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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, 2003



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



For the transition period from  to



Commission File Number: 1-9481



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ARCHON CORPORATION

(Exact name of registrant as specified in its charter)



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



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

(Address of principal executive office and zip code)



(702) 732-9120

(Registrants telephone number, including area code)



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



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



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



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



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



The number of shares of common stock outstanding as of December 16, 2003 was
6,221,431. The market value of the common stock held by non-affiliates of the registrant as of December 16, 2003 was approximately $6,738,903. The market value was computed by reference to the average bid and asked price of the common stock on
December 16, 2003.



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



APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:



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



APPLICABLE ONLY TO CORPORATE REGISTRANTS:



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



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



DOCUMENTS
INCORPORATED BY REFERENCE



Part III of this report
incorporates by reference portions of the proxy statement for the 2004 Annual Meeting of

Stockholders (to be filed with the Securities and
Exchange Commission within 120 days after September 30, 2003).



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ARCHON CORPORATION AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL

YEAR ENDED SEPTEMBER 30, 2003

TABLE OF CONTENTS



|         |  |          |  |                                                                                                 |  | Page
|-------- |  | -------- |  | ----------------------------------------------------------------------------------------------- |  | ----
|PART I   |  | 1       
|         |  | Item 1.  |  | Business                                                                                        |  | 1   
|         |  |          |  | General                                                                                         |  | 1   
|         |  |          |  | Hotel and Casino Operations                                                                     |  | 2   
|         |  |          |  | Investment Properties                                                                           |  | 3   
|         |  |          |  | Land Held for Development                                                                       |  | 3   
|         |  |          |  | Nevada Regulations and Licensing                                                                |  | 4   
|         |  | Item 2.  |  | Properties                                                                                      |  | 7   
|         |  | 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                                                                          |  | 26  
|         |  | Item 8.  |  | Financial Statements and Supplementary Data                                                     |  | 27  
|         |  | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            |  | 62  
|         |  | Item 9A. |  | Controls and Procedures                                                                         |  | 62  
|         | 
|PART III |  | 62      
|         |  | Item 10. |  | Directors and Executive Officers of the Registrant Executive Compensation and Other Information |  | 62  
|         |  | Item 11. |  | Executive Compensation                                                                          |  | 62  
|         |  | Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                                  |  | 62  
|         |  | Item 13. |  | Certain Relationships and Related Transactions                                                  |  | 62  
|         |  | Item 15. |  | Principal Accountant Fees and Services                                                          |  | 62  
|         | 
|PART IV  |  | 63      
|         |  | Item 16. |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                 |  | 63  



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PART I



Item 1. Business



General



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



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



On December 29, 2000, the Company entered into a series of agreements to exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986,
as amended (the Code), the real and personal property, excluding gaming equipment, and intangible assets used in the operations of the Pioneer to a third party and agreed to lease and license the assets sold for up to 20 years, during
which period the Company will operate the Pioneer (collectively, the Pioneer Transactions). Additionally, the Company has the option to acquire the Pioneer during the period from December 29, 2003 to December 31, 2007. On November 13,
2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company will exercise its Early Purchase Option on December 29, 2003.



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



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



Recent Developments



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



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



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



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



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Hotel and Casino Operations



The Pioneer



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



Revenues



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



Market



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



Business Strategy



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



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



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Management and Personnel



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



Competition



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



Investment Properties



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



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



See also Item 2., Properties.



Land Held for Development



The
Company owns, through SLVC, an approximately 27-acre parcel of real property on the Strip. In connection with the acquisition of the property, the Company assumed an operating lease under which a water theme park operates. The lease may be
terminated at any time by the Company.



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



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



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



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



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



See also Item 2., Properties.



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



Nevada Regulations and Licensing



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



Item 2. Properties



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



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



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



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



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SFHI owns the approximate 20-acre parcel of undeveloped real property located on the corner of Rainbow
and Lone Mountain Road. The Company and SFHI have granted to the buyer of the SFHI assets an option to purchase the property for $5.0 million through October 2003. The buyer has declined to exercise the option to purchase the property.



Item 3. Legal Proceedings



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



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



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



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



The Company was the defendant in an action titled
Local Joint Executive Board, et al. v. Santa Fe Gaming Corporation et al., No. CV-S-01-0233-RLH. The plaintiffs instituted the action on or about February 28, 2001 in the United States District Court for the District of Nevada, alleging that
the Company violated the Worker Adjustment Retraining and Notification Act, (WARN Act), by improperly providing notification of the closing of the Santa Fe. The plaintiffs sought damages in the amount provided for by the statute. The
plaintiffs filed a motion for class certification, and the Company stipulated to the certification. On October 12, 2001, Archon filed a motion for summary judgment to dismiss the complaint in its entirety. Plaintiffs filed a memorandum in opposition
to defendants motion for summary judgment, as well as a counter-motion for summary judgment alleging the WARN Act notices sent by Archon were invalid. On February 1, 2002 a hearing was held on the motions and the



8



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##### Table of Contents

court denied both the plaintiffs and Archons motions for summary judgment. However, the court subsequently narrowed the scope of the case, and
set the case for trial to commence October 21, 2002. On October 1, 2002, the parties participated in a settlement conference with the magistrate judge assigned to the case. A settlement was reached whereby the Company agreed to pay the plaintiffs
the total lump sum of $202,000 in exchange for a dismissal of the lawsuit with prejudice and a full release of all claims relating to the closure of the Santa Fe. The class action settlement was approved by the court on October 24, 2002. The Company
accrued the settlement payment in September 2002 and made the payment in December 2002.



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



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



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



9



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



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



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



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##### Table of Contents

Item 6. Selected Financial Data



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



|                                         |  | 2003                                             |         |   | 2002 |   |         | 2001 |  | 2000 |         | 1999 |  
|---------------------------------------- |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | ---- | ------- | ---- | -
|                                         |  | (dollars in thousands, except per share amounts) |        
|Net operating revenues(1)                |  | $                                                | 46,161  |   |      | $ | 48,765  |      |  | $    | 48,003  |      | $
|                                         |  |                                                  |         |   |     
|Net income (loss)                        |  |                                                  |         |   |      |   |         |      |  |      |         |      |  
|before extraordinary items, net of taxes |  |                                                  | (7,451  | ) |      |   | (7,707  | )    |  |      | 89,182  |      |  
|per common share                         |  |                                                  | (1.20   | ) |      |   | (1.25   | )    |  |      | 14.43   |      |  
|                                         |  |                                                  |         |   |     
|Net income (loss)(2)                     |  |                                                  | (8,977  | ) |      |   | (9,262  | )    |  |      | 87,231  |      |  
|per common share                         |  |                                                  | (1.44   | ) |      |   | (1.50   | )    |  |      | 14.11   |      |  
|                                         |  |                                                  |         |   |     
|Total assets                             |  |                                                  | 237,990 |   |      |   | 242,086 |      |  |      | 249,485 |      |  
|Long-term debt, less current portion     |  |                                                  | 148,698 |   |      |   | 153,029 |      |  |      | 157,667 |      |  
|Redeemable preferred stock(3)            |  |                                                  | 18,091  |   |      |   | 18,147  |      |  |      | 16,747  |      |  

---

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

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

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





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##### Table of Contents

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



General



Critical Accounting Policies and Estimates



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



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.



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##### Table of Contents

Results of Operations  Fiscal 2003 Compared to Fiscal 2002



Consolidated



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



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



Operating Expenses.Total operating expenses increased
$400,000, or 0.9%, to $42.9 million for the year ended September 30, 2003 from $42.5 million for the year ended September 30, 2002. Total operating expenses as a percentage of revenue increased to 91.9% for the year ended September 30, 2003 from
87.1% for the year ended September 30, 2002. Operating expenses decreased $2.3 million, or 6.5%, at the Pioneer, by $300,000 at the investment properties and by $100,000 at corporate. The decrease in operating expenses at the investment properties
was due to an adjustment to depreciation and amortization expenses in the prior year period. The decrease at corporate was due to development costs associated with the development of certain gaming technology which was incurred in the prior year
period. ASMC had operating expenses of $2.2 million. The Company recorded a $1.0 million reserve for receivable and wrote-off its initial $100,000 investment with respect to Dukes Casino in the current year.



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



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



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



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



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



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##### Table of Contents

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



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



Pioneer



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



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



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



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



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



14



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##### Table of Contents

from 52.1% for the year ended September 30, 2002. Other expenses decreased $200,000, or 9.2%, to $1.8 million for the year ended September 30, 2003 compared
to $2.0 million for the year ended September 30, 2002, due to the decrease in retail sales. Other expenses as a percentage of other revenues increased to 89.7% for the year ended September 30, 2003 from 85.2% for the year ended September 30, 2002.



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



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



Results of Operations  Fiscal 2002 Compared to Fiscal 2001



Consolidated



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



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



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



15



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##### Table of Contents

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



Interest Expense.Consolidated interest expense for the
year ended September 30, 2002 was $16.4 million, a $5.3 million increase compared to $11.1 million in fiscal 2001. The increase is due to interest expense related to $132.7 million of non-recourse debt incurred and assumed in the second quarter of
fiscal 2001 in connection with the acquisition of the investment properties, as well as the interest expense component of the $33.5 million obligation under lease incurred on December 29, 2000 in connection with the Pioneer sale/leaseback
transactions.



