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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



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

For the fiscal year ended: September 30, 2006



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

For the transition period from  to

Commission
File Number: 1-9481

ARCHON CORPORATION

(Exact name of registrant as specified in its charter)



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

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

(Address of principal executive office and zip code)

(702) 732-9120

(Registrants telephone number, including area code)



---

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

Common Stock, par value $.01 per share

Over the Counter Bulletin Board

(Title of Class)

Exchangeable Redeemable Preferred Stock

Over the Counter Bulletin Board

(Title of Class)

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

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

Large accelerated
filer ̈an accelerated
filer ̈or a non-accelerated
filer  x

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

The aggregate market value of the common stock held by non-affiliates of the registrant was approximately $45,000,000. The market value was computed by
reference to the closing price of the common stock as of March 31, 2006.

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

6,235,931 as of January 16, 2007

DOCUMENTS INCORPORATED BY REFERENCE

None

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K). YES x



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ARCHON CORPORATION AND SUBSIDIARIES

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL

YEAR ENDED SEPTEMBER 30, 2006

TABLE OF CONTENTS



|         |  |                                                                                       |  |         
|-------- |  | ------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                       |  | Page No.
|PART I   |  |                                                                                       |  |         
|Item 1.  |  | Business                                                                              |  | 1       
|         |  | General                                                                               |  | 1       
|         |  | Hotel and Casino Operations                                                           |  | 1       
|         |  | Investment Properties                                                                 |  | 2       
|         |  | Land Held for Development                                                             |  | 3       
|         |  | Nevada Regulations and Licensing                                                      |  | 4       
|Item 1A  |  | Risk Factors                                                                          |  | 6       
|Item 2.  |  | Properties                                                                            |  | 7       
|Item 3.  |  | Legal Proceedings                                                                     |  | 8       
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 9       
|         |  |                                                                                      
|PART II  |  |                                                                                       |  |         
|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                                                                |  | 24      
|Item 8.  |  | Financial Statements                                                                  |  | 25      
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 53      
|Item 9A. |  | Controls and Procedures                                                               |  | 53      
|         |  |                                                                                      
|PART III |  |                                                                                       |  |         
|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  | 54      
|Item 11. |  | Executive Compensation                                                                |  | 56      
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 59      
|Item 13. |  | Certain Relationships and Related Transactions                                        |  | 60      
|Item 14. |  | Principal Accountant Fees and Services                                                |  | 61      
|         |  |                                                                                      
|PART IV  |  |                                                                                       |  |         
|Item 15. |  | Exhibits and Reports on Form 8-K                                                      |  | 62      



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PART I



|Item 1. | BUSINESS
|------- | --------

General

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

Through the Securities and Exchange Commissions (SEC) website, at http://www.sec.gov/ the Companys annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchanges Act, are made available free of charge, as soon as reasonably
practical after such information has been filed or furnished to the SEC.

The principal executive office of the Company is located at 4336
Losee Road, Suite 5, North Las Vegas, Nevada, 89030, and the telephone number is (702) 732-9120.

Hotel and Casino Operations

The Pioneer

The Pioneer, built in 1982, features a classical western architecture style, and is located in Laughlin, Nevada, an unincorporated town on the Colorado River bordering Arizona. The Pioneer is located on approximately
12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated near the center of Laughlins Casino Drive. Approximately 61/2acres of the 12 acres are leased pursuant to a 99-year ground lease (the
Ground Lease) which, by its terms, is scheduled to terminate in December 2078. The leased land lies between and separates the remaining two parcels of land that are held in fee simple. The Pioneer is comprised of four buildings. One of
the three motel buildings together with a portion of both the Pioneers casino building and a second motel building are located on land subject to the Ground Lease. The casino is located in the main building, totaling approximately 50,000
square feet, of which approximately 21,500 square feet house the casino. The first floor includes the casino, two bars, snack bar and gift shop, as well as a twenty-four hour restaurant, kitchen, special events area, restrooms and storage areas. A
partial second floor houses a gourmet restaurant, administrative offices and banquet rooms. The three motel buildings were built in 1984 and comprise approximately 66,000, 54,000 and 30,000 square feet, respectively. A total of 416 motel rooms are
housed in the three buildings with improvements including a swimming pool and spa.

Revenues. The primary source of
revenues to the Companys hotel-casino operations is gaming, which represented approximately 55.2%, 55.2% and 60.1% in 2006, 2005 and 2004, respectively, of total revenues. The Pioneer contributed 100% in fiscal 2006 and 2005 to total gaming
revenues and approximately 99% in fiscal 2004. As of September 30, 2006 the Pioneer had approximately 748 slot machines, eight blackjack tables (21), one craps table, one roulette wheel and five 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 rates at the Pioneer were approximately 64%, 57% and 70% in fiscal years 2006, 2005 and 2004, 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



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liberal theoretical pay outs, compared to other casinos in Laughlin. The Pioneer periodically sponsors detailed product research of its competitors to
categorize the number and type of video poker games by payouts and monitors changes in game products to assist it in developing competitive products.

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

Management and Personnel

As of September 30, 2006, the Company employed 12 executive and administrative personnel and the Pioneer employed approximately 500 persons.

Competition

In addition to competing with the hotel-casinos in Laughlin, the Pioneer also competes
with the hotel-casinos in Las Vegas and those situated on Interstate-15 (the principal highway between Las Vegas and Southern California) near the California-Nevada state line. In March 2000, California voters approved an amendment to the California
constitution which permits compacts that allow Native American tribes to operate in excess of 100,000 slot machines in addition to banked card games and lotteries. Management believes that Native American casinos in Southern California, Arizona and
New Mexico have had an adverse impact on the Laughlin market, including the Pioneer, by drawing visitors away from the market.

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 $0.5 million in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the property. The property is under a net lease through 2020 with a single tenant with an
investment grade credit rating. Under the lease, the tenant is responsible for substantially all obligations related to the property.

The
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.



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Land Held for Development

The Company owns, through Sahara Las Vegas Corp. (SLVC), an
approximately 27-acre parcel of real property on the Strip. In connection with the acquisition of the property, the Company assumed an operating lease under which a water theme park operated. The lease was terminated September 30, 2004. The
Company presently leases portions of the property to three different lessees on a month-to-month basis for an aggregate amount of approximately $100,000.

On June 24, 2006, SLVC, a Nevada corporation and subsidiary of Archon Corporation entered into an Option Agreement (the Agreement) between SLVC and LVTI LLC, a Delaware limited liability company
(LVTI). Pursuant to the Agreement, SLVC granted to LVTI an option (the Option) to purchase the 27 acre parcel of real property described in the prior paragraph located on Las Vegas Boulevard South (the Property)
or, alternatively, to allow a limited liability company (LVT LLC) to be formed by SLVC to acquire the Property. The purchase price to be paid by LVTI (or LVT LLC, as may be applicable) for purchase of the Property is $450 million. LVTI
paid an initial option payment of $5.0 million on June 27, 2006, which was refundable to LVTI if it had terminated the Agreement within a 30-day due diligence period. The $5.0 million option payment was held in escrow by an unrelated third
party until the end of the 30-day due diligence period. The due diligence period ended on July 24, 2006. The Agreement also provides for a second option payment of $40.0 million due on or before the later of (1) September 22, 2006 and
(2) the date Archon delivers a Notice of Archon Mailing confirming that Archon has mailed an Information Statement related to the transactions contemplated by the Agreement to its stockholders and additional monthly payments of approximately
$2.2 million in each month commencing on the 13th calendar month following the date the second option payment is paid until the closing of the exercise of the Option. The 30-day due diligence period has ended and LVTI did not terminate the
Agreement. In September 2006, the Company granted an extension to LVTI for the second option payment until December 31, 2006 and received $750,000 for the extension. In December, 2006, the Company granted an additional extension to LVTI for the
second option payment of $40.0 million until March 31, 2007 and received approximately $1.2 million for the extension. Upon exercise of the Option, the initial option payment and the second option payment (but not the extension fee) will be
credited against the total purchase price. The Agreement provides for certain adjustments to the purchase price if certain easements are entered into with respect to the Property prior to the closing. The Option may be exercised by LVTI at any time
between the last day of the 12thcalendar month and the last day of the 18thcalendar month following the date on which the second option payment is paid; provided that the option term may be extended by up to 30 days if SLVC
does not give written notice to LVTI of the option term expiration as required by the Agreement. The first and second option payments and any additional monthly payments paid to SLVC prior to termination of the Agreement will be retained by SLVC
upon a termination of the Agreement without exercise of the option, except under certain circumstances specified in the Agreement.

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

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

The holders of more than 76% of
the Companys outstanding shares of common stock, including Paul W. Lowden, President and Chief Executive Officer of the Company and holder of more that 75% of the outstanding common stock, have approved the Agreement and the transactions
contemplated thereby. No other stockholder approval is required in connection with the transaction.

The Company cannot give any assurances
that the above described transaction will be consummated according to the terms of the Option Agreement.

See also Item 2.,
Properties.

The Company has provided financial segment information in the Notes to Consolidated Financial
Statements, Note 18. Segment Information.



