Mitchell.



50



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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, the Company believes that, during fiscal year 2004, Jay Parthemore filed the following reports late: (i) a Form 3; (ii) a Form 4 reporting one late transaction; (iii) a Form 4
reporting two late transactions; (iv) a Form 4 reporting seven late transactions; and (v) a Form 4 reporting one late transaction. All forms were filed with the SEC on December 16, 2004. The Company is currently reviewing reports filed for previous
fiscal years to determine whether other reports may have been filed late.



Code of Ethics



Pursuant
to Item 406 of Regulation S-K, the Company adopted a Code of Ethics governing the behavior of the Companys principal executive and senior financial officers.



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, 2004, 2003 and 2002 of Paul W. Lowden, the Chief Executive Officer. There were
no other executive officers serving as such at the end of the Companys fiscal year ended September 30, 2004 that earned a total annual salary and bonus in excess of $100,000 during the fiscal year ended September 30, 2004.



Summary Compensation Table



|                                                        |  |                     |  |            |                       |           |   |                       |                                  |  |                           |     |  |   |                  |          
|------------------------------------------------------- |  | ------------------- |  | ---------- | --------------------- | --------- | - | --------------------- | -------------------------------- |  | ------------------------- | --- |  | - | ---------------- | ---------
|                                                        |  | Annual Compensation | 
|Name and Principal
Position                             |  | Fiscal Year         |  | Salary ($) |                       | Bonus ($) |   |                       | Other Annual Compensation ($)(1) |  | All OtherCompensation ($) |    
|Paul W. Lowden President, Chairman of the Board and CEO |  | 200420032002        |  | $          | 571,154550,000550,000 |           | $ | 200,000200,000243,750 | (2)(2)(2)                        |  | $                         | 000 |  | $ | 4,5114,51131,772 | (3)(3)(3)

---

|(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 person named above.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(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) | Mr. Garner began his employment in February 2004, and therefore, the amounts reflected above for 2004 represent only the period from 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 2004, which provided for an annual base salary of $550,000. Due to the timing of payroll dates in fiscal 2004, Mr. Lowdens wages received were higher than his $550,000 annual salary.
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 2004.



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,
ceased granting options 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.



52



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Compensation Plans



Stock Option Plan



The Companys Stock Option Plan 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. The Company ceased granting options under the Stock Option Plan as of September 30, 2003. As of September 30,
2004, there were approximately 450,000 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, 2004.



1998 Subsidiary Stock Option Plans



The Company and certain of its subsidiaries, SFHI, Inc.,
Sahara Las Vegas Corp., and Pioneer Hotel Inc. have adopted 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, 2004, no options had been granted under any Subsidiary Plans.



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 2004 was approximately $48,000 of which approximately $3,000 and $1,000 were contributed by the Company to the account of Mr. Lowden 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 2001 through fiscal 2003, the Company purchased from J & J Mortgage an aggregate of $400,000 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



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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 years 2004 and 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 December 27, 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 of Common Stock |     |  | Percent |   |  | Shares of Preferred Stock |     |  | Percent |  
|Paul W. Lowden(1)                                 |  | 4,980,144              | (2) |  | 75.7    | % |  | 810,000                   | (3) |  | 17.9    | %
|Suzanne Lowden                                    |  | 4,792                  | (4) |  | *       |   |  | 2,524                     | (5) |  | *       |  
|John W. Delaney                                   |  | 13,750                 | (6) |  | *       |   |  | 0                         |     |  | 0       |  
|William J. Raggio                                 |  | 17,972                 | (6) |  | *       |   |  | 5,472                     |     |  | *       |  
|Howard Foster                                     |  | 12,500                 | (6) |  | *       |   |  | 148,126                   |     |  | 3.3     | %
|Jay Parthemore                                    |  | 175,249                | (7) |  | 2.8     | % |  | 200                       |     |  | *       |  
|All Directors and Officers as a group (7 persons) |  | 5,204,407              |     |  | 79.3    | % |  | 966,322                   |     |  | 21.4    | %

---

|* | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------

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

|(7) | Includes 9,342 shares in investment accounts held by Mr. Parthemores spouse and mother-in-law and father-in-law. Although Mr. Parthemore has investment power
over these securities, Mr. Parthemore disclaims beneficial ownership in these securities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 13. Certain Relationships and Related Transactions



The Company believes 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



54



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##### Table of Contents

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. 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, 2004, the Company had expended approximately $250,000 for commercial development of the technology.



In fiscal 2001, the Company purchased for $100,000 Class B member interests in 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.



In December 2003, Dukes closed its casino operations. The Company
operated Dukes operations. The Company also loaned Dukes approximately $1.4 million. The Company wrote-off its investment in Dukes and recorded a reserve for its receivable from Dukes of approximately $1.5 million during its
fiscal year ended September 30, 2003 and has no further asset exposure from Dukes. The Company made the determination to reserve the entire amount invested in and owed from Dukes as the collateral value securing the receivable was deemed
insignificant subsequent to the closure of the casino.



During
fiscal 2001 through 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. At September 30, 2004, the Company was owed approximately $400,000 from J
and 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 2004 and 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. 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, 2004 and 2003:



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2004 |         | 2003
|Audit Fees:        |  | $    | 213,423 |      | $ | 127,000
|                   |  |      |         |      |   |        
|Audit-Related Fees |  | $    | 13,000  |      | $ | 12,000 
|                   |  |      |         |      |   |        
|Tax Fees           |  | $    | 18,000  |      | $ | 9,684  
|                   |  |      |         |      |   |        



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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 years ended September 30, 2004 and 2003 including the reviews of the financial statements included in the Companys Form 10-Qs for that fiscal year.