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



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



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



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



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



16



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##### Table of Contents

Pioneer



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



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



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



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



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



Selling, general and administrative expenses decreased $100,000, or 1.5%,
to $5.4 million in fiscal 2002 compared to $5.5 million in fiscal 2001. Selling, general and administrative expenses as a percentage of revenues increased to 15.4% in fiscal 2002 from 13.8% in fiscal 2001. Utilities and property expenses were
unchanged at $4.9 million. Utilities and property expenses as a percentage of revenues increased to 13.9% in fiscal 2002 from 12.3% in fiscal 2001. Depreciation and amortization expenses decreased $100,000 or 3.6% to $2.0 million in fiscal 2002 from
$2.1 million in fiscal 2001. The Company sold certain gaming equipment on December 29, 2000 and repurchased the gaming equipment in May 2002. Depreciation and amortization expense decreased during the period from January 2001 to May 2002.



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



17



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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, 2003 for the fiscal years ending September 30, 2004, 2005, 2006, 2007, 2008, 2009, 2010 and thereafter):



|                         |  | Payments Due By Periods
|------------------------ |  | -----------------------
|                         |  | 2004                   
|                         |  | (dollars in thousands) 
|Non-recourse debt:       |  |                        
|Gaithersburg             |  | $                      
|Sovereign                |  |                        
|                         |  |                        
|Obligations under lease: |  |                        
|Pioneer Hotel Inc.(1)    |  |                        
|                         |  |                        
|Long-term debt:          |  |                        
|Building                 |  |                        
|Equipment                |  |                        
|Other                    |  |                        
|                         |  |                        
|Operating leases:        |  |                        
|Ground lease             |  |                        
|Corporate offices        |  |                        
|                         |  |                        
|                         |  | $                      
|                         |  |                        

---

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



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



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



Cash Flows from Operating Activities.The Companys cash used in operations was $2.5 million for the year ended September 30,
2003 as compared to cash provided by operations of $1.6 million at



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September 30, 2002. The primary changes were due to cash used of $3.9 million in deferred income taxes and $5.8 million in other assets and cash provided
from operations of $6.0 million in accrued and other liabilities in the current year, compared to cash used in operations of $600,000 in deferred income taxes and $1.8 million in other assets and cash provided of $4.0 million from accrued and other
liabilities in the prior year.



Cash Flows from
Investing Activities.Cash provided by investing activities was $3.0 million during the year ended September 30, 2003, compared to cash used in investing activities of $3.9 million during the year ended September 30, 2002. In the
current year, $5.5 million, net, was provided from the redemption of marketable securities, of which $500,000, net, was deposited in the restricted cash accounts. Capital expenditures for the current year were $2.0 million. In the prior year, the
Company invested $2.1 million, net, in marketable securities and made $4.4 million in capital expenditures. These capital expenditures were funded in part by the use of cash in the amount of $2.5 million, net of interest income, from the restricted
cash accounts.



Cash Flows from Financing
Activities. Cash used in financing activities was $3.2 million in the year ended September 30, 2003 compared to $5.3 million in the prior year. In the years ended September 30, 2003 and 2002, the Company repaid $6.0 million and $5.2
million of debt, respectively. In the 2003 period, the Company also used $600,000 to acquire shares of its preferred stock, borrowed $2.9 million for operating cash and received capital contribution of $500,000.



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



The Companys primary use of
funds is for operations of Archon, which includes costs of executive and administrative personnel, administrative functions, costs to explore development opportunities and required capital contributions to Pioneer and deposits of cash in the Pioneer
restricted cash accounts pursuant to the terms of the agreements related to the Pioneer transactions (see Pioneer). Additionally, the Company has the option to acquire the Pioneer during the period from December 29, 2003 to December 31,
2007. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company will exercise its Early Purchase Option (EPO) on December 29,
2003. The EPO is in the amount of $35.6 million and will be paid from the following monies: a note from PDS that is due on December 29, 2003 in the amount of $5.0 million, a loan for which the Company has already received a commitment in the amount
of $18.0 million and funds from the restricted cash accounts in the amount of approximately $12.6 million.



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



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Pioneer



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



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



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



Archon and SFHI guaranteed the
payments under the lease and license agreements and agreed to certain covenants, including restrictions on the payment of management fees, competing in the Laughlin, Nevada area and payment of dividends with respect to the Archon preferred stock. In
addition, Archon agreed to maintain consolidated liquidity (as defined in the agreements relating to the Pioneer Transactions) of not less than $25.0 million. At September 30, 2003, Archons consolidated liquidity was $70.0 million. Archon has
agreed to forgo all or a portion of the management fees payable by PHI if PHIs ratio of fixed charges to operating cash flow (fixed charges ratio) falls below 1.20 to 1.00. Further, Archon has agreed to contribute capital to PHI
and in certain events to deposit cash in restricted cash accounts in the event PHIs fixed charges ratio falls below 1.00 to 1.00 during any rolling four-quarter period, calculated on a quarterly basis.



Specifically, if the fixed charges ratio is less than 1.00 to 1.00 for any
four-quarter period ending on or before December 31, 2003, Archon is obligated to contribute capital to PHI in the amount of the deficiency and, if the fixed charges ratio is less than 1.00 to 1.00 for three consecutive quarters during that period,
to deposit additional cash to restricted cash accounts based upon a specified percentage of the stipulated loss value set forth in the lease, with payments ranging from $500,000 for the quarter ended June 30, 2003 to $2,000,000 for the quarter
ending December 31, 2003, with significant increases thereafter. 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 will exercise its
Early Purchase Option (EPO) on December 29, 2003. The EPO is in the amount of $35.6 million and will be paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan for which the Company has already
received a commitment in the amount of $18.0 million, funds from the restricted cash accounts in the amount of approximately $12.6 million, and $2.0 million from marketable securities.



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With respect to four-quarter periods ending after December 31, 2003, if the fixed charges ratio requirement is not met, Archon will be required to make a
capital contribution in the amount of the deficiency and an additional cash payment to the restricted cash account based upon a specified percentage of the stipulated loss value set forth in the lease. Notwithstanding the foregoing, if the fixed
charges ratio is less than 1.00 to 1.00 for four consecutive quarters and the fourth consecutive quarter ends after the quarter ending December 31, 2003, Archon will not be permitted to cure the deficiency. If Archon fails to make any required
payments or is not permitted to cure a deficiency with respect to quarters ending after the quarter ending December 31, 2003, an event of default will occur under the lease.



Pursuant to the agreements relating to the Pioneer Transactions, Archon has foregone the management fee otherwise payable to
it since April 2001. PHIs fixed charges ratio was 0.61 to 1.00 for the four quarters ended September 30, 2003. As a result, the Company is required to make a deposit to the restricted cash account in the amount of $983,000. A deposit in the
amount of $489,000 was required for the quarter ended June 30, 2003, in which quarter the fixed charges ratio was .60 to 1.00. As a result of the EPO, the Company will not make the deposits as all funds will be paid to the lessor to satisfy the EPO.
PHIs fixed charges ratio for the four quarters ended June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003 were 0.92 to 1.00, 0.87 to 1.00, 0.81 to 1.00 and 0.55 to 1.00, respectively. As a result, Archon made capital
contributions to PHI in the amounts of approximately $375,000, $275,000, $314,000 and $1,372,000 with respect to the four-quarter periods ended June 30, September 30, December 31, 2002 and March 31, 2003, respectively. Additionally, it deposited
$484,000 and $487,000 in the restricted cash account for the four quarters ended December 31, 2002 and March 31, 2003, respectively. The Company expects that future operating results at the Pioneer will result in fixed charges ratios of less than
1.00 to 1.00, so that the Company will be required to continue to make capital contributions and significant deposits to restricted cash accounts for the foreseeable future.



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



The agreements related to the Pioneer Transactions provide an option for the
Company to purchase the assets under the lease and license agreements to PHI during the period from December 29, 2003 and December 31, 2007, at purchase price amounts ranging between $35.5 million and $38.7 million, which, as of the date of the
agreements, approximated estimated fair market value at the relevant purchase dates, and at the end of the lease term for fair market value. On November 13, 2003, the Company notified GE Capital that in accordance with Article 25 of the lease
between HAHF Pioneer,



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LLC (GE) and PHI, the Company will exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO is in the amount of $35.6
million and will be paid from the following monies: a $2.5 million payment on a note receivable from PDS Gaming, a loan for which the Company has already received a commitment in the amount of $18.0 million and funds from the restricted cash
accounts in the amount of approximately $12.6 million, and $2.0 million from marketable securities.



Dukes Casino



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



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



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



The Company and the senior lender have agreed in principle that the senior
lender will sell the Dukes Real Property to the Company for $3.7 million payable no later than June 1, 2007, subject to increase to $3.8 million if not paid in full by June 1, 2005. The purchase price will be evidenced by a promissory note
which will bear interest during the first 36 months of the loan at the rate of 1.75% plus the senior lenders actual cost of funds (currently the prime rate less 25 basis points) increasing to a rate of 2.5% plus the senior lenders cost
of funds for months 37 through 48. Interest will accrue monthly, commencing as of June 1, 2003, and be payable on a monthly basis. All principal and accrued but unpaid interest will be payable on or before June 1, 2007. The promissory note will be
secured by a deed of trust on the Dukes Real Property. Consummation of the purchase is subject to the execution of a mutually acceptable purchase and sale agreement, promissory note, security agreement and related closing



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documents. Additionally, the purchase is subject to approval of the Board of Directors of the Company. Until such time as a final agreement is reached with
the senior lender with respect to the purchase of the Dukes Real Property and the Company acquires the Dukes Real Property, the Company expects to continue to operate Dukes on the same terms as provided in the Dukes-Sparks
Lease described below. If the Company and the senior lender are unable to reach agreement and the Company does not acquire the Dukes Real Property, the Dukes-Sparks Lease will be voided. As a result of the foreclosure of the Dukes
Real Property and continuing default under the Dukes Senior Loan, and the Companys loans to Dukes, the Company has established a reserve in the amount of $1.0 million with respect to its loans to Dukes. In addition, the
Company wrote-off its $100,000 initial investment in Dukes.