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Nevada Regulations and Licensing

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

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

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

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

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

Individual
Licensing. Certain stockholders, directors, officers and key employees of corporate gaming licensees must be licensed by the Nevada Gaming Authorities. An application for licensing of an individual may be denied for any cause deemed
reasonable by the issuing agency. Changes in licensed positions must be reported to Nevada Gaming Authorities. In addition to its authority to deny an application for an individual license, the Nevada 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,



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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 Nevada Gaming Control Act and the regulations of the Commission and Board (collectively, the Nevada Gaming Regulations), that acquires more than 10% of the
Companys voting securities may apply to the Commission for a waiver of such finding of suitability requirement. If the stockholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. Any beneficial owner of equity or debt securities of a Registered Entity (whether or not a controlling stockholder) may be required to be found suitable if the relevant Nevada Gaming
Authorities have reason to believe that such ownership would be inconsistent with the declared policy of the State of Nevada. If the beneficial owner who must be found suitable is a corporation, partnership or trust, it must submit detailed business
and financial information, including a list of its securities.

Any stockholder found unsuitable and who beneficially owns, directly or
indirectly, any securities or partner interests of a Registered Entity beyond such period of time as may be prescribed by the Nevada Gaming Authorities may be guilty of a gross misdemeanor. Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do so may be found unsuitable. A Registered Entity is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a security holder or partner, as the
case may be, or to have any other relationship with it, such Registered Entity (i) 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; (ii) recognizes the exercise, directly or indirectly, of any voting rights in its securities or partner interests by the unsuitable person; (iii) pays the unsuitable person any remuneration in any form for
services rendered or otherwise, except in certain and specific circumstances or; (iv) fails to pursue all lawful efforts to require the unsuitable person to divest himself of his voting securities, including, if necessary, the immediate
purchase of the voting securities for cash at fair market value.

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

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

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

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



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

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

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

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

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



|Item 1A. | RISK FACTORS
|-------- | ------------

You are encouraged to review
the following discussion of the specific risks and uncertainties that affect our business. These include, but are not limited to, the following:

Our Business is Vulnerable to Changing Economic Conditions. Unfavorable changes in general economic conditions including recession, economic slowdown, or higher fuel or other transportation costs,
may reduce disposable income of casino patrons or result in fewer patrons visiting casinos. Our operating results may be negatively impacted by a increase in interest rates causing an increase in interest expense.

Our Laughlin Property is Vulnerable to Existing and New Competitors and Their Capital Investments. Recent acquisition by
competitors of casino/hotel properties in Laughlin could produce unfavorable operating results if the investments by



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competitors are successful in capturing market share from the Companys Laughlin property. These new competitors may have greater capital resources and
liquidity than the Company has.

Liquidation of the Companys Preferred Stock is Approximately $21.7 Million and is in
Dispute. The Company has preferred shareholders with a liquidation preference of approximately $21.7 million. Additionally, a preferred shareholder of the Company has asserted that the dividends, which accrue semi-annually at a rate
of 16% per annum, have been incorrectly calculated and the liquidation preference is substantially greater than $21.7 million. A preferred shareholder has filed a lawsuit and if the preferred shareholders claim is adjudicated unfavorably
against the Company, the Company could be required to substantially increase its liquidation preference and future dividend accruals, accordingly. At September 30, 2006, the difference between the Companys liquidation preference calculation
and the amount asserted by the preferred shareholder is approximately $11.5 million. The Company plans to vigorously defend this lawsuit and has both procedural and substantive defenses and may have rights against other persons or parties related to
the purported lawsuit.

A Significant Decline in Real Estate Values may have an Adverse Impact on the Companys Financial
Condition.The Company owns real estate on the Las Vegas strip and on the East Coast of the United States. Although the Company is presently not dependent on cash flows from these properties, a significant decline in real
estate values in these markets could have an impact on the Companys ability to readily generate cash flow from the real estate to meet its debt, preferred stock or other obligations.

Our Outstanding Debt Obligations Subject us to Additional Risks.Our outstanding mortgage debt obligation currently has matured and the
Company is in the process of securing an extension of its mortgage obligation to January 2008. Our liquidity could be impacted if the bank elects not to renew; however, the bank has informed the Company that it does not plan on electing not to renew
but rather plans to extend the mortgage obligation. Additionally, the Company also has outstanding indebtedness with certain entities. If the Companys operating cash flow is not sufficient to meet obligations as required, the Companys
business operations and liquidity could be adversely impacted.

Reversal of September 2006 Stock Option Exercises Due To
Mistake. The Company received notice of the exercise of stock option grants from Mr. David Lowden and from Mr. Chris Lowden in September, 2006. The Company and Messrs. Lowden believed the grants to be of the type designated pursuant to
Internal Revenue Code Section 422 (Section 422), commonly called qualified stock option grants (sometimes referred to as incentive stock options). Section 422 (and the underlying regulations and rules governing that Section) include
complex provisions and involve several special rules and limitations. To exercise the purported incentive option grants, certain loans were made to the optionees which loans were documented in written form. Upon further review of the original basis
for the grant and later exercise, it was subsequently determined by the Company and its advisors that the grants believed to be exercised as incentive stock option grants did not fully qualify for that special treatment and, actually, reverted to
nonqualified stock option status as a result. As the timing and tax treatment for the exercise of qualified and non-qualified stock option grants is materially different, the exercise was recognized as being induced by a significant error in
designating the options as qualified stock options and the exercise was fully reversed at the request of the optionees and the shares have been fully restored to the Company (with the corresponding optionee grants also being restored). The Company
believes that it acted promptly to reverse the transaction after the true nature of the mistaken designation attributed to the option grants became known to it and the Company believes the exercise and subsequent reversal of the September 2006
exercises by Messrs. Lowden are each undertaken in good faith and in compliance with applicable tax laws, rules and regulations. As required by rules governing financial accounting, the Company has reserved sums it deems sufficient to pay any
penalties or interest that may be due for the period of 2006 regarding the reversal of the option exercise should that reversal be determined to not comply with applicable tax laws, rules and regulations.



|Item 2. | PROPERTIES
|------- | ----------

The Pioneer is located on
approximately 12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated near the center of Laughlins Casino Drive. The Company previously leased the Pioneer under a lease that expired in December 2020, subject
to two five-year options to extend the term. However, the Company exercised an early purchase option in December 2003 and no longer has a significant capital lease obligation at this property. See Item 1., Business  Hotel and
Casino Operations for more detailed information regarding the Pioneer.

The Companys investment property in Dorchester,
Massachusetts is located on 12 acres and includes several buildings with approximately 425,000 square feet of commercial office space. The property was acquired for approximately $82.4 million plus $0.5 million in debt issuance costs. The Company
paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the property. The property is under a net lease through 2020 with a single tenant with an investment grade credit rating. Under the lease, the tenant is
responsible for substantially all obligations related to the property.

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

The Company owns approximately 27 acres of
real property located on the Strip. See Item 1., BusinessLand Held for Development.



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|Item 3. | LEGAL PROCEEDINGS
|------- | -----------------

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

The Company is a defendant in a class action lawsuit originally filed
in the United States District Court of Florida, Orlando Division in 1994, entitled Poulos v. Caesars World, Inc., et al., Ahern v. Caesars World, Inc., et al. and Schrier v. Caesars World, Inc., et al., along with a
fourth action against cruise ship gaming operators and which have been consolidated in a single action now pending in the United States District Court, District of Nevada (the Court). Also named as defendants in these actions are many of
the largest gaming companies in the United States and certain gaming equipment manufacturers. Each complaint is identical in its material allegations. The actions allege that the defendants have engaged in fraudulent and misleading conduct by
inducing people to play video poker machines and electronic slot machines based on false beliefs concerning how the machines operate and the extent to which there is actually an opportunity to win on a given play. The complaints allege that the
defendants acts constitute violations of the Racketeer Influenced and Corrupt Organizations Act and also give rise to claims for common law fraud and unjust enrichment, and seek compensatory, special consequential, incidental and punitive
damages of several billion dollars.

In response to the complaints, all of the defendants, including the Company, filed motions attacking
the pleadings for failure to state a claim, seeking to dismiss the complaints for lack of personal jurisdiction and venue. As a result of those motions, the Court has required the Plaintiffs in the four consolidated cases to file a single
consolidated amended complaint. Subsequent to Plaintiffs filing of their consolidated amended complaint, the defendants filed numerous motions attacking the amended complaint upon many of the bases as the prior motions. The Court heard the
arguments on those motions and ultimately denied the motions. Plaintiffs then filed their motion to certify a class. Defendants have vigorously opposed the motion. In June 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. In August 2002, the Ninth Circuit granted review. The briefing is complete, an oral hearing took place in January 2004. In September 2005, the federal
district court granted the defendants motion for dismissal. On October 19, 2005, the plaintiffs appealed that additional decision to the Ninth Circuit. The Company has not recorded a reserve under the provisions of SFAS No. 5 for this
matter, as management does not believe that it is probable that a liability has been incurred.

Mercury Real Estate Securities Fund, LP and
Mercury Real Estate Securities Offshore Limited v. Archon Corporation

On November 9, 2006, the Company was served with a
legal action in the United States District Court for the District of Connecticut styled as Mercury Real Estate Securities Fund, LP and Mercury Real Estate Securities Offshore Limited v. Archon Corporation, Case No. 306CV1740 (SRU),
dated and filed November 1, 2006 (the Complaint).

The Complaint alleges, amongst other things, that the Company has
failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 13 years ago. The Complaint further alleges that previous disclosure by the Company
with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. At September 30, 2006, the difference between the Companys liquidation preference calculation
and the amount asserted by the preferred shareholder is approximately $11.5 million.

The causes of action related to the purported
claim include: Count 1 (Violation of Section 10(b) of the Exchange Act and Rule 10b-5); Count II (Breach of Agreement); Count III (Breach of Implied Covenant of Good Faith and Fair Dealing); Count IV (Fraudulent Misrepresentation/Inducement);
Count V (Violation of Connecticut Unfair Trade Practices); and, Count VI (Accounting). No specific damages are sought by the plaintiffs, although the Complaint contends the amount in controversy exceeds $75,000, exclusive of interest and costs.