Audit-related fees billed in fiscal 2004 and 2003 are for
professional services rendered in connection with the audit of the Companys 401(k) retirement plan for the years ended December 31, 2003 and December 2002, respectively.



Tax fees in 2004 are for professional services rendered in connection with the preparation of the Companys 2002
federal income tax returns and fees billed in 2003 are for professional services rendered in connection with the assistance on property tax matters.



In 2004, no fees were paid to Deloitte & Touche LLP pursuant to the de minimus exception to the pre-approval policy permitted under the
Securities and Exchange Act of 1934, as amended.



The Audit
Committee Guidelines for Pre-Approval of Independent Auditor Services is attached to this 10-K as Exhibit 99.



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PART IV



Item 15. Exhibits 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 Consolidated Financial Statements under Item 8.



|(b) | Reports on Form 8-K filed during the fourth fiscal quarter of 2004.
|--- | -------------------------------------------------------------------



None



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



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



|              |  |                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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. (10)                                                                                                                                                                                                 
|              | 
|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 131/2% 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          |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998. (4)                                                                                                                                              
|              | 
|10.5          |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI. (6)                                                                                                                                                             
|              | 
|10.6          |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (5)                                                                                                                                                   
|              | 
|10.7          |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (5)                                                                                                                                



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|      |  |                                                                                                                                                                                                                                                                    
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8  |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden. (7)                                                                                                                        
|      | 
|10.9  |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000. (9)                                                                                                                                               
|      | 
|10.10 |  | 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)                                                                      
|      | 
|10.11 |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001. (10)                                                                                                                 
|      | 
|10.12 |  | 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)                                                                                         
|      | 
|10.13 |  | 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)                                                                    
|      | 
|10.14 |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999. (10)                                                                                                                               
|      | 
|10.15 |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC. (10)                                                                                                                                                 
|      | 
|10.16 |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc. (10)                                                                                                                                                                
|      | 
|10.17 |  | 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)                                                                                                                     
|      | 
|10.18 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005. (10)                                                                                                                                                                         
|      | 
|10.19 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020. (10)                                                                                                                                                                         
|      | 
|10.20 |  | 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)
|      | 
|10.21 |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank. (10)                                                                                                                                                       
|      | 
|10.22 |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee. (10)                                                                                                             
|      | 
|10.23 |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden. (11)                                                                                                                                                   



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|      |  |                                                                                                                                                                                                                          
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.24 |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Dukes-Sparks, LLC. (11)                                                                                                                
|      | 
|10.25 |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino. (11)                                                                                                                                           
|      | 
|10.26 |  | Option Agreement dated October 8, 2002 between Endeavors North LLC and Archon Corporation. (11)                                                                                                                          
|      | 
|10.27 |  | Loan Agreement dated December 15, 2003 between Colonial Bank, Archon Corporation and Sahara Las Vegas Corp. (12)                                                                                                         
|      | 
|10.28 |  | Security Agreement and Second Deed of Trust Dated October 8, 2002 (13)                                                                                                                                                   
|      | 
|10.29 |  | Demand Note dated February 6, 2003 in favor of Archon Corporation. (14)                                                                                                                                                  
|      | 
|14.1  |  | Code of Ethics (16)                                                                                                                                                                                                      
|      | 
|21    |  | Subsidiaries of Archon Corporation (15)                                                                                                                                                                                  
|      | 
|23.1  |  | Consent of Deloitte & Touche LLP.*                                                                                                                                                                                       
|      | 
|31.1  |  | Certification of Paul W. Lowden, Principal Executive Officer, pursuant to Rule 13a- 15(e) or 15d-15(e) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|      | 
|31.2  |  | Certification of John M. Garner, Principal Financial Officer, pursuant to Rule 13a- 15(e) or 15d-15(e) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|      | 
|32    |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                         
|      | 
|99    |  | Pre-approval Policy of Audit Committee (16)                                                                                                                                                                              

---



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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(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 June 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 8-K dated November 15, 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 10-Q for the quarter ended June 30, 2000 and
incorporated herein by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



59



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##### Table of Contents

|(7) | 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | 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.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(13) | 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.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(14) | 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.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(15) | 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.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(16) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Proxy Statement on Schedule 14A dated May 7, 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
|                  |  |                   
|December 27, 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. Lowden               |  | Chairman of the Board and President (Principal Executive Officer)                             |  | December 27 2004 
|Paul W. Lowden                   |  |                                                                                               | 
|                                 |  |                                                                                              
|/s/ John Delaney                 |  | Director                                                                                      |  | December 27, 2004
|John Delaney                     |  |                                                                                               |  |                  
|                                 |  |                                                                                              
|/s/ Suzanne Lowden               |  | Director                                                                                      |  | December 27, 2004
|Suzanne Lowden                   |  |                                                                                               |  |                  
|                                 |  |                                                                                              
|/s/ William J. Raggio            |  | Director                                                                                      |  | December 27, 2004
|William J. Raggio                |  |                                                                                               |  |                  
|                                 |  |                                                                                              
|/s/ Howard E. Foster             |  | Special Director                                                                              |  | December 27, 2004
|Howard E. Foster                 |  |                                                                                               |  |                  
|                                 |  |                                                                                              
|/s/ Jay Parthemore               |  | Special Director                                                                              |  | December 27, 2004
|Jay Parthemore                   |  |                                                                                               |  |                  
|                                 |  |                                                                                              
|/s/ John M. GarnerJohn M. Garner |  | Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) |  | December 27, 2004
|                                 | 



61