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



Preferred Stock



The Companys preferred stock provides that
dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company has accrued the
semiannual preferred stock dividends since October 1, 1996. The dividend rate per annum was equal to 8% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11%; the dividend rate
continues to increase by an additional 50 basis points on each succeeding semiannual dividend payment date up to a maximum of 16% per annum. In October 2003, the dividend rate increased to 16.0%. The accrued stock dividends have been recorded as an
increase to the preferred stock account. As of September 30, 2003, the aggregate liquidation preference of the preferred stock was $18.1 million, or $3.90 per share.



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



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The Board of Directors of the Company authorized an increase in the amount of cash that may be used to
purchase preferred stock to $2.5 million. As of December 16, 2003, the Company had purchased 795,228 shares of preferred stock for $1,213,382 under this program. In addition, in April 2001 the Company acquired approximately 3.5 million shares
of preferred stock as part of a litigation settlement agreement.



Recently
Issued Accounting Standards



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



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



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



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



SFAS 150.In May 2003, the FASB issued SFAS 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities



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and equity. Financial instruments that are within the scope of the statement, which previously were often classified as equity, must now be classified as
liabilities. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise generally effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of this
statement did not have a material effect on our results of operations or financial position.



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



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



Effects of Inflation



The Company has been generally successful in recovering
costs associated with inflation through price adjustments in its hotels-casinos. Expenses of operating the Companys investment properties are generally borne by the tenants. Any such future increases in costs associated with casino operations
and maintenance of properties may not be completely recovered by the Company.



Private Securities Litigation Reform Act



Certain statements in this Annual Report on Form 10-K 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.



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##### Table of Contents

Item 7A. Market Risk Disclosure



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



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





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##### Table of Contents

Item 8. Financial Statements and Supplementary Data



INDEX

TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULES

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



|                                                                                                                   |  | Page
|------------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                                   | 
|Independent Auditors Report                                                                                       |  | 28  
|                                                                                                                   | 
|Consolidated Balance Sheets as of September 30, 2003 and 2002                                                      |  | 29  
|                                                                                                                   | 
|Consolidated Statements of Operations for the Years Ended September 30, 2003, 2002 and 2001                        |  | 31  
|                                                                                                                   | 
|Consolidated Statements of Stockholders Equity (Deficiency) for the Years Ended September 30, 2003, 2002 and
2001 |  | 32  
|                                                                                                                   | 
|Consolidated Statements of Cash Flows for the Years Ended September 30, 2003, 2002 and 2001                        |  | 33  
|                                                                                                                   | 
|Notes to Consolidated Financial Statements                                                                         |  | 34  



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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INDEPENDENT AUDITORS REPORT



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, 2003 and
2002, and the related consolidated statements of operations, stockholders equity and cash flows for each of the three years in the period ended September 30, 2003. 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 auditing standards generally accepted in the United States of America. 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, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended September 30,
2003 in conformity with accounting principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP

Las Vegas, Nevada

December 24, 2003





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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets

as of September 30, 2003 and 2002



|                                    |  | 2003 |             |   | 2002 |  
|----------------------------------- |  | ---- | ----------- | - | ---- | -
|ASSETS                              |  |      |             |   |      |  
|                                    |  |     
|Current assets:                     |  |      |             |   |      |  
|Cash and cash equivalents           |  | $    | 5,852,354   |   |      | $
|Investment in marketable securities |  |      | 7,262,208   |   |      |  
|Accounts receivable, net            |  |      | 3,178,143   |   |      |  
|Inventories                         |  |      | 288,947     |   |      |  
|Prepaid expenses and other          |  |      | 755,537     |   |      |  
|                                    |  |      |             |   |      |  
|Total current assets                |  |      | 17,337,189  |   |      |  
|                                    |  |     
|Property and equipment:             |  |      |             |   |      |  
|Land held for development           |  |      | 23,109,400  |   |      |  
|Property held for investment, net   |  |      | 136,824,589 |   |      |  
|Land used in operations             |  |      | 8,125,589   |   |      |  
|Buildings and improvements          |  |      | 35,639,920  |   |      |  
|Machinery and equipment             |  |      | 11,515,818  |   |      |  
|Accumulated depreciation            |  |      | (20,587,802 | ) |      |  
|                                    |  |      |             |   |      |  
|Property and equipment, net         |  |      | 194,627,514 |   |      |  
|                                    |  |     
|Restricted cash                     |  |      | 13,898,971  |   |      |  
|Other assets                        |  |      | 12,126,516  |   |      |  
|                                    |  |      |             |   |      |  
|Total assets                        |  | $    | 237,990,190 |   |      | $
|                                    |  |      |             |   |      |  



See
the accompanying Notes to Consolidated Financial Statements.



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Archon Corporation and Subsidiaries

Consolidated Balance Sheets

as of September 30, 2003 and 2002



|                                                                                                                                                                                                                                                       |  | 2003 |             |   | 2002 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | -
|LIABILITIES and STOCKHOLDERS EQUITY                                                                                                                                                                                                                   |  |      |             |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Current liabilities:                                                                                                                                                                                                                                   |  |      |             |   |      |  
|Accounts payable                                                                                                                                                                                                                                       |  | $    | 2,668,187   |   |      | $
|Interest payable                                                                                                                                                                                                                                       |  |      | 2,249,954   |   |      |  
|Accrued and other liabilities                                                                                                                                                                                                                          |  |      | 3,071,867   |   |      |  
|Current portion of long-term debt                                                                                                                                                                                                                      |  |      | 3,510,004   |   |      |  
|Current portion of non-recourse debt                                                                                                                                                                                                                   |  |      | 6,414,729   |   |      |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |  
|Total current liabilities                                                                                                                                                                                                                              |  |      | 17,914,741  |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Long-term debt - less current portion                                                                                                                                                                                                                  |  |      | 1,073,305   |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Non-recourse debt - less current portion                                                                                                                                                                                                               |  |      | 110,987,179 |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Obligation under lease                                                                                                                                                                                                                                 |  |      | 36,637,505  |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Deferred income taxes                                                                                                                                                                                                                                  |  |      | 30,143,408  |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Other liabilities                                                                                                                                                                                                                                      |  |      | 16,586,096  |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Commitments                                                                                                                                                                                                                                            |  |      |             |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Stockholders equity:                                                                                                                                                                                                                                  |  |      |             |   |      |  
|Common stock, $.01 par value; authorized-100,000,000 shares; issued and outstanding  6,221,431 shares at September 30, 2003
and 6,221,431 at September 30, 2002                                                                                       |  |      | 62,214      |   |      |  
|Preferred stock, exchangeable, redeemable 15.5% cumulative, stated at $2.14 liquidation value plus accrued interest,
authorized-10,000,000 shares; issued and outstanding  4,638,421 shares at September 30, 2003 and 5,077,720 at September 30, 2002 |  |      | 18,090,538  |   |      |  
|Additional paid-in capital                                                                                                                                                                                                                             |  |      | 58,883,538  |   |      |  
|Accumulated deficit                                                                                                                                                                                                                                    |  |      | (53,071,658 | ) |      |  
|Accumulated other comprehensive income / (loss)                                                                                                                                                                                                        |  |      | 844,841     |   |      |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |  
|Subtotal                                                                                                                                                                                                                                               |  |      | 24,809,473  |   |      |  
|                                                                                                                                                                                                                                                       |  |     
|Less stock subscriptions receivable                                                                                                                                                                                                                    |  |      | (73,743     | ) |      |  
|Less treasury common stock  4,875 shares, at cost                                                                                                                                                                                                     |  |      | (87,774     | ) |      |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |  
|Total stockholders equity                                                                                                                                                                                                                             |  |      | 24,647,956  |   |      |  
|                                                                                                                                                                                                                                                       |  |      |             |   |      |  
|Total liabilities and stockholders equity                                                                                                                                                                                                             |  | $    | 237,990,190 |   |      | $
|                                                                                                                                                                                                                                                       |  |      |             |   |      |  



See the accompanying Notes to
Consolidated Financial Statements.