The Company is assessing the Complaint with its legal counsel and plans to conduct a vigorous defense. The Company believes it has
well-grounded procedural and substantive defenses to the causes of action set forth above and may also have certain rights against one or more other persons or entities related to the purported claim.



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Pioneer Hotel and Gambling Hall adv. Eckstrom:

The Company was a defendant in a lawsuit filed in the Eighth Judicial District Court entitled Pioneer Hotel and Gambling Hall adv. Eckstrom.The
complaint alleged that the plaintiffs were exposed to potentially hazardous levels of carbon monoxide from a malfunctioning water heater in a hotel room at the Pioneer and that one of the plaintiffs suffered, among other things, a myocardial
infarction as a result of the exposure. The Company has defended this lawsuit vigorously and has asserted its rights under its insurance coverage which included a self-insured retention of $25,000. The plaintiffs were seeking damages amounting to
$750,000. The Company has recorded a reserve of its $25,000 self-insured retention under the provisions of SFAS No. 5 for this matter. The lawsuit was recently settled and the Company believes it has no further financial exposure, other than the
$25,000 self-insured retention already recorded.

Douglas Medley v. Pioneer Hotel & Casino/Archon Corporation:

The Company is a defendant in a lawsuit entitled Douglas Medley v. Pioneer Hotel & Casino/Archon Corporation dated March 2006. The
complaint alleges unpaid wages for overtime and the plaintiff is seeking approximately $160,000 in damages. The Company plans to defend this lawsuit vigorously and has not recorded a reserve under the provisions of SFAS No. 5 for this matter,
as management does not believe that it is probable that a liability has been incurred.

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
|------- | ---------------------------------------------------

The holders of more than 76% of the Companys outstanding shares of common stock, including Paul W. Lowden, President and Chief Executive Office of the Company and holder of more than 75% of the outstanding common stock, have approved
the Agreement and the transactions contemplated thereby in advance of the Information Statement mailing. No other stockholder approval is required in connection with the transaction. The Company will file an information statement with respect to the
transactions contemplated by the Agreement with the SEC and will mail the information statement to its stockholders. Stockholders and investors are urged to read the information statement regarding the transaction when it becomes available because
it will contain important information. In addition to being mailed a copy, stockholders and investors may obtain a free copy of the information statement (when available) and other related documents filed by the Company with the SEC at its website
at www.sec.gov.

See also Item 1., Land Held for Development.



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##### Table of Contents

PART II



|Item 5. | MARKET FOR THE REGISTRANTS COMMON STOCK AND RELATED SECURITY HOLDERS MATTERS
|------- | -----------------------------------------------------------------------------

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

The closing price of the Common Stock on January 16, 2007 was $36.49 per share. The tables below set forth the high and low closing prices by
quarter for the fiscal years ended September 30, 2006 and 2005 of the common stock, as reported by the OTCBB.



|             |  |              |       |               |   |              |  |               |       |  |   |      
|------------ |  | ------------ | ----- | ------------- | - | ------------ |  | ------------- | ----- |  | - | -----
|             |  | FirstQuarter |       | SecondQuarter |   | ThirdQuarter |  | FourthQuarter
|Fiscal 2006: |  |              |       |               |   |              |  |               |       |  |   |      
|High         |  | $            | 39.28 |               | $ | 38.50        |  | $             | 44.95 |  | $ | 44.00
|Low          |  |              | 37.00 |               |   | 30.75        |  |               | 32.25 |  |   | 31.00
|Fiscal 2005: |  |              |       |               |   |              |  |               |       |  |   |      
|High         |  | $            | 23.00 |               | $ | 20.05        |  | $             | 29.55 |  | $ | 49.00
|Low          |  |              | 7.00  |               |   | 18.00        |  |               | 19.55 |  |   | 28.50

The Company has never paid cash dividends on its Common Stock, nor does it anticipate paying such
dividends in the foreseeable future. There were approximately 700 common stockholders of record as of January 16, 2007.



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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, 2006, 2005, 2004, 2003 and 2002:



|                                           |  |                                                  |         |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|------------------------------------------ |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                           |  | 2006                                             |         |   | 2005 |   |         | 2004 |  |   | 2003    |   |  | 2002 |        
|                                           |  | (dollars in thousands, except per share amounts) |        
|Net operating revenues(1)                  |  | $                                                | 45,154  |   |      | $ | 43,688  |      |  | $ | 45,693  |   |  | $    | 46,161  |   |  | $ | 48,765  |  
|Net loss, net of taxes                     |  |                                                  | (3,356  | ) |      |   | (4,912  | )    |  |   | (1,882  | ) |  |      | (7,847  | ) |  |   | (7,707  | )
|Net loss applicable to common shares       |  |                                                  | (4,867  | ) |      |   | (6,423  | )    |  |   | (3,444  | ) |  |      | (9,374  | ) |  |   | (9,262  | )
|Net loss per common share                  |  |                                                  | (0.78   | ) |      |   | (1.03   | )    |  |   | (0.55   | ) |  |      | (1.51   | ) |  |   | (1.50   | )
|Total assets                               |  |                                                  | 198,050 |   |      |   | 199,638 |      |  |   | 206,932 |   |  |      | 237,390 |   |  |   | 242,086 |  
|Long-term debt, less current portion       |  |                                                  | 77,042  |   |      |   | 79,499  |      |  |   | 82,057  |   |  |      | 148,698 |   |  |   | 153,029 |  
|Exchangeable redeemable preferred stock(2) |  |                                                  | 9,445   |   |      |   | 9,445   |      |  |   | 9,674   |   |  |      | 9,926   |   |  |   | 10,866  |  

---

|(1) | Net operating revenues for fiscal years 2002 through 2006 represent primarily operations at the Pioneer and revenues from investment properties.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The Company has not declared dividends on its preferred stock since fiscal 1996. Dividends of approximately $1.5 million, $1.5 million, $1.6 million, $1.5 million
and $1.6 million for fiscal 2006, 2005, 2004, 2003 and 2002, respectively, have not been declared and are in arrears. Total accumulated preferred stock dividends in arrears for the five preceding years ended on September 30, 2006 are $12.3
million, $10.8 million, $9.5 million, $8.2 million and $7.3 million, respectively. The Company has repurchased and retired 985,932 shares of exchangeable redeemable preferred stock. The legal proceeding set forth in Item 3 relates to
exchangeable redeemable preferred stock.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

GENERAL

Overview of Business Operations and Trends

The Company, historically, has owned, managed and operated hotel/casino properties through a number of acquisitions or developments, and it has
subsequently divested certain of these properties. Presently, the Company operates the Pioneer in Laughlin, Nevada. The Company also owns Strip property that may be sold pursuant to an Option Agreement entered into in fiscal 2006 whereby the
Optionee has the right to purchase the property from the Company for $450 million.

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

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

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

Critical Accounting Policies and Estimates

Managements Discussion and Analysis of Financial Condition
and Results of Operations discuss Archons consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated 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



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

RESULTS OF OPERATIONS  FISCAL 2006 COMPARED TO FISCAL 2005

General

During fiscal 2006, the Companys net operating revenues increased approximately $1.5 million and operating expenses decreased approximately $1.1
million, resulting in an increase of approximately $2.6 million in operating income. The improvement in operating results was primarily due to approximately $1.0 million received as reimbursements of amounts previously expended on behalf of an
affiliated company, an improvement of $0.8 million in operating results at the Pioneer and a $0.8 million decrease in stock-based compensation.

Throughout the latter half of calendar 2004 through June 30, 2006, the Company financed certain legal costs totaling approximately $0.8 million associated with certain arbitration between Dukes LLC and a general contractor.
Christopher Lowden, son of Paul W. Lowden, is a limited partner in Dukes LLC which was the managing member of Dukes Casino, a casino managed and operated by a subsidiary of the Company. The Company had previously written-off its
investment in and receivables from Dukes LLC, related to the operation of Dukes Casino, of approximately $1.5 million in the fiscal year ended September 30, 2003. In January 2005, the American Arbitration Association awarded
Dukes LLC approximately $4.9 million against the general contractor of a casino renovation at Dukes Casino. The Company has an agreement with Dukes LLC whereby the Company is to be reimbursed for legal and certain other costs
related to the arbitration as well as recovery of amounts previously written-off, which in total may exceed $3 million. However, due to various contingencies surrounding the enforcement, collection or settlements with Dukes LLC and the general
contractor, management can give no assurance of the timing or the amount it will ultimately receive. During the three months ended September 30, 2006, the Company received approximately $1.0 million from Dukes LLC. According to the terms
of the various agreements, the Company may continue to receive approximately $60,000 per month for approximately 40 months as well as a payment in approximately 2 years of approximately $280,000 and a final payment of approximately $1.0 million in
approximately 4 years. The Company can not give assurance that these payments will occur and plans to record any future recoveries as received.

Consolidated

Net Operating Revenues.Consolidated net operating revenues for the year ended
September 30, 2006 were $45.2 million, a $1.5 million, or 3%, increase from $43.7 million for the year ended September 30, 2005. Income from investment properties was $12.4 million in each of the fiscal years. Net revenues increased
approximately $1.3 million to $31.0 million during fiscal 2006 at the Pioneer compared to $29.7 million for the 2005 fiscal year.



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In fiscal 2006, 69% of the Companys net revenues were derived from the Pioneer and 27% from
investment properties. The Companys business strategy at the Pioneer emphasizes slot and video poker machine play. For fiscal 2006, approximately 80% of the Pioneers net revenues were derived from casino operations. Approximately 91% of
gaming revenues at the Pioneer were derived from slot and video poker machines, while 8% of such revenues were from table games and 1% was from other gaming activities such as keno.

Operating Expenses.Total operating expenses decreased approximately $1.1 million, or 3%, to $40.3 million for the year ended
September 30, 2006 from $41.4 million for the year ended September 30, 2005. Total operating expenses as a percentage of net revenues decreased to 89% for the year ended September 30, 2006 from 95% for the year ended
September 30, 2005. The decrease in operating expenses was principally the result of a decrease of approximately $0.8 million in stock-based compensation expense and a $0.8 million reimbursement of legal expenses from an affiliate partially
offset by an increase of $0.5 million in operating expenses at the Pioneer.

Operating Income. Consolidated operating income
for the year ended September 30, 2006 was $4.8 million, an approximate $2.5 million increase from $2.3 million for the year ended September 30, 2005. Operating income increased by $0.8 million at the Pioneer.

Interest Expense. Consolidated interest expense for the year ended September 30, 2006 was $8.9 million, a $2.2 million decrease
compared to $11.1 million for the year ended September 30, 2005, primarily due to a decrease in interest expense associated with non-recourse debt of the investment properties.

Interest and Other Income. Interest and other income for the year ended September 30, 2006 was $0.2 million, a decrease of $1.1
million from $1.3 million for the year ended September 30, 2005. In fiscal 2005, the Company had $0.1 million from net gains on sales of marketable securities and $0.9 million of income from other investments and other assets.

Loss Before Income Tax. Consolidated loss before income tax for the year ended September 30, 2006 was $3.8 million, a
$3.7 million improvement compared to $7.5 million for the year ended September 30, 2005.

Federal Income Tax.The
Company recorded a federal income tax benefit of $0.4 million (an approximate 11% rate) for the year ended September 30, 2006 compared to $2.6 million (an approximate 35% tax rate) for the year ended September 30, 2005. Certain expenses,
principally related to stock-based compensation expense, recorded in fiscal year 2006 were not deductible for income tax purposes.

Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred
stock. However, dividends of approximately $1.5 million for fiscal years 2006 and 2005 accrued on the preferred stock for purposes of calculating net loss applicable to common shares. The dividend rate increased to its maximum rate of 16.0%
effective October 1, 2003.

Net Loss. Consolidated net loss applicable to common shares was $4.9 million, or $0.78 per
common share, for the year ended September 30, 2006 compared to net loss applicable to common shares of $6.4 million, or $1.03 per common share, for the year ended September 30, 2005.

Pioneer

General. Casino,
hotel and food/beverage revenues and expenses at the Pioneer comprise the majority of consolidated casino, hotel and food/beverage revenues and expenses included in the Companys consolidated statements of operations and are discussed
separately below.

Net Operating Revenues. Net revenues at the Pioneer increased $1.3 million, or approximately 4%, to $31.0
million for the year ended September 30, 2006 from $29.7 million for the year ended September 30, 2005.

Gross casino revenues
increased approximately $0.8 million, or 3%, to $24.9 million for the year ended September 30, 2006 from $24.1 million for the year ended September 30, 2005. Slot and video poker revenues increased approximately $0.9 million, or 4%, to
$22.6 million for the year ended September 30, 2006 from $21.7



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million for the year ended September 30, 2005. Other gross gaming revenues, including table games, were relatively unchanged at $2.3 million for the
2006 year compared to $2.4 million for the 2005 year. Management believes this increase was a result of improved marketing strategies to attract local customers. Casino promotional allowances increased $0.6 million, or 11%, to $6.2 million in fiscal
year 2006 compared to $5.6 million for fiscal year 2005 primarily due to the aforementioned increase in slot and video poker revenues and certain changes in marketing strategies.

Hotel revenues increased $0.2 million, or 6%, to $3.0 million for the year ended September 30, 2006 from $2.8 million in fiscal 2005, due to an
increase in occupancy rate partially offset by a decrease in the average daily room rate. Food and beverage revenues increased $0.5 million, or 8%, to $7.4 million for the year 2006 from $6.9 million for the 2005 year, primarily due to the increase
in casino promotional allowances. Other revenues increased $0.4 million, or 28%, to $1.9 million in the current year from $1.5 million in the prior year due to increased retail sales.

Operating Expenses.Operating expenses increased $0.5 million, or 2%, to $31.0 million for the year ended September 30, 2006 from
$30.5 million for the year ended September 30, 2005. Operating expenses as a percentage of net revenues decreased to 100% in fiscal 2006 from 103% in fiscal 2005.

Casino expenses increased $0.8 million, or 6%, to $13.9 million for the year ended September 30, 2006 from $13.1 million for the year ended September 30, 2005, primarily related to increase in casino
promotional allowances. Casino expenses as a percentage of casino revenues increased to 56% for the year ended September 30, 2006 from 54% for the year ended September 30, 2005.

Hotel expenses were relatively unchanged at $1.1 million for the year ended September 30, 2006 compared to $1.0 for the year ended
September 30, 2005 as the Pioneer was able to increase occupancy without increasing costs. Food and beverage expenses decreased $0.2 million, or 5%, to $3.9 million in fiscal 2005 from $4.1 million in fiscal 2005, primarily due to a decrease in
the cost of food sales associated with a change in food promotions. Food and beverage expenses as a percentage of food and beverage revenues decreased to 53% for the 2006 year from 60% for the 2005 year. Other expenses increased $0.4 million, or
38%, to $1.6 million for the year ended September 30, 2006 compared to $1.2 million for the year ended September 30, 2005 due to the increase in retail sales. Other expenses as a percentage of other revenues increased to 84% for the 2006
year from 78% for the 2005 year.

Selling, general and administrative expenses decreased $0.1 million, or 2%, to $4.4 million for the year
ended September 30, 2006 compared to $4.5 million for the year ended September 30, 2005. Selling, general and administrative expenses as a percentage of revenues decreased to 14% for the 2006 year from 15% for the 2005 year. Pioneers
selling, general and administrative expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses were unchanged at $3.9 million for the years ended
September 30, 2006 and 2005. Utilities and property expenses as a percentage of revenues remained unchanged at 13%. Depreciation and amortization expenses decreased $0.3 million, or 11%, to $2.2 million in the year ended September 30, 2006
from $2.5 million in the year ended September 30, 2005. The Pioneer recorded a loss of $0.2 million on the disposal of older slot machines in the prior year compared to $20,000 in the current year.

Interest Expense. Interest expense increased $0.1 million, or 11%, to $1.4 million for the year ended September 30, 2006 from $1.3
million for the year ended September 30, 2005, primarily due to the increase in the prime lending rate.



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##### Table of Contents

RESULTS OF OPERATIONS  FISCAL 2005 COMPARED TO FISCAL 2004

General

During fiscal 2005, the Company
experienced a marginal decline in net operating revenues of 4%. However, due to appreciation in the market value of the Companys common stock, the Company recorded a significant noncash compensation expense of approximately $3.9 million for
stock options awarded in April 2005. This increase to operating expenses of the Company for fiscal 2005 was offset partially by certain reductions of costs primarily at the Pioneer and due to the closure of Dukes Casino in December 2003 of
approximately $3.5 million. Additionally, the Company recorded a gain on the sale of fixed assets in fiscal 2004 of approximately $4.0 million. Overall, the Companys operating income declined in fiscal 2005 as compared to fiscal 2004 by
approximately $6.6 million.

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

Consolidated

Net Operating Revenues.Consolidated net operating revenues for the year ended September 30, 2005 were $43.7 million, a $2.0 million,
or 4%, decrease from $45.7 million for the year ended September 30, 2004. Income from investment properties was $12.4 million in each of the fiscal years. Net revenues decreased approximately $2.5 million to $29.7 million during fiscal 2005 at
the Pioneer compared to $32.2 million for the 2004 fiscal year. Archon Sparks Management Company (ASMC), which began operating Dukes Casino in February 2003, had revenues of $0.4 million in the 2004 fiscal year compared to $0 for
the 2005 fiscal year.

In fiscal 2005, 68% of the Companys net revenues were derived from the Pioneer and 28% from investment
properties. The Companys business strategy at the Pioneer emphasizes slot and video poker machine play. For fiscal 2005, approximately 81% of the Pioneers net revenues were derived from casino operations. Approximately 90% of gaming
revenues at the Pioneer were derived from slot and video poker machines, while 8% of such revenues were from table games and 2% was from other gaming activities such as keno.

Operating Expenses.Total operating expenses increased approximately $4.6 million, or 13%, to $41.4 million for the year ended
September 30, 2005 from $36.8 million for the year ended September 30, 2004. Total operating expenses as a percentage of net revenues increased to 95% for the year ended September 30, 2005 from 80% for the year ended
September 30, 2004. The increase in operating expenses was principally the result of (i) a charge of approximately $3.9 million of stock-based compensation expense related to options granted in fiscal 2005; (ii) a decrease in
operating expenses of approximately $2.0 million, or 6%, at the Pioneer, in fiscal 2005; (iii) the inclusion in fiscal 2004 of approximately $0.7 million of operating expenses at Dukes casino; and (iv) a gain on sale of assets during
fiscal 2004 of approximately $4.0 million from the sale of certain land held for development partially offset by a loss on disposal of assets by ASMC. During fiscal 2005, a loss on the disposal of assets of approximately $0.2 million was recorded at
the Pioneer for the disposal of certain slot equipment.