30



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Operations

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



|                                                        |  | 2003 |             |   | 2002 |   |             | 2001 | 
|------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- | 
|Revenues:                                               |  |      |             |   |      |   |             |      | 
|Casino                                                  |  | $    | 27,948,767  |   |      | $ | 29,415,497  |      | 
|Hotel                                                   |  |      | 2,689,656   |   |      |   | 2,659,335   |      | 
|Food and beverage                                       |  |      | 7,385,940   |   |      |   | 7,831,579   |      | 
|Investment properties                                   |  |      | 12,402,246  |   |      |   | 12,402,247  |      | 
|Other                                                   |  |      | 2,576,058   |   |      |   | 3,197,838   |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Gross revenues                                          |  |      | 53,002,667  |   |      |   | 55,506,496  |      | 
|                                                        |  |      |            
|Less casino promotional allowances                      |  |      | (6,841,198  | ) |      |   | (6,741,025  | )    | 
|                                                        |  |      |             |   |      |   |             |      | 
|Net operating revenues                                  |  |      | 46,161,469  |   |      |   | 48,765,471  |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|                                                        |  |      |            
|Operating expenses:                                     |  |      |             |   |      |   |             |      | 
|Casino                                                  |  |      | 16,337,894  |   |      |   | 15,978,110  |      | 
|Hotel                                                   |  |      | 733,436     |   |      |   | 816,471     |      | 
|Food and beverage                                       |  |      | 3,567,409   |   |      |   | 4,084,003   |      | 
|Other                                                   |  |      | 1,828,325   |   |      |   | 1,988,276   |      | 
|Selling, general and administrative                     |  |      | 4,806,533   |   |      |   | 5,062,358   |      | 
|Corporate expenses                                      |  |      | 2,796,269   |   |      |   | 2,815,467   |      | 
|Utilities and property expenses                         |  |      | 5,236,325   |   |      |   | 5,701,546   |      | 
|Depreciation and amortization                           |  |      | 6,459,589   |   |      |   | 6,035,038   |      | 
|Reserve for receivable and investment                   |  |      | 1,100,000   |   |      |   | 0           |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Total operating expenses                                |  |      | 42,865,780  |   |      |   | 42,481,269  |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Operating income                                        |  |      | 3,295,689   |   |      |   | 6,284,202   |      | 
|                                                        |  |      |            
|Interest expense                                        |  |      | (16,183,619 | ) |      |   | (16,413,145 | )    | 
|Gain on sale of assets                                  |  |      | 0           |   |      |   | 0           |      | 
|Litigation settlement, net                              |  |      | 0           |   |      |   | 0           |      | 
|Interest income                                         |  |      | 1,489,483   |   |      |   | 1,288,887   |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Income (loss) before income tax (expense) benefit       |  |      | (11,398,447 | ) |      |   | (8,840,056  | )    | 
|Federal income tax (expense) benefit                    |  |      | 3,947,668   |   |      |   | 1,133,000   |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Net income (loss)                                       |  |      | (7,450,779  | ) |      |   | (7,707,056  | )    | 
|Dividends accrued on preferred shares                   |  |      | (1,526,611  | ) |      |   | (1,555,246  | )    | 
|                                                        |  |      |             |   |      |   |             |      | 
|Net income (loss) applicable to common shares           |  | $    | (8,977,390  | ) |      | $ | (9,262,302  | )    | 
|                                                        |  |      |             |   |      |   |             |      | 
|Average common shares outstanding                       |  |      | 6,221,431   |   |      |   | 6,180,152   |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Average common and common equivalent shares outstanding |  |      | 6,221,431   |   |      |   | 6,180,152   |      | 
|                                                        |  |      |             |   |      |   |             |      | 
|Income (loss) per common share:                         |  |      |             |   |      |   |             |      | 
|Basic                                                   |  | $    | (1.44       | ) |      | $ | (1.50       | )    | 
|                                                        |  |      |             |   |      |   |             |      | 
|Diluted                                                 |  | $    | (1.44       | ) |      | $ | (1.50       | )    | 
|                                                        |  |      |             |   |      |   |             |      | 



See the accompanying Notes to
Consolidated Financial Statements.



31



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Stockholders Equity (Deficiency)

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



|                                                             |  | Common Stock |        |   | Preferred Stock |   |             | Additional Paid-In Capital |  | Accumulated Deficit |            |  | Accumulated Other Comprehensive Loss |              |   | Stock Subscriptions Receivable |   |          | Treasury Stock |  |   | Total   |  
|------------------------------------------------------------ |  | ------------ | ------ | - | --------------- | - | ----------- | -------------------------- |  | ------------------- | ---------- |  | ------------------------------------ | ------------ | - | ------------------------------ | - | -------- | -------------- |  | - | ------- | -
|Balances, October 1, 2000                                    |  | $            | 62,004 |   |                 | $ | 26,439,760  |                            |  | $                   | 51,520,954 |  | $                                    | (122,063,224 | ) |                                | $ | 0        |                |  | $ | 0       |  
|Net income                                                   |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      | 89,181,659   |   |                                |   |          |                |  |   |         |  
|Preferred stock dividend accrued                             |  |              |        |   |                 |   | 1,950,401   |                            |  |                     |            |  |                                      | (1,950,401   | ) |                                |   |          |                |  |   |         |  
|Common and preferred stock acquired in litigation settlement |  |              | (536   | ) |                 |   | (10,800,869 | )                          |  |                     | 5,364,422  |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Preferred stock purchased                                    |  |              |        |   |                 |   | (842,706    | )                          |  |                     | 390,473    |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Unrealized loss on marketable securities                     |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   | (406,701 | )              |  |   |         |  
|Stock options exercised                                      |  |              | 65     |   |                 |   | 65          |                            |  |                     | 7,935      |  |                                      |              |   |                                |   |          |                |  |   |         |  
|                                                             |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Balances, September 30, 2001                                 |  |              | 61,533 |   |                 |   | 16,746,586  |                            |  |                     | 57,283,784 |  |                                      | (34,831,966  | ) |                                |   | (406,701 | )              |  |   | 0       |  
|Net loss                                                     |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      | (7,707,056   | ) |                                |   |          |                |  |   |         |  
|Preferred stock dividend accrued                             |  |              |        |   |                 |   | 1,555,246   |                            |  |                     |            |  |                                      | (1,555,246   | ) |                                |   |          |                |  |   |         |  
|Preferred stock purchased                                    |  |              |        |   |                 |   | (155,076    | )                          |  |                     | 79,955     |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Stock options exercised                                      |  |              | 681    |   |                 |   |             |                            |  |                     | 73,743     |  |                                      |              |   |                                |   |          |                |  |   | (73,743 | )
|Unrealized gain on marketable securities                     |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   | 312,023  |                |  |   |         |  
|                                                             |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Balances, September 30, 2002                                 |  |              | 62,214 |   |                 |   | 18,146,756  |                            |  |                     | 57,437,482 |  |                                      | (44,094,268  | ) |                                |   | (94,678  | )              |  |   | (73,743 | )
|Net loss                                                     |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      | (7,450,779   | ) |                                |   |          |                |  |   |         |  
|Preferred stock dividend accrued                             |  |              |        |   |                 |   | 1,526,611   |                            |  |                     |            |  |                                      | (1,526,611   | ) |                                |   |          |                |  |   |         |  
|Preferred stock purchased                                    |  |              |        |   |                 |   | (1,582,829  | )                          |  |                     | 953,692    |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Capital contributions                                        |  |              |        |   |                 |   |             |                            |  |                     | 492,364    |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Unrealized gain on marketable securities                     |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   | 939,519  |                |  |   |         |  
|                                                             |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   |          |                |  |   |         |  
|Balances, September 30, 2003                                 |  | $            | 62,214 |   |                 | $ | 18,090,538  |                            |  | $                   | 58,883,538 |  | $                                    | (53,071,658  | ) |                                | $ | 844,841  |                |  | $ | (73,743 | )
|                                                             |  |              |        |   |                 |   |             |                            |  |                     |            |  |                                      |              |   |                                |   |          |                |  |   |         |  



See the accompanying Notes to
Consolidated Financial Statements.



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

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



|                                                                                                   |  | 2003 |            |   | 2002 |   |            | 2001 | 
|-------------------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ---- | 
|Cash flows from operating activities:                                                              |  |      |            |   |      |   |            |      | 
|Net income (loss)                                                                                  |  | $    | (7,450,779 | ) |      | $ | (7,707,056 | )    | 
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |      |            |   |      |   |            |      | 
|Depreciation and amortization                                                                      |  |      | 6,459,589  |   |      |   | 6,035,038  |      | 
|Gain on sale of assets                                                                             |  |      | 0          |   |      |   | 0          |      | 
|Negative amortization of debt                                                                      |  |      | 1,272,197  |   |      |   | 1,117,411  |      | 
|Change in assets and liabilities:                                                                  |  |      |            |   |      |   |            |      | 
|Accounts receivable, net                                                                           |  |      | 47,801     |   |      |   | (165,917   | )    | 
|Inventories                                                                                        |  |      | (2,362     | ) |      |   | (12,542    | )    | 
|Prepaid expenses and other                                                                         |  |      | 219,661    |   |      |   | (5,629     | )    | 
|Deferred income taxes                                                                              |  |      | (3,947,668 | ) |      |   | (633,000   | )    | 
|Other assets                                                                                       |  |      | (5,826,247 | ) |      |   | (1,846,292 | )    | 
|Accounts payable                                                                                   |  |      | 741,383    |   |      |   | 922,826    |      | 
|Interest payable                                                                                   |  |      | (35,294    | ) |      |   | (91,770    | )    | 
|Accrued and other liabilities                                                                      |  |      | 6,027,592  |   |      |   | 3,987,202  |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Net cash provided by (used in) operating activities                                                |  |      | (2,494,127 | ) |      |   | 1,600,271  |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Cash flows from investing activities:                                                              |  |      |            |   |      |   |            |      | 
|Proceeds from sale of assets                                                                       |  |      | 0          |   |      |   | 0          |      | 
|Decrease (increase) in restricted cash                                                             |  |      | (483,814   | ) |      |   | 2,485,305  |      | 
|Cost and expenses related to sale of assets                                                        |  |      | 0          |   |      |   | 0          |      | 
|Capital expenditures                                                                               |  |      | (2,022,838 | ) |      |   | (4,352,497 | )    | 
|Marketable securities purchased                                                                    |  |      | (1,067,096 | ) |      |   | (7,314,325 | )    | 
|Marketable securities sold                                                                         |  |      | 6,531,199  |   |      |   | 5,262,028  |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Net cash provided by (used in) investing activities                                                |  |      | 2,957,451  |   |      |   | (3,919,489 | )    | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Cash flows from financing activities:                                                              |  |      |            |   |      |   |            |      | 
|Long-term debt                                                                                     |  |      | 2,867,171  |   |      |   | 0          |      | 
|Non-recourse debt                                                                                  |  |      | 0          |   |      |   | 0          |      | 
|Obligation under lease                                                                             |  |      | 0          |   |      |   | 0          |      | 
|Paid on long-term debt                                                                             |  |      | (5,956,780 | ) |      |   | (5,203,337 | )    | 
|Paid on note payable  officer                                                                     |  |      | 0          |   |      |   | 0          |      | 
|Debt issue costs                                                                                   |  |      | 0          |   |      |   | 0          |      | 
|Capital stock acquired                                                                             |  |      | (629,137   | ) |      |   | (75,121    | )    | 
|Capital contributions                                                                              |  |      | 492,364    |   |      |   | 0          |      | 
|Stock options exercised                                                                            |  |      | 0          |   |      |   | 0          |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Net cash used in financing activities                                                              |  |      | (3,226,382 | ) |      |   | (5,278,458 | )    | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Increase (decrease) in cash and cash equivalents                                                   |  |      | (2,763,058 | ) |      |   | (7,597,676 | )    | 
|Cash and cash equivalents, beginning of year                                                       |  |      | 8,615,412  |   |      |   | 16,213,088 |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 
|Cash and cash equivalents, end of year                                                             |  | $    | 5,852,354  |   |      | $ | 8,615,412  |      | 
|                                                                                                   |  |      |            |   |      |   |            |      | 



See the accompanying Notes to
Consolidated Financial Statements.





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##### Table of Contents

ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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



1. Basis of Presentation and General Information



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



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



On December 29, 2000, the Company entered into a series of agreements to exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986,
as amended (the Code), the real and personal property, excluding gaming equipment, and intangible assets used in the operation of the Pioneer to a third party and agreed to lease and license the assets sold for up to 20 years, during
which period the Company will operate the Pioneer (collectively, the Pioneer Transactions). Additionally, the Company has the option to acquire the Pioneer during the period from December 29, 2003 to December 31, 2007. On November 13,
2003, the Company notified GE Capital that in accordance with Article 25 of the lease between HAHF Pioneer, LLC (GE) and PHI, the Company will exercise its Early Purchase Option on December 29, 2003.



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



2. Summary of Significant Accounting Policies



Principles of Consolidation



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



34



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##### Table of Contents

Cash and Cash Equivalents



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



Investment in
Marketable Securities



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



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



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



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



|                                  |  | 2003
|--------------------------------- |  | ----
|                                  |  | Cost
|Government and agency obligations |  | $   
|Other debt securities             |  |     
|                                  |  |     
|Total debt securities             |  |     
|Equity securities                 |  |     
|                                  |  |     
|Total                             |  | $   
|                                  |  |     



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##### Table of Contents

|                                  |  | 2002
|--------------------------------- |  | ----
|                                  |  | Cost
|Government and agency obligations |  | $   
|Other debt securities             |  |     
|                                  |  |     
|Total debt securities             |  |     
|Equity securities                 |  |     
|                                  |  |     
|Total                             |  | $   
|                                  |  |     



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



|                                       |  | 2003
|-------------------------------------- |  | ----
|                                       |  | Cost
|Due in one year or less                |  | $   
|Due after one year through five years  |  |     
|Due after five years through ten years |  |     
|Due after ten years                    |  |     
|Mortgage backed securities             |  |     
|                                       |  |     
|Total                                  |  | $   
|                                       |  |     



|                                       |  | 2002
|-------------------------------------- |  | ----
|                                       |  | Cost
|Due in one year or less                |  | $   
|Due after one year through five years  |  |     
|Due after five years through ten years |  |     
|Due after ten years                    |  |     
|Mortgage backed securities             |  |     
|                                       |  |     
|Total                                  |  | $   
|                                       |  |     



Inventories



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



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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. 121, Impairment of Long-Lived Assets (SFAS 121).



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



Pre-Opening Expenses and Capitalized Interest



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



Federal Income Taxes



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



Treasury Stock



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



Revenue Recognition



Casino revenue is
recorded as gaming wins less losses. Revenues include the retail amount of room, food, beverage and other services provided gratuitously to customers. Such amounts are then deducted as promotional allowances. The estimated cost of providing these
promotional services has been reported in the accompanying 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):



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|                  |  | 2003 |       | 2002 |   | 2001 
|----------------- |  | ---- | ----- | ---- | - | -----
|Food and beverage |  | $    | 4,661 |      | $ | 4,530
|Hotel             |  |      | 893   |      |   | 825  
|Other             |  |      | 78    |      |   | 72   
|                  |  |      |       |      |   |      
|Total             |  | $    | 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 income (loss) per share and diluted net income (loss) per share. Basic per share amounts are computed by dividing net income (loss) by average shares outstanding during the period, while diluted per share
amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options. The effect of options outstanding was included in diluted calculations during the year ended September 30, 2001 but was not included in
diluted calculations during fiscal years 2003 and 2002 since the Company incurred a net loss. The dilutive effect of the assumed exercise of stock options increased the weighted average number of shares of common stock by 626,521 shares for the year
ended September 30, 2001.



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



Accounting for Stock-Based Compensation



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



|                                                                                                                                            |  | Twelve Months EndedSeptember 30,
|------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------
|                                                                                                                                            |  | 2003                            
|Net income (loss)                                                                                                                           |  | $                               
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related
tax effects |  |                                 
|                                                                                                                                            |  |                                 
|Pro forma net income/(loss)                                                                                                                 |  | $                               
|                                                                                                                                            |  |                                 
|Income/(loss) per share:                                                                                                                    |  |                                 
|Basic-as reported                                                                                                                           |  | $                               
|                                                                                                                                            |  |                                 
|Basic-pro forma                                                                                                                             |  | $                               
|                                                                                                                                            |  |                                 
|Diluted-as reported                                                                                                                         |  | $                               
|                                                                                                                                            |  |                                 
|Diluted-pro forma                                                                                                                           |  | $                               
|                                                                                                                                            |  |                                 



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



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



Recently
Issued Accounting Standards



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



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



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



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



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



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



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



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



Fair Value of Financial Instruments



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



Reclassifications



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



3. Cash and Cash Equivalents



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



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



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4. Restricted Cash



At September 30, 2003 and 2002, approximately $13.9 million and $13.0 million, respectively, were held by SFHI is restricted in use and has been pledged
to secure SFHIs guaranty of PHIs lease and license obligations. The permitted investments for the restricted cash are investment grade commercial paper, money market accounts, government backed securities and preferred stock of the
Purchaser. Additionally, $1.9 million of the $13.9 million may be used for capital expenditures at the Pioneer and acquisition of real property and equipment under lease at the Pioneer. See Note 12



5. Accounts Receivable, Net



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



|                                     |  | 2003 |           |   | 2002 |  
|------------------------------------ |  | ---- | --------- | - | ---- | -
|Casino and hotel                     |  | $    | 485,202   |   |      | $
|Investment properties                |  |      | 3,021,562 |   |      |  
|Other                                |  |      | 258,016   |   |      |  
|                                     |  |      |           |   |      |  
|                                     |  |      | 3,764,780 |   |      |  
|Less allowance for doubtful accounts |  |      | (586,637  | ) |      |  
|                                     |  |      |           |   |      |  
|Total                                |  | $    | 3,178.143 |   |      | $
|                                     |  |      |           |   |      |  



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



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



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6. Land Held for Development



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



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



7. Property and Equipment, Net



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



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



Included in Property and equipment, net in
the accompanying Consolidated Balance Sheets at September 30, 2003 and 2002 are certain assets held under lease at the Pioneer with a net carrying value of approximately $18.9 million and $29.2 million, respectively. See Note 12



8. Rental Property Held for Investment, Net



The property in Dorchester, Massachusetts is located on 12 acres and
includes several buildings with approximately 425,000 square feet of commercial office space. The property was acquired for approximately $82.4 million plus $500,000 in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3
million in non-recourse debt associated with the property. The property is under a net lease through 2019 with a single tenant with an investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations
related to the property. The Company allocated approximately $15.0 million of the purchase price to land and the



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balance to building and improvements. The expense incurred to acquire the property is recorded in Other assets in the accompanying Consolidated Balance
Sheets and is being amortized over the remaining term of the lease. Deferred rent at September 30, 2003 and 2002 in the amount of $16.6 million and $11.3 million, respectively, is included in Other liabilities on the accompanying Consolidated
Balance Sheets. See Note 11



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



9. Other Assets



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



Included in Other assets at September
30, 2003 and 2002 is $700,000 and $900,000, respectively, of commercial and residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third parties as well as loans made directly to J & J
Mortgage under a master loan agreement. The loans purchased by the Company were purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under the master loan agreement bear interest at the prime rate
plus 2%. J & J Mortgage is owned by LICO, which in turn is wholly-owned by Paul W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W. Delaney, a director of the Company, is the
president of J & J Mortgage.