Operating Income. Consolidated operating income for the year ended
September 30, 2005 was $2.3 million, a $6.6 million, or 74%, decrease from $8.9 million for the year ended September 30, 2004. Operating income decreased by $0.5 million at the Pioneer. ASMC had an operating loss of approximately $0.4
million for the fiscal year ended September 30, 2004.

Interest Expense. Consolidated interest expense for the year
ended September 30, 2005 was $11.1 million, a $1.8 million decrease compared to $12.9 million for the year ended September 30, 2004. Interest expense decreased $1.0 million at the Pioneer due to the purchase of the Pioneer assets of
approximately $36 million in December 2003, and the resulting termination of capital leases, which bore interest at approximately 14%. The capital lease obligations of approximately $36 million were replaced by the acquisition of certain debt in
December 2003 of approximately $18 million, bearing interest at prime plus 1%. Additionally, certain debt related to non-recourse obligations declined during fiscal 2005 and contributed to the decrease in interest expense.



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##### Table of Contents

Interest Income. Interest income for the year ended September 30, 2005 was $0.3
million, a decrease of $0.6 million from $0.9 million for the year ended September 30, 2004 due to a decrease in marketable equity securities in the 2005 and 2004 fiscal years. A significant portion of marketable securities was sold in December
2003, the proceeds of which were used for the purchase of the Pioneer assets.

Other Income. Other income was $1.0 million in
fiscal 2005 and is comprised primarily of $0.1 million from net gains on sales of marketable securities and $0.9 million of income from other investments and other assets. In fiscal 2004, the Company reported $0.3 million of income from these
sources.

Loss Before Income Tax. Consolidated loss before income tax for the year ended September 30, 2005 was $7.5
million, a $4.7 million decline compared to a consolidated loss before income taxes of $2.8 million for the year ended September 30, 2004. This decline is principally attributable to the aforementioned stock-based compensation charges offset,
in part, by a decline in interest expense due to the retirement of certain obligations under capital leases and reduced debt outstanding.

Federal Income Tax.The Company recorded a federal income tax benefit of approximately $2.6 million (an approximate 35% effective tax rate) for the year ended September 30, 2005 compared to $0.9 million (an approximate
33% tax rate) for the year ended September 30, 2004.

Preferred Share Dividends. Undeclared preferred share dividends
are not recorded in the stockholders equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred stock. However, dividends of approximately $1.5 million and $1.6 million for fiscal years
2005 and 2004, respectively, accrued on the preferred stock for purposes of calculating net loss applicable to common shares. The dividend rate increased to its maximum rate of 16.0% effective October 1, 2003 from 15.5% beginning on
April 1, 2003.

Net Loss. Consolidated net loss applicable to common shares was $6.4 million, or $1.03 per common share,
for the year ended September 30, 2005 compared to net loss applicable to common shares of $3.4 million, or $0.55 per common share, for the year ended September 30, 2004.

Pioneer

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

Net Operating Revenues.
Net revenues at the Pioneer decreased $2.5 million, or approximately 8%, to $29.7 million for the year ended September 30, 2005 from $32.2 million for the year ended September 30, 2004.

Gross casino revenues decreased approximately $3.0 million, or 11%, to $24.1 million for the year ended September 30, 2005 from $27.1 million for
the year ended September 30, 2004. Slot and video poker revenues decreased approximately $2.1 million, or 9%, to $21.7 million for the year ended September 30, 2005 from $23.9 million for the year ended September 30, 2004. Other gross
gaming revenues, including table games, decreased approximately $0.9 million, or 27%, due primarily to decreased table game win. Management believes fewer table game casino and hotel patrons contributed to this decline. Casino promotional allowances
decreased to approximately $5.6 million in fiscal year 2005 compared to $7.8 million for the year ended September 30, 2004 due to lower casino and hotel revenues from decreased patronage at the property.

Hotel revenues decreased approximately $0.3 million, or 11%, to approximately $2.8 million for the year ended September 30, 2005 from approximately
$3.1 million in fiscal 2004, as a decrease in occupancy rate from 69.8% in 2004 to 57.1% in 2005 was partially offset by an increase in the average daily room rate of approximately 18%. Management believes its efforts to improve the quality and
condition of many of its rooms through repairs attributed greatly to its ability to raise room rates. Food and beverage revenues decreased approximately $1.4



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million, or 17%, to $6.9 million for the year ended September 30, 2005 from $8.3 million for the year ended September 30, 2004, primarily due to the
decrease in casino promotional allowances and decreased patronage. Other revenues were unchanged at approximately $1.5 million.

Operating Expenses.Operating expenses decreased approximately $2.0 million, or 6%, to $30.5 million for the year ended September 30, 2005 from $32.5 million for the year ended September 30, 2004. Operating expenses
as a percentage of net revenues increased to 103% in fiscal 2005 from 101% in fiscal 2004.

Casino expenses decreased approximately $1.8
million, or 12%, to $13.1 million for the year ended September 30, 2005 from $14.8 million for the year ended September 30, 2004, primarily related to reductions in casino promotional allowances. Casino expenses as a percentage of casino
revenues decreased to 54% for the year ended September 30, 2005 from 55% for the year ended September 30, 2004.

Hotel expenses
increased $0.4 million, or 56%, to $1.0 million for the year ended September 30, 2005 from $0.7 million for the year ended September 30, 2004. Due to the decrease in casino promotional allowances, the hotel department received a $0.4
million decreased expense transfer to the casino department. Food and beverage expenses decreased approximately $0.2 million, or 4%, to $4.1 million in fiscal 2005 from $4.3 million in fiscal 2004. Food and beverage expenses as a percentage of food
and beverage revenues increased to 60% for the year ended September 30, 2005 from 52% for the year ended September 30, 2004. Due to the decrease in casino promotional allowances, the food and beverage department received a $1.1 million
decreased expense transfer to the casino department. Other expenses increased approximately $0.1 million, or 6%, to $1.2 million for the year ended September 30, 2005 compared to $1.1 million for the year ended September 30, 2004. Other
expenses as a percentage of other revenues increased to 78% for the year ended September 30, 2005 from 75% for the year ended September 30, 2004.

Selling, general and administrative expenses decreased $0.3 million, or 7%, to $4.5 million for the year ended September 30, 2005 compared to $4.8 million for the year ended September 30, 2004, primarily due
to reductions in payroll and outside services. Selling, general and administrative expenses as a percentage of revenues was unchanged at 15% for the years ended September 30, 2005 and 2004. Pioneers selling, general and administrative
expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses decreased $0.4 million, or 9%, to $3.9 million for the year ended September 30, 2005 from
$4.3 million for the year ended September 30, 2004, due to a decrease in rent expense. Utilities and property expenses as a percentage of revenues remained unchanged at 13% for the years ended September 30, 2005 and 2004.

Interest Expense. Interest expense decreased $1.0 million, or 44%, to $1.3 million for the year ended September 30, 2005 from $2.3
million for the year ended September 30, 2004, due to a decreased amount of debt outstanding in the 2005 period and the absence of certain capital lease obligations that were retired at December 29, 2003, which had effective interest rates
of approximately 14%. These lease obligations, approximately $36 million, were replaced with debt of $18 million bearing interest at prime plus 1%.



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LIQUIDITY AND CAPITAL RESOURCES; TRENDS AND FACTORS RELEVANT TO FUTURE OPERATIONS

Contractual Obligations and Commitments

The following table summarizes the Companys fiscal year contractual obligations and commitments as of September 30, 2006 for the fiscal years ending September 30, 2007, 2008, 2009, 2010, 2011, 2012 and thereafter:



|                    |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        
|------------------- |  | ----------------------- | ------ | ---- | - | ----- |  | ---- | ----- | ---- | - | ------------------ |  | ----- | ----- |  | - | ------ |  | - | -------
|                    |  | Payments Due By Periods
|                    |  | 2007                    |        | 2008 |   | 2009  |  | 2010 |       | 2011 |   | 2012 andThereafter |  | Total
|                    |  | (dollars in thousands) 
|Non-recourse debt:  |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        
|Gaithersburg        |  | $                       | 2,196  |      | $ | 2,490 |  | $    | 2,828 |      | $ | 3,186              |  | $     | 3,573 |  | $ | 33,542 |  | $ | 47,815 
|Sovereign           |  |                         | 0      |      |   | 0     |  |      | 0     |      |   | 0                  |  |       | 0     |  |   | 31,199 |  |   | 31,199 
|Long-term debt:     |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        
|Equipment           |  |                         | 1,280  |      |   | 171   |  |      | 52    |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 1,503  
|Mortgage obligation |  |                         | 10,147 |      |   | 0     |  |      | 0     |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 10,147 
|Operating leases:   |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        
|Ground lease        |  |                         | 362    |      |   | 364   |  |      | 364   |      |   | 364                |  |       | 364   |  |   | 24,460 |  |   | 26,278 
|Corporate offices   |  |                         | 22     |      |   | 0     |  |      | 0     |      |   | 0                  |  |       | 0     |  |   | 0      |  |   | 22     
|                    |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        
|                    |  | $                       | 14,007 |      | $ | 3,025 |  | $    | 3,244 |      | $ | 3,550              |  | $     | 3,937 |  | $ | 89,201 |  | $ | 116,964
|                    |  |                         |        |      |   |       |  |      |       |      |   |                    |  |       |       |  |   |        |  |   |        

The Company is required to make the following cash interest payments related to the above debt
obligations: (i) Non-recourse debt - $7.1 million (2007), $7.0 million (2008), $6.8 million (2009), $6.6 million (2010), $6.3 million (2011) and $39.9 million (2012 and thereafter); and (ii) Long-term debt - $0.4 million (2007), $0.0
million (2008), $0.0 million (2009), $0.0 million (2010), $0.0 million (2011) and $0.0 million (2012 and thereafter).