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10. Long-Term Debt



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



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



11. Non-Recourse Debt Obligations



The Company assumed $77.3 million of indebtedness,
consisting of approximately $75.1 million of first mortgage indebtedness and $2.1 million of indebtedness under Section 467 of the Code, in connection with its acquisition on March 2, 2001 of the commercial office building located in Dorchester,
Massachusetts. The building is under a net lease through June 2019, which requires the tenant to make higher semi-annual lease payments through June 2005 and lower semi-annual lease payments thereafter. The lease payments are applied to the
outstanding indebtedness and are intended to reduce the first mortgage note balance to $31.2 million by June 2005. The portion of higher lease payments attributable to future periods is considered an advance of rent under section 467 of the Code.
The first mortgage indebtedness is non-recourse and matures in June 2019 to coincide with the end of the lease term. See Note 8



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



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



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



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12. Obligations Under Lease



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



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



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



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



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



Specifically, if the fixed charges ratio is less
than 1.00 to 1.00 for any four-quarter period ending on or before December 31, 2003, Archon is obligated to contribute capital to PHI in the amount of the deficiency and, if the fixed charges ratio is less than 1.00 to 1.00 for three consecutive
quarters during that period, to deposit additional cash to restricted cash accounts based upon a specified percentage of the stipulated loss value set forth in the lease, with payments ranging from $500,000 for the quarter ended June 30, 2003 to
$2,000,000 for the quarter ending December 31, 2003, with significant increases thereafter. 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 will exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO is in the amount of $35.6 million and will be paid from the following monies: a note from PDS that is due on December 29, 2003 in the amount of $5.0
million, a loan for which the Company has already received a commitment in the amount of $18.0 million and funds from the restricted cash accounts in the



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amount of approximately $12.6 million. With respect to four-quarter periods ending after December 31, 2003, if the fixed charges ratio requirement is not
met, Archon will be required to make a capital contribution in the amount of the deficiency and an additional cash payment to the restricted cash account based upon a specified percentage of the stipulated loss value set forth in the lease.
Notwithstanding the foregoing, if the fixed charges ratio is less than 1.00 to 1.00 for four consecutive quarters and the fourth consecutive quarter ends after the quarter ending December 31, 2003, Archon will not be permitted to cure the
deficiency. If Archon fails to make any required payments or is not permitted to cure a deficiency with respect to quarters ending after the quarter ending December 31, 2003, an event of default will occur under the lease.



Pursuant to the agreements relating to the Pioneer Transactions, Archon has
foregone the management fee otherwise payable to it since April 2001. PHIs fixed charges ratio was 0.61 to 1.00 for the four quarters ended September 30, 2003. As a result, the Company is required to make a deposit to the restricted cash
account in the amount of $983,000. A deposit in the amount of $489,000 was required for the quarter ended June 30, 2003, in which quarter the fixed charges ratio was .60 to 1.00. As a result of the EPO, the Company will not make the deposits as all
funds will be paid to the lessor to satisfy the EPO. PHIs fixed charges ratio for the four quarters ended June 30, 2002, September 30, 2002, December 31, 2002 and March 31, 2003 were 0.92 to 1.00, 0.87 to 1.00, 0.81 to 1.00 and 0.55 to 1.00,
respectively. As a result, Archon made capital contributions to PHI in the amounts of approximately $375,000, $275,000, $314,000 and $1,372,000 with respect to the four-quarter periods ended June 30, September 30, December 31, 2002 and March 31,
2003, respectively. Additionally, it deposited $484,000 and $487,000 in the restricted cash account for the four quarters ended December 31, 2002 and March 31, 2003, respectively. The Company expects that future operating results at the Pioneer will
result in fixed charges ratios of less than 1.00 to 1.00, so that the Company will be required to continue to make capital contributions and significant deposits to restricted cash accounts for the foreseeable future.



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



The agreements related to the Pioneer Transactions
provide an option for the Company to purchase the assets under the lease and license agreements to PHI during the period from December 29, 2003 and December 31, 2007, at purchase price amounts ranging between $35.5 million and $38.7 million, which,
as of the date of the agreements, approximated estimated fair market value at the relevant purchase dates, and at the end of the lease term for fair market value. On November 13, 2003, the Company notified GE Capital that in accordance with Article
25 of the lease between HAHF



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Pioneer, LLC (GE) and PHI, the Company will exercise its Early Purchase Option (EPO) on December 29, 2003. The EPO is in the amount
of $35.6 million and will be paid from the following monies: a note from PDS that is due on December 29, 2003 in the amount of $5.0 million, a loan for which the Company has already received a commitment in the amount of $18.0 million and funds from
the restricted cash accounts in the amount of approximately $12.6 million.



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



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



|           |  | Operating
|---------- |  | ---------
|2004       |  | $        
|2005       |  |          
|2006       |  |          
|2007       |  |          
|2008       |  |          
|Thereafter |  |          
|           |  |          
|Total      |  | $        
|           |  |          



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



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



14. Gain on Sale of Assets



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



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15. Litigation Settlement, Net



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



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



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



16. Preferred Stock



The Company has outstanding redeemable exchangeable cumulative preferred
stock (Preferred Stock). Prior to fiscal 1997, the Company satisfied the semi-annual dividend payments on its Preferred Stock through the issuance of paid-in-kind dividends. Commencing in fiscal 1997, dividends paid on the Preferred
Stock, to the extent declared, must be paid in cash. Pursuant to the terms of the Certificate of Designation with respect to the Preferred Stock, dividends that are not declared are cumulative and accrue. The dividend rate per annum was equal to
8.0% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11.0%. Beginning October 1, 1999, the dividend rate increased by an additional 50 basis points on each



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succeeding semi-annual dividend payment date up to a maximum of 16.0% per annum. The dividend rate is 16.0% effective October 1, 2003. The accrued
stock dividends have been recorded as an increase to the Preferred Stock account. As of September 30, 2003, the aggregate liquidation preference of the Preferred Stock was $18.1 million, or $3.90 per share.



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



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



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



17. Stock Option Plan



The Company has a Key Employee Stock Option Plan (the Stock Option Plan) providing for the grant of up to 1.2
million shares of its common stock to key employees. The Stock Option Plan provides for both incentive stock options and non-qualified stock options. This Stock Option Plan was terminated as of September 30, 2003. As of September 30, 2003, there
were 508,860 options outstanding under the Stock Option Plan. During fiscal years 2002 and 2001, 68,175 and 6,500 options, respectively, were exercised. No options were exercised during the fiscal year 2003. During fiscal year 2002, options with
respect to 4,000 shares of common stock were granted. No options were granted during the fiscal years 2003 and 2001. The outstanding options have expiration dates through June 2010.



In December 1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (the Non-Employee Director
Plan) which provides for the grant of up to 100,000 shares of its common stock to the directors. Under the Non-Employee Director Plan, directors were automatically granted an option to purchase 12,500 shares of the common stock at an exercise
price equal to the market value of such shares on the date of such election to the board. This Non-Employee Director Plan was terminated on March 21, 2002. As of September 30, 2003, there were 37,500 options outstanding under this plan. During
fiscal years 2003 and 2002, no options were granted. The outstanding options have an expiration date through February 2010



SFHI, SLVC and PHI (collectively, the Subsidiaries), have adopted subsidiary stock option plans (the Subsidiary Plans). The
Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such Subsidiarys



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Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to
enable the Subsidiaries, the Company and any subsidiaries of the Company or Subsidiaries to attract, retain and motivate their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of
such persons in the Subsidiaries. As of September 30, 2003, no options had been granted under any Subsidiary Plans.