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

A non-recourse obligation related to the Massachusetts property of approximately $25.7 million
matured and was paid by the tenant during the three months ended June 30, 2005. The tenant of the property was required to make this payment subject to a lease agreement. Based upon the financial condition of the tenant, management does not
foresee any problems in the timely satisfaction of future obligations by third parties.

Liquidity and Capital Resources

Mortgage Note Obligation - The Company has a mortgage note obligation which matured in late December 2006 in the approximate amount of $10.1
million. The Bank has informed the Company of its commitment to extend the maturity date of the note obligation to January 2008. The terms of the extension include monthly principal and interest payments of $120,000 with interest at a rate of prime
plus 1% and a balloon payment of approximately $9.5 million in January 2008 with no prepayment penalties. The extended note will continue to be secured by the land owned on the Las Vegas strip by the Company and by a personal guaranty of the
Companys



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Chairman of the Board and CEO, Paul W. Lowden. Although the Company believes the banks commitment to extend the maturity date of the loan will be made
formal in the near-term, it can not give any assurances that the extension will occur. However, the bank has informed the Company it intends to extend the maturity date to January 2008.

As of September 30, 2006, the Company held cash and cash equivalents of $6.2 million compared to $2.1 million at September 30, 2005. In
addition, the Company had $6.0 million in investment in marketable securities at September 30, 2006 compared to $6.8 million at September 30, 2005. Management believes that through cash flow generated from its casino operations and its
short and long-term investments, the Company will have sufficient available cash and cash resources to meet its cash requirements through the twelve-month period ending September 30, 2007. The investment properties were structured such that
future tenants payments cover future required mortgage payments.

Cash Flows from Operating Activities. The
Companys cash provided by operations was approximately $8.9 million for the year ended September 30, 2006 as compared to approximately $30.5 million for the year ended September 30, 2005. This decrease was primarily due to a decrease
in deferred rents payable of approximately $26.0 million in the prior year as amounts due under non-recourse debt obligations have been paid in advance of the rental obligations.

Cash Flows from Investing Activities. Cash provided by investing activities was $1.1 million during the year ended September 30, 2006,
compared to cash used in investing activities of $2.1 million during the year ended September 30, 2005. During fiscal 2006, the primary component of cash provided by investing activities was net marketable securities transactions of $1.7
million, offset by $0.4 million investment in partnerships and capital expenditures of $0.2 million. In the prior year, the primary components of cash used by investing activities were net marketable securities transactions of approximately $0.8
million, investment in partnerships of $0.8 million and capital expenditures of approximately $0.5 million.

Cash Flows from
Financing Activities.Cash used in financing activities was $5.9 million during the year ended September 30, 2006 compared to $29.7 million during the prior year. During fiscal 2006, the Company paid $6.6 million on debt and
non-recourse debt and borrowed $0.7 million from a margin account. During fiscal 2005, the Company paid $31.7 million on debt and non-recourse debt, borrowed $2.4 million from a margin account and used $0.4 million to acquire its preferred stock.

The Companys primary source of operating cash is from the Pioneers operations, from interest income on available cash and cash
equivalents, from leasing real estate owned in Las Vegas, NV and from investments in marketable securities. From time-to-time, transactions involving the sale of certain land or other assets also contribute to the Companys cash balances as
evidenced by the recent sale of an Option Agreement for the purchase of the Companys Las Vegas strip property whereby the Company received $5.8 million through September 30, 2006. In December 2006, the Company received an additional $1.2
million for the granting of an extension to March 31, 2007 for the payment of $40.0 million to be made by the holder of the Option Agreement to purchase the Las Vegas strip property. The holder of the Option Agreement is contractually obligated
to pay the Company $40.0 million on or before March 31, 2007 according to the terms of the Option Agreement, as amended. The Company has used, and plans to use, these proceeds to reduce certain short-term debt obligations, purchase marketable
securities and for general corporate purposes.

Rental income from the Companys two investment properties is contractually committed
to reducing the non-recourse indebtedness issued or assumed in connection with the acquisition of the investment properties. Under the two leases, the tenants are responsible for substantially all obligations related to the property. The
Companys 27-acre parcel of real property on the Strip was previously subject to a lease with a water theme park operator. The Company generated minimal cash from the lease agreement after payment of property costs. This lease was terminated in
September 2004, although a third party has agreed to a short-term lease for approximately 10% of the property which will generate approximately the same amount of net cash generated from the terminated lease.



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Pioneer

Pioneers principal uses of cash are for payments of rent and capital expenditures to maintain the facility and administrative expenses incurred in operating a casino. The Company has implemented changes in
personnel and promotional programs and installed new slot equipment to address the decreases in revenues and operating income. One of managements main focuses is to recapture market share in the Laughlin market.

Rent expense was approximately $0.2 million and $0.3 million for fiscal years ended September 30, 2006 and 2005, respectively. Capital expenditures
to maintain the facility in fiscal 2006 were approximately $0.2 million.

Dukes Casino

The Company had previously loaned approximately $1.4 million to Dukes  Sparks (Dukes), a Nevada limited-liability company.
The Company, through its wholly-owned subsidiary ASMC, operated Dukes casino. Christopher Lowden, son of Paul W. Lowden, is a limited partner in the company which was a managing member of Dukes. The Company also acquired a $100,000 Class
B member interest in Dukes. In December 2003, Dukes closed its casino operations.

Throughout the latter half of calendar 2004
through June 30, 2006, the Company financed certain legal costs totaling approximately $0.8 million associated with certain arbitration between Dukes LLC and a general contractor. Christopher Lowden, son of Paul W. Lowden, is a limited
partner in Dukes LLC which was the managing member of Dukes Casino, a casino managed and operated by a subsidiary of the Company. The Company had previously written-off its investment in and receivables from Dukes LLC, related to
the operation of Dukes Casino, of approximately $1.5 million in the fiscal year ended September 30, 2003. In January 2005, the American Arbitration Association awarded Dukes LLC approximately $4.9 million against the general
contractor of a casino renovation at Dukes Casino. The Company has an agreement with Dukes LLC whereby the Company is to be reimbursed for legal and certain other costs related to the arbitration as well as recovery of amounts previously
written-off, which in total may exceed $3 million. However, due to various contingencies surrounding the enforcement, collection or settlements with Dukes LLC and the general contractor, management can give no assurance of the timing or the
amount it will ultimately receive. During the three months ended September 30, 2006, the Company received approximately $1.0 million from Dukes LLC. According to the terms of the various agreements, the Company may continue to receive
approximately $60,000 per month for approximately 40 months as well as a payment in approximately 2 years of approximately $280,000 and a final payment of approximately $1.0 million in approximately 4 years. The Company can not give assurance that
these payments will occur and plans to record any future recoveries as received, although the Company did receive approximately $0.2 million from October 1, 2006 through late December 2006.

Preferred Stock

The Companys
preferred stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends.
The Company has not declared the semiannual preferred stock dividends since October 1, 1996. As originally drafted, the Certificate of Designation of the Exchangeable Redeemable Preferred Stock(Certificate of Designation)
provides in part that:

The holders of record of shares of Exchangeable Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available therefore, cumulative cash dividends at a rate per annum per share (the Dividend Rate) initially set at 8% of (i) $2.14 plus (ii) accrued but unpaid dividends as
to which a Dividend Payment Date has occurred. Dividends shall accrue from the date of issuance and be payable semi-annually in arrears on the 31stday of March and the 30thday of September in each year (or if such
day is a non-business day, on the next business day), commencing on March 31, 1994 (each of such dates a Dividend Payment Date); provided, however, that on any or all of the first six Dividend



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Payment Dates, the Company may, at its option, pay dividends on the Exchangeable Preferred Stock in the form of additional shares of Exchangeable Preferred
Stock at the rate per annum of 0.08 shares of additional Exchangeable Preferred Stock for every share of Exchangeable Preferred Stock entitled to receive a dividend. If all Exchangeable Preferred Stock has not been redeemed prior to the tenth
Dividend Payment Date, the Dividend Rate will increase on the tenth Dividend Payment Date to the rate per annum per share of 11% and will thereafter increase by an additional 0.50% per annum per share on each Dividend Payment Date until either
the Dividend Rate reaches a rate per annum per share of 16% or the Exchangeable Preferred Stock is redeemed or exchanged by the Company. In no circumstances will the Dividend Rate exceed 16% per annum per share.

During the quarter ended June 30, 2006, a holder of the Companys preferred stock advised the Company that the holder had concluded that the
Companys calculation of the dividends on the preferred stock would accumulate at a compounded rate and is therefore erroneous, and that as a result the aggregate liquidation preference of the preferred stock is significantly greater than that
calculated by the Company. Based upon the Companys review to date of the relevant documents, the Company does not agree with the holders position. The Company is continuing its review of the 1993 transaction in which the preferred stock
was issued.

The holder of the preferred stock filed a complaint in November 2006, which is the basis of the legal proceeding described in
Item 3 above. The Complaint alleges, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company
approximately 13 years ago. The Complaint further alleges that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. At
September 30, 2006, the difference between the Companys liquidation preference calculation and the amount asserted by the preferred shareholder is approximately $11.5 million. The Company plans to vigorously defend this Complaint and has both
procedural and substantive defenses and may have rights against other persons or parties related to the purported claim.

The accrued stock
dividends have not been recorded as an increase to the preferred stock account. As of September 30, 2006, the aggregate liquidation preference of the preferred stock was approximately $21.7 million, or $4.93 per share.

Pursuant to the Certificate of Designation of Preferred Stock, dividends are payable only when, as and if declared by the Board of Directors and the
liquidation preference is payable only upon a liquidation, dissolution or winding up of the Company. Because dividends in an amount equal to dividend payments for one dividend period have accrued and remain unpaid for at least two years, the
preferred stockholders, voting as a separate class, are entitled to elect two directors. Accordingly, one of the Companys current six board members has been elected by the preferred shareholders while one was appointed by the Board.

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 20, 2006, the Company had purchased 709,305 shares of preferred stock for $1,370,042 under this program. Previously, the Company had purchased 276,627 shares for $452,232. During the year ended September 30, 2006,
the Company did not purchase any preferred shares.

Recently Issued Accounting Standards

SFAS 157. In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for
measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarch used to classify
the source of the information. This statement is effective beginning in October 2008. The Company is evaluating whether adoption of this statement will result in a change to its fair value measurements.

SAB 108. In September 2006, the SEC issued SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements. SAB 108 requires analysis of misstatements using both an income statement (rollover approach) and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect
transition adjustment. SAB 108 is effective for the Companys fiscal year 2007 annual financial statements. The Company does not expect the adoption of the statement to have a material impact on its consolidated results of operations, financial
position or cash flows.

SFAS 154. In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, Requiring
Retrospective Application to Prior-Period Financial Statements of Changes in Accounting Principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also redefines
restatement as the revising of previously issued financial statements to reflect the corrections of errors. This statement is effective for the Company beginning in October 2006. Although the Company has no current application for this
statement, the adoption of this statement may affect its future consolidated results of operations, financial position or cash flows.

SFAS 123R. In the first quarter of fiscal 2006, the Company adopted SFAS 123R, Share-Based Payment, and recognized share-based compensation expense in our financial statements. See Notes to Consolidated
Financial Statements  Note 2 for a discussion of the impact on operating results for the year of the Companys Consolidated Financial Statements for additional information regarding the adoption of SFAS 123R. See Note 2 of our
Consolidated Financial Statements for additional information regarding recently issued accounting standards.

FIN 48. In July
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes (FIN 48). This interpretation, among other things, creates a two-step approach for evaluating uncertain tax positions.
Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that
more-likely-than-not will be realized upon settlement. Derecognition of a tax position that



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was previously recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being
sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition of tax positions, and it has expanded disclosure requirements. FIN 48 is effective for fiscal years beginning after December 15, 2006,
in which the impact of adoption should be accounted for as a cumulative-effect adjustment to the beginning balance of retained earnings. The Company is evaluating FIN 48 and has not yet determined the impact the adoption will have on the
consolidated financial statements.

EITF 04-5. In June 2005, the U.S. Emerging Issues Task Force (EITF) reached a
consensus on EITF issue 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5), addressing when a general
partner, or general partners as a group, control and should therefore, consolidate a limited partnership. Under EITF 04-5, a sole general partner is presumed to control a limited partnership when certain conditions are met. As a result, for the
fiscal year ended September 30, 2007, the Company will be required to include the accounts of Santa Fe Mining Corp (SFMC) for U.S. GAAP purposes.

The Company currently accounts for its 50% ownership in SFMC using the equity method of accounting whereby its equity in SFMC is reflected in the caption Other assets within its consolidated balance
sheets. After adopting this accounting guidance, the Company will consolidate all accounts of SFMC into its consolidated financial statements.

Effects of Inflation

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

Private Securities Litigation Reform Act

Certain statements in this Annual Report on Form 10-K which are not historical facts are forward-looking statements, such as statements relating to future
operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development, expansion or sale activities, capital expenditures, expansion of business operations into new areas and the
payment of certain obligations by third parties. 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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|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 prices. Excluding its non-recourse debt, the Company has total interest-bearing debt of approximately $12 million, of
which approximately $10 million bears interest at a variable rate (9.25% at September 30, 2006). Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would cause an approximate
$100,000 change in the amount of interest the Company would incur based on the amount of variable debt outstanding at September 30, 2006. Any future borrowings with variable interest rate terms will be exposed to this same market rate risk.

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



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|Item 8. | FINANCIAL STATEMENTS
|------- | --------------------

INDEX

TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2006, 2005 and 2004



|                                                                                                      |  |         
|----------------------------------------------------------------------------------------------------- |  | --------
|                                                                                                      |  | Page No.
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                           |  | 26      
|Report of Independent Registered Public Accounting Firm  Deloitte & Touche LLP                       |  | 27      
|Consolidated Balance Sheets as of September 30, 2006 and 2005                                         |  | 28      
|Consolidated Statements of Operations for the Years Ended September 30, 2006, 2005 and 2004           |  | 30      
|Consolidated Statements of Stockholders Equity for the Years Ended September 30, 2006, 2005 and 2004 |  | 31      
|Consolidated Statements of Cash Flows for the Years Ended September 30, 2006, 2005 and 2004           |  | 32      
|Notes to Consolidated Financial Statements                                                            |  | 33      

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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Archon Corporation:

We have audited the accompanying consolidated balance sheets of Archon Corporation and Subsidiaries (the Company) as of September 30,
2006 and 2005, and the related consolidated statements of operations, stockholders equity and cash flows for the years then ended. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit
of the Companys internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
the Company as of September 30, 2006 and 2005, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Las Vegas, Nevada

December 21, 2006

/s/ Ernst & Young LLP



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders of Archon Corporation:

We have audited the accompanying consolidated statements of operations, stockholders equity and cash flows for the year ended September 30, 2004 of Archon
Corporation and subsidiaries (the Company). 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 audit.

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

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

/s/ DELOITTE & TOUCHE LLP

Las Vegas, Nevada

December 23, 2004



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets

as of September 30,



|                                         |  |      |             |   |      |   |             |  
|---------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                         |  | 2006 |             |   | 2005 |  
|ASSETS                                   |  |      |             |   |      |   |             |  
|Current assets:                          |  |      |             |   |      |   |             |  
|Cash and cash equivalents                |  | $    | 6,187,533   |   |      | $ | 2,116,708   |  
|Investment in marketable securities      |  |      | 6,011,225   |   |      |   | 6,803,967   |  
|Accounts receivable, net                 |  |      | 1,096,333   |   |      |   | 1,051,998   |  
|Inventories                              |  |      | 414,033     |   |      |   | 355,459     |  
|Prepaid expenses and other               |  |      | 1,045,654   |   |      |   | 761,307     |  
|                                         |  |      |             |   |      |   |             |  
|Total current assets                     |  |      | 14,754,778  |   |      |   | 11,089,439  |  
|Property held for sale                   |  |      | 21,504,400  |   |      |   | 21,504,400  |  
|Property and equipment:                  |  |      |             |   |      |   |             |  
|Rental property held for investment, net |  |      | 127,364,625 |   |      |   | 130,536,513 |  
|Land used in operations                  |  |      | 8,125,589   |   |      |   | 8,125,589   |  
|Buildings and improvements               |  |      | 35,082,588  |   |      |   | 35,365,442  |  
|Machinery and equipment                  |  |      | 9,234,649   |   |      |   | 9,230,908   |  
|Accumulated depreciation                 |  |      | (25,664,662 | ) |      |   | (24,008,187 | )
|                                         |  |      |             |   |      |   |             |  
|Property and equipment, net              |  |      | 154,142,789 |   |      |   | 159,250,265 |  
|Other assets                             |  |      | 7,648,201   |   |      |   | 7,793,447   |  
|                                         |  |      |             |   |      |   |             |  
|Total assets                             |  | $    | 198,050,168 |   |      | $ | 199,637,551 |  
|                                         |  |      |             |   |      |   |             |  

See the accompanying Notes to Consolidated Financial Statements.



28



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Balance Sheets  (continued)