Accounting for Stock-Based Compensation



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



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



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



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



|                                      |  | 2002 |       
|------------------------------------- |  | ---- | ------
|Net loss applicable to common shares: |  |      |       
|As reported                           |  | $    | (9,262
|Pro forma                             |  |      | (9,273
|                                      | 
|Loss per share:                       |  |      |       
|As reported                           |  |      | (1.50 
|Pro forma                             |  |      | (1.50 
|                                      | 
|Weighted average assumptions:         |  |      |       
|Expected stock price volatility       |  |      | 100.0 
|Risk-free interest rate               |  |      | 4.35  
|Expected option lives (in years)      |  |      | 5.00  
|Estimated fair value of options       |  |      | 2.64  



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|                                                                                                                                    |  | 2003                                         |        |   | 2002 |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- | ------ | - | ---- | -
|                                                                                                                                    |  | (dollars in thousands,except per share data) |       
|Net loss                                                                                                                            |  | $                                            | (6,331 | ) |      | $
|Deduct:                                                                                                                             |  |                                              |        |   |      |  
|Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                              | (1     | ) |      |  
|                                                                                                                                    |  |                                              |        |   |      |  
|Pro forma net loss                                                                                                                  |  | $                                            | (6,332 | ) |      | $
|                                                                                                                                    |  |                                              |        |   |      |  
|Loss per share:                                                                                                                     |  |                                              |        |   |      |  
|Basic-as reported                                                                                                                   |  | $                                            | (1.02  | ) |      | $
|                                                                                                                                    |  |                                              |        |   |      |  
|Basic-pro forma                                                                                                                     |  | $                                            | (1.02  | ) |      | $
|                                                                                                                                    |  |                                              |        |   |      |  
|Diluted-as reported                                                                                                                 |  | $                                            | (1.02  | ) |      | $
|                                                                                                                                    |  |                                              |        |   |      |  
|Diluted-pro forma                                                                                                                   |  | $                                            | (1.02  | ) |      | $
|                                                                                                                                    |  |                                              |        |   |      |  



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18. Federal Income Taxes



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



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



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



|                         |  | 2003                   |        |   | 2002 |   |        | 2001 | 
|------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | ---- | 
|                         |  | (dollars in thousands) |       
|Amount at statutory rate |  | $                      | (3,990 | ) |      | $ | (3,094 | )    | 
|Goodwill                 |  |                        | 0      |   |      |   | 0      |      | 
|Goodwill reserve         |  |                        | 0      |   |      |   | 1,925  |      | 
|Valuation allowance      |  |                        | 0      |   |      |   | 0      |      | 
|Other                    |  |                        | 42     |   |      |   | 36     |      | 
|                         |  |                        |        |   |      |   |        |      | 
|Total                    |  | $                      | (3,948 | ) |      | $ | (1,133 | )    | 
|                         |  |                        |        |   |      |   |        |      | 



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



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



|                                                     |  | 2003                   |         |   | 2002 |  
|---------------------------------------------------- |  | ---------------------- | ------- | - | ---- | -
|                                                     |  | (dollars in thousands) |        
|Deferred tax liabilities:                            |  |                        |         |   |      |  
|Prepaid expenses                                     |  | $                      | 445     |   |      | $
|Fixed asset cost, depreciation and amortization, net |  |                        | 31,949  |   |      |  
|Other                                                |  |                        | 3,356   |   |      |  
|                                                     |  |                        |         |   |      |  
|Gross deferred tax liabilities                       |  |                        | 35,750  |   |      |  
|                                                     |  |                        |         |   |      |  
|Deferred tax assets:                                 |  |                        |         |   |      |  
|Net operating loss carryforward                      |  |                        | 22,449  |   |      |  
|Reserves for accounts and contracts receivable       |  |                        | 115     |   |      |  
|Other                                                |  |                        | 537     |   |      |  
|Deferred payroll                                     |  |                        | 170     |   |      |  
|Tax credits                                          |  |                        | 952     |   |      |  
|                                                     |  |                        |         |   |      |  
|Gross deferred tax assets                            |  |                        | 24,223  |   |      |  
|                                                     |  |                        |         |   |      |  
|Net deferred tax (liability) before goodwill reserve |  |                        | (11,527 | ) |      |  
|Goodwill reserve                                     |  |                        | (18,616 | ) |      |  
|                                                     |  |                        |         |   |      |  
|Net deferred tax (liability)                         |  | $                      | (30,143 | ) |      | $
|                                                     |  |                        |         |   |      |  



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



19. Benefit Plans



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



20. Related Parties



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



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



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



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



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



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



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



21. Contingencies



Litigation:



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



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



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



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



Local Joint Executive Board et al.



The Company was the defendant in an action titled Local Joint Executive
Board, et al. v. Santa Fe Gaming Corporation et al., No. CV-S-01-0233-RLH. The plaintiffs instituted the action on or about February 28, 2001 in the United States District Court for the District of Nevada, alleging that the Company violated the
Worker Adjustment Retraining and Notification Act, (WARN Act), by improperly providing notification of the closing of the Santa Fe. The plaintiffs sought damages in the amount provided for by the statute. The plaintiffs filed a motion
for class certification, and the Company stipulated to the certification. On October 12, 2001, Archon filed a motion for summary judgment to dismiss the complaint in its entirety. Plaintiffs filed a memorandum in opposition to defendants
motion for summary judgment, as well as a counter-motion for summary judgment alleging the WARN Act notices sent by Archon were invalid. On February 1, 2002 a hearing was held on the motions and the court denied both the plaintiffs and
Archons motions for summary judgment. However, the court subsequently narrowed the scope of the case, and set the case for trial to commence October 21, 2002. On October 1, 2002, the parties participated in a settlement conference with the
magistrate judge assigned to the case. A settlement was reached whereby the Company agreed to pay the plaintiffs the total lump sum of $202,000 in exchange for a dismissal of the lawsuit with prejudice and a full release of all claims relating to
the closure of the Santa Fe. The class action settlement was approved by the court on October 24, 2002. The Company accrued the settlement payment in September 2002 and made the payment in December 2002.



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



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22. Supplemental Statement of Cash Flows Information



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



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



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23. Segment Information



The Companys operations are in the hotel/casino industry and investment properties. The Companys hotel/casino operations are conducted at
the Pioneer in Laughlin, Nevada. The Company owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland, which were acquired in March 2001. Other and Eliminations below includes financial information for the
Companys corporate operations and Archon Sparks Management Company, adjusted to reflect eliminations upon consolidation.



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



|                              |  | 2003                   |         |   | 2002 |   | 2001   
|----------------------------- |  | ---------------------- | ------- | - | ---- | - | -------
|                              |  | (dollars in thousands)
|Pioneer Hotel                 |  |                        |         |   |      |   |        
|Operating revenues            |  | $                      | 31,919  |   |      | $ | 35,468 
|                              |  |                        |         |   |      |   |        
|Operating income (loss)       |  | $                      | (1,017  | ) |      | $ | 251    
|Depreciation and amortization |  |                        | 2,481   |   |      |   | 2,001  
|Interest income               |  |                        | 23      |   |      |   | 17     
|                              |  |                        |         |   |      |   |        
|EBITDA(1)                     |  | $                      | 1,487   |   |      | $ | 2,269  
|                              |  |                        |         |   |      |   |        
|Interest expense              |  | $                      | 4,897   |   |      | $ | 4,760  
|                              |  |                        |         |   |      |   |        
|Capital expenditures          |  | $                      | 1,416   |   |      | $ | 4,143  
|                              |  |                        |         |   |      |   |        
|Identifiable assets(2)        |  | $                      | 37,072  |   |      | $ | 37,099 
|                              |  |                        |         |   |      |   |        
|                              |  |                        |        
|Investment Properties (3)     |  |                        |         |   |      |   |        
|Operating revenues            |  | $                      | 12,402  |   |      | $ | 12,402 
|                              |  |                        |         |   |      |   |        
|Operating income              |  | $                      | 8,998   |   |      | $ | 8,709  
|Depreciation and amortization |  |                        | 3,404   |   |      |   | 3,693  
|Interest income               |  |                        | 0       |   |      |   | 0      
|                              |  |                        |         |   |      |   |        
|EBITDA(1)                     |  | $                      | 12,402  |   |      | $ | 12,402 
|                              |  |                        |         |   |      |   |        
|Interest expense              |  | $                      | 11,322  |   |      | $ | 11,772 
|                              |  |                        |         |   |      |   |        
|Capital expenditures          |  | $                      | 0       |   |      | $ | 0      
|                              |  |                        |         |   |      |   |        
|Identifiable assets(2)        |  | $                      | 144,301 |   |      | $ | 147,077
|                              |  |                        |         |   |      |   |        



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|                              |  | 2003                   |         |   | 2002 |   |         | 2001 | 
|----------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- | 
|                              |  | (dollars in thousands) |        
|Other and Eliminations        |  |                        |         |   |      |   |         |      | 
|Operating revenues            |  | $                      | 1,840   |   |      | $ | 895     |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Operating loss                |  | $                      | (4,685  | ) |      | $ | (2,676  | )    | 
|Depreciation and amortization |  |                        | 575     |   |      |   | 341     |      | 
|Interest income               |  |                        | 1,466   |   |      |   | 1,272   |      | 
|                              |  |                        |         |   |      |   |         |      | 
|EBITDA(1)                     |  | $                      | (2,644  | ) |      | $ | (1,063  | )    | 
|                              |  |                        |         |   |      |   |         |      | 
|Interest expense              |  | $                      | (36     | ) |      | $ | (119    | )    | 
|                              |  |                        |         |   |      |   |         |      | 
|Capital expenditures          |  | $                      | 2,191   |   |      | $ | 313     |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Identifiable assets(2)        |  | $                      | 56,617  |   |      | $ | 57,910  |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Total                         |  |                        |         |   |      |   |         |      | 
|Operating revenues            |  | $                      | 46,161  |   |      | $ | 48,765  |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Operating income              |  | $                      | 3,296   |   |      | $ | 6,284   |      | 
|Depreciation and amortization |  |                        | 6,460   |   |      |   | 6,035   |      | 
|Interest income               |  |                        | 1,489   |   |      |   | 1,289   |      | 
|                              |  |                        |         |   |      |   |         |      | 
|EBITDA(1)                     |  | $                      | 11,245  |   |      | $ | 13,608  |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Interest expense              |  | $                      | 16,183  |   |      | $ | 16,413  |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Capital expenditures          |  | $                      | 3,607   |   |      | $ | 4,456   |      | 
|                              |  |                        |         |   |      |   |         |      | 
|Identifiable assets(2)        |  | $                      | 237,990 |   |      | $ | 242,086 |      | 
|                              |  |                        |         |   |      |   |         |      | 

---

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

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

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



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27. Subsequent Events



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



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



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28. Quarterly Results of Operations (Unaudited)



|                           |  | 2003                                     |        |   | 2002 |  
|-------------------------- |  | ---------------------------------------- | ------ | - | ---- | -
|                           |  | (dollars in thousands, except per share) |       
|Revenues:                  |  |                                          |        |   |      |  
|First Quarter              |  | $                                        | 11,300 |   |      | $
|Second Quarter             |  |                                          | 13,075 |   |      |  
|Third Quarter              |  |                                          | 11,482 |   |      |  
|Fourth Quarter             |  |                                          | 10,304 |   |      |  
|                           |  |                                          |        |   |      |  
|                           |  | $                                        | 46,161 |   |      | $
|                           |  |                                          |        |   |      |  
|Operating income (loss):   |  |                                          |        |   |      |  
|First Quarter              |  | $                                        | 1,211  |   |      | $
|Second Quarter             |  |                                          | 1,976  |   |      |  
|Third Quarter              |  |                                          | (173   | ) |      |  
|Fourth Quarter             |  |                                          | 282    |   |      |  
|                           |  |                                          |        |   |      |  
|                           |  | $                                        | 3,296  |   |      | $
|                           |  |                                          |        |   |      |  
|Net loss:                  |  |                                          |        |   |      |  
|First Quarter              |  | $                                        | (1,482 | ) |      | $
|Second Quarter             |  |                                          | (1,295 | ) |      |  
|Third Quarter              |  |                                          | (2,410 | ) |      |  
|Fourth Quarter             |  |                                          | (2,264 | ) |      |  
|                           |  |                                          |        |   |      |  
|                           |  | $                                        | (7,451 | ) |      | $
|                           |  |                                          |        |   |      |  
|Net loss per common share: |  |                                          |        |   |      |  
|First Quarter              |  | $                                        | (0.30  | ) |      | $
|Second Quarter             |  |                                          | (0.27  | ) |      |  
|Third Quarter              |  |                                          | (0.45  | ) |      |  
|Fourth Quarter             |  |                                          | (0.42  | ) |      |  
|                           |  |                                          |        |   |      |  
|                           |  | $                                        | (1.44  | ) |      | $
|                           |  |                                          |        |   |      |  



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



Not applicable.



Item 9A. Controls and Procedures



Based on their evaluation, as of a date within 90 days of the filing of this Form 10-K, the Companys Chief Executive Officer and Chief Financial Officer have concluded the Companys disclosure controls and procedures (as defined
in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are effective. There have been no significant changes in internal controls or in other factors that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



PART III



Item 10. Directors and Executive Officers of the Registrant



The information regarding the directors and executive officers of the Company to be included in the Companys Proxy Statement for the 2003 Annual
Meeting of Stockholders (the Proxy Statement) is incorporated herein by reference.



Item 11. Executive Compensation



The information regarding Executive Compensation to be included in the Proxy Statement is incorporated herein by reference.



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



The information regarding Security Ownership to be included in the Proxy Statement is incorporated herein by reference.



Item 13. Certain Relationships and Related Transactions



The information regarding Certain Relationships and Related Transactions to be included in the Proxy Statement is incorporated herein by reference.



Item 15. Principal Accountant Fees and Services



The information regarding accountant fees and services to be included in the Proxy Statement is incorporated herein by reference.



62



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PART IV



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



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



The financial statements and schedules 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 quarter of 2003.
|--- | ------------------------------------------------------------



None



63



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|(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 Bylaws of Santa Fe Gaming Corporation.(5)                                                                                                                                                                                                    
|              | 
|10.1          |  | Notes secured by liens on office building in Las Vegas, Nevada in the original principal amounts of $301,598.05, $23,337.96 and $649,063.99 bearing interest at 10%, 11% and 13
1/2% per annum, respectively.(1)                                                  
|              | 
|10.2          |  | Key Employee Stock Option Plan.(2)                                                                                                                                                                                                                                
|              | 
|10.3          |  | Lease Modification Letter dated August 24, 1995 by and between Wet N Wild Nevada, Inc. and Sahara Corporation.(3)                                                                                                                                                
|              | 
|10.4          |  | Employment Agreement by and among Santa Fe Gaming Corporation and Thomas K. Land dated October 1, 1999.(4)                                                                                                                                                        
|              | 
|10.5          |  | First amendment to the Employment Agreement, dated October 1, 1998 by and among Santa Fe Gaming Corporation and Thomas K. Land.(4)                                                                                                                                
|              | 
|10.6          |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998.(5)                                                                                                                                               
|              | 
|10.7          |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI.(6)                                                                                                                                                              
|              | 
|10.8          |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                                                    
|              | 
|10.9          |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                                 
|              | 
|10.10         |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden.(7)                                                                                                                        
|              | 
|10.11         |  | Asset Purchase Agreement dated June 12, 2000 by and among Santa Fe Hotel Inc., Santa Fe Gaming Corporation and Station Casinos, Inc.(8)                                                                                                                           
|              | 
|10.12         |  | Credit Agreement dated as of June 12, 2000 by and between Pioneer Hotel Inc. and Station Casinos, Inc.(8)                                                                                                                                                         
|              | 
|10.13         |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000.(9)                                                                                                                                               
|              | 
|10.14         |  | Guaranty by Santa Fe Gaming Corporation, guarantor; Pioneer Hotel Inc., tenant and guarantor and Santa Fe Hotel Inc., guarantor dated December 29, 2000.(9)                                                                                                       
|              | 
|10.15         |  | Exchange Agreement among Pioneer LLC, as transferor; Pioneer Hotel Inc., as tenant; HAHF Pioneer LLC as transferee and Heller Affordable House of Florida, Inc., dated December 29,
2000.(9)                                                                      
|              | 
|10.16         |  | Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                                                            
|              | 
|10.17         |  | Lease Schedule No. 1 to Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                                    
|              | 
|10.18         |  | Guaranty by and between PDS Gaming Corporation-Nevada and Santa Fe Gaming Corporation dated December 29, 2000.(9)                                                                                                                                                 
|              | 
|10.19         |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001.(10)                                                                                                                 



64



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|ExhibitNumber |  | Description of Exhibit                                                                                                                                                                                                                                            
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              | 
|10.20         |  | Promissory Note dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.(10)                                                                                         
|              | 
|10.21         |  | Deed of Trust and Security Agreement dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers
Holdings Inc.(10)                                                                    
|              | 
|10.22         |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999.(10)                                                                                                                               
|              | 
|10.23         |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC.(10)                                                                                                                                                 
|              | 
|10.24         |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                                                                
|              | 
|10.25         |  | First Amendment dated December 26, 2000 to Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                     
|              | 
|10.26         |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005.(10)                                                                                                                                                                         
|              | 
|10.27         |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020.(10)                                                                                                                                                                         
|              | 
|10.28         |  | Mortgage, Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing financing Statement dated as of June 30, 2000 between S-BNK Dorchester
Operations, LLC. and First Security Bank, National Association as Indenture Trustee.(10)
|              | 
|10.29         |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank.(10)                                                                                                                                                       
|              | 
|10.30         |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee.(10)                                                                                                             
|              | 
|10.31         |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden.(11)                                                                                                                                                   
|              | 
|10.32         |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Dukes-Sparks, LLC.                                                                                                                                                              
|              | 
|10.33         |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino.                                                                                                                                                                                         
|              | 
|10.34         |  | Option Agreement dated October 8, 2002 between Endeavors North LLC and Archon Corporation.                                                                                                                                                                        
|              | 
|21            |  | Subsidiaries of the Company.                                                                                                                                                                                                                                      
|              | 
|23.1          |  | Consent of Deloitte & Touche LLP.*                                                                                                                                                                                                                                
|              | 
|31.1          |  | Certification of Paul W. Lowden, Principal Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) 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 Charles W. Sandefur, Principal Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.*                                     
|              | 
|32.0          |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                  



|* | Filed concurrently herewith.
|- | ----------------------------

---

FOOTNOTES TO EXHIBIT INDEX



|(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 March 30, 1999 and
incorporated herein by reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



65



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##### Table of Contents

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

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

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

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

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

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





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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 23, 2003 |  |  |  | By:               
|                  |  |  |  |                   



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



|Signature                                                                               |  | Title                                                                             |  | Date             
|--------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | -----------------
|                                                                                        |  |                                                                                  
|/s/ Paul W. LowdenPaul W. Lowden (Principal Executive Officer)                          |  | Chairman of the Board and President (Principal Executive Officer)                 |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ John DelaneyJohn Delaney                                                            |  | Director                                                                          |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ Suzanne LowdenSuzanne Lowden                                                        |  | Director                                                                          |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ William J. RaggioWilliam J. Raggio                                                  |  | Director                                                                          |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ Charles W. SandefurCharles W. Sandefur (Principal Financial and Accounting Officer) |  | Director and Chief Financial Officer (Principal Accounting and Financial Officer) |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ Howard E. FosterHoward E. Foster                                                    |  | Special Director                                                                  |  | December 23, 2003
|                                                                                        |  |                                                                                  
|/s/ Jay ParthemoreJay Parthemore                                                        |  | Special Director                                                                  |  | December 23, 2003





67