as of September 30,



|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                                                                                                                                        |  | 2006 |             |   | 2005 |  
|LIABILITIES and STOCKHOLDERS EQUITY                                                                                                                                                                                                                                                    |  |      |             |   |      |   |             |  
|Current liabilities:                                                                                                                                                                                                                                                                    |  |      |             |   |      |   |             |  
|Accounts payable                                                                                                                                                                                                                                                                        |  | $    | 2,770,938   |   |      | $ | 2,096,606   |  
|Interest payable                                                                                                                                                                                                                                                                        |  |      | 1,310,796   |   |      |   | 1,255,096   |  
|Accrued and other liabilities                                                                                                                                                                                                                                                           |  |      | 3,524,408   |   |      |   | 3,197,668   |  
|Nonrefundable option payment                                                                                                                                                                                                                                                            |  |      | 5,750,000   |   |      |   | 0           |  
|Current portion of debt                                                                                                                                                                                                                                                                 |  |      | 11,427,277  |   |      |   | 14,915,525  |  
|Current portion of non-recourse debt                                                                                                                                                                                                                                                    |  |      | 2,195,326   |   |      |   | 1,915,478   |  
|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                                                                                                                                                               |  |      | 26,978,745  |   |      |   | 23,380,373  |  
|Debt - less current portion                                                                                                                                                                                                                                                             |  |      | 223,306     |   |      |   | 484,856     |  
|Non-recourse debt - less current portion                                                                                                                                                                                                                                                |  |      | 76,818,600  |   |      |   | 79,013,926  |  
|Deferred income taxes                                                                                                                                                                                                                                                                   |  |      | 27,245,317  |   |      |   | 27,353,693  |  
|Deferred rent and other accrued liabilities                                                                                                                                                                                                                                             |  |      | 45,051,567  |   |      |   | 48,021,017  |  
|Commitments and contingencies (see Note 15)                                                                                                                                                                                                                                             |  |      |             |   |      |   |             |  
|Stockholders equity:                                                                                                                                                                                                                                                                   |  |      |             |   |      |   |             |  
|Common stock, $.01 par value; authorized-100,000,000 shares; issued and outstanding  6,672,281 and 6,235,931 shares on
September 30, 2006 and 2005; 436,350 shares are subject to non-recourse option note agreements at September 30, 2006                                            |  |      | 66,723      |   |      |   | 62,359      |  
|Preferred stock, exchangeable, redeemable 16.0% cumulative, stated at $2.14 liquidation value, authorized-10,000,000 shares; issued and
outstanding  4,413,777 shares on September 30, 2006 and 2005 with cumulative dividends in arrears of $12,302,741 and $10,791,464, respectively |  |      | 9,445,483   |   |      |   | 9,445,483   |  
|Additional paid-in capital                                                                                                                                                                                                                                                              |  |      | 61,482,194  |   |      |   | 58,342,933  |  
|Accumulated deficit                                                                                                                                                                                                                                                                     |  |      | (51,098,102 | ) |      |   | (47,742,393 | )
|Accumulated other comprehensive income                                                                                                                                                                                                                                                  |  |      | 1,924,109   |   |      |   | 1,363,078   |  
|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Subtotal                                                                                                                                                                                                                                                                                |  |      | 21,820,407  |   |      |   | 21,471,460  |  
|Less treasury common stock  4,875 shares, at cost                                                                                                                                                                                                                                      |  |      | (87,774     | ) |      |   | (87,774     | )
|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total stockholders equity                                                                                                                                                                                                                                                              |  |      | 21,732,633  |   |      |   | 21,383,686  |  
|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  
|Total liabilities and stockholders equity                                                                                                                                                                                                                                              |  | $    | 198,050,168 |   |      | $ | 199,637,551 |  
|                                                                                                                                                                                                                                                                                        |  |      |             |   |      |   |             |  

See the accompanying Notes to Consolidated Financial Statements.



29



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Operations

For the Years Ended September 30,



|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|---------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                 |  | 2006 |            |   | 2005 |   |             | 2004 | 
|Revenues:                                                        |  |      |            |   |      |   |             |      |  |   |             |  
|Casino                                                           |  | $    | 24,919,899 |   |      | $ | 24,119,395  |      |  | $ | 27,470,751  |  
|Hotel                                                            |  |      | 2,955,969  |   |      |   | 2,782,506   |      |  |   | 3,125,408   |  
|Food and beverage                                                |  |      | 7,433,296  |   |      |   | 6,914,157   |      |  |   | 8,381,094   |  
|Investment properties                                            |  |      | 12,402,247 |   |      |   | 12,402,247  |      |  |   | 12,402,247  |  
|Other                                                            |  |      | 3,685,589  |   |      |   | 3,088,930   |      |  |   | 2,166,278   |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Gross revenues                                                   |  |      | 51,397,000 |   |      |   | 49,307,235  |      |  |   | 53,545,778  |  
|Less casino promotional allowances                               |  |      | (6,243,334 | ) |      |   | (5,619,377  | )    |  |   | (7,853,205  | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Net operating revenues                                           |  |      | 45,153,666 |   |      |   | 43,687,858  |      |  |   | 45,692,573  |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Operating expenses:                                              |  |      |            |   |      |   |             |      |  |   |             |  
|Casino                                                           |  |      | 13,874,582 |   |      |   | 13,051,698  |      |  |   | 15,126,830  |  
|Hotel                                                            |  |      | 1,074,335  |   |      |   | 1,040,601   |      |  |   | 669,411     |  
|Food and beverage                                                |  |      | 3,923,775  |   |      |   | 4,138,451   |      |  |   | 4,382,641   |  
|Other                                                            |  |      | 1,634,239  |   |      |   | 1,204,775   |      |  |   | 1,133,699   |  
|Selling, general and administrative                              |  |      | 3,807,060  |   |      |   | 3,550,890   |      |  |   | 4,325,537   |  
|Corporate expenses                                               |  |      | 5,776,989  |   |      |   | 7,634,409   |      |  |   | 3,850,474   |  
|Utilities and property expenses                                  |  |      | 4,702,539  |   |      |   | 4,702,176   |      |  |   | 5,088,568   |  
|Depreciation and amortization                                    |  |      | 5,502,009  |   |      |   | 5,834,726   |      |  |   | 5,980,476   |  
|Provision for receivable and investment                          |  |      | 0          |   |      |   | 0           |      |  |   | 162,225     |  
|Loss (gain) on sale/disposal of assets                           |  |      | 14,523     |   |      |   | 244,648     |      |  |   | (3,953,148  | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Total operating expenses                                         |  |      | 40,310,051 |   |      |   | 41,402,374  |      |  |   | 36,766,713  |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Operating income                                                 |  |      | 4,843,615  |   |      |   | 2,285,484   |      |  |   | 8,925,860   |  
|Interest expense                                                 |  |      | (8,854,722 | ) |      |   | (11,059,577 | )    |  |   | (12,880,017 | )
|Interest and other income                                        |  |      | 244,926    |   |      |   | 1,268,134   |      |  |   | 1,158,928   |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Loss before income tax benefit                                   |  |      | (3,766,181 | ) |      |   | (7,505,959  | )    |  |   | (2,795,229  | )
|Federal income tax benefit                                       |  |      | 410,472    |   |      |   | 2,594,181   |      |  |   | 913,487     |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Net loss                                                         |  |      | (3,355,709 | ) |      |   | (4,911,778  | )    |  |   | (1,881,742  | )
|Dividends accrued on preferred shares                            |  |      | (1,511,277 | ) |      |   | (1,511,277  | )    |  |   | (1,562,171  | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Net loss applicable to common shares                             |  | $    | (4,866,986 | ) |      | $ | (6,423,055  | )    |  | $ | (3,443,913  | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Average common shares outstanding                                |  |      | 6,235,931  |   |      |   | 6,229,015   |      |  |   | 6,221,431   |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Average common and common equivalent shares outstanding          |  |      | 6,235,931  |   |      |   | 6,229,015   |      |  |   | 6,221,431   |  
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Basic loss per common share                                      |  | $    | (0.78      | ) |      | $ | (1.03       | )    |  | $ | (0.55       | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  
|Diluted loss per common and common equivalent shares outstanding |  | $    | (0.78      | ) |      | $ | (1.03       | )    |  | $ | (0.55       | )
|                                                                 |  |      |            |   |      |   |             |      |  |   |             |  

See the accompanying Notes to Consolidated Financial Statements.



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Archon Corporation and Subsidiaries

Consolidated Statements of Stockholders Equity

For the Years Ended September 30, 2006, 2005 and 2004



|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |             |  
|---------------------------------------- |  | ----------- | ------ | -------------- | - | --------- | ------------------------ |  | - | ------------------ | - |  | ------------------------------------------ | ----------- | ---------------------------- |  | - | ------------- |  | - | ------- | - |  | - | ------- | - |  | - | ----------- | -
|                                         |  | CommonStock |        | PreferredStock |   |           | AdditionalPaid-InCapital |  |   | AccumulatedDeficit |   |  | AccumulatedOtherComprehensiveIncome/(Loss) |             | StockSubscriptionsReceivable |  |   | TreasuryStock |  |   | Total   |  
|Balances, October 1, 2003                |  | $           | 62,214 |                | $ | 9,926,221 |                          |  | $ | 54,529,070         |   |  | $                                          | (40,948,873 | )                            |  | $ | 844,841       |  | $ | (73,743 | ) |  | $ | (87,774 | ) |  | $ | 24,251,956  |  
|Net loss                                 |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            | (1,881,742  | )                            |  |   |               |  |   |         |   |  |   |         |   |  |   | (1,881,742  | )
|Preferred stock purchased                |  |             |        |                |   | (252,668  | )                        |  |   | 3,294              |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | (249,374    | )
|Stock-based compensation expense         |  |             |        |                |   |           |                          |  |   | 50,000             |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | 50,000      |  
|Stock subscriptions received             |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   | 73,743  |   |  |   |         |   |  |   | 73,743      |  
|Unrealized gain on marketable securities |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   | 147,182       |  |   |         |   |  |   |         |   |  |   | 147,182     |  
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2004             |  |             | 62,214 |                |   | 9,673,553 |                          |  |   | 54,582,364         |   |  |                                            | (42,830,615 | )                            |  |   | 992,023       |  |   | 0       |   |  |   | (87,774 | ) |  |   | 22,391,765  |  
|Net loss                                 |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            | (4,911,778  | )                            |  |   |               |  |   |         |   |  |   |         |   |  |   | (4,911,778  | )
|Preferred stock purchased                |  |             |        |                |   | (228,070  | )                        |  |   | (188,340           | ) |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | (416,410    | )
|Exercise of stock options                |  |             | 145    |                |   |           |                          |  |   | 19,275             |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | 19,420      |  
|Stock-based compensation expense         |  |             |        |                |   |           |                          |  |   | 3,929,634          |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | 3,929,634   |  
|Unrealized gain on marketable securities |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   | 371,055       |  |   |         |   |  |   |         |   |  |   | 371,055     |  
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2005             |  |             | 62,359 |                |   | 9,445,483 |                          |  |   | 58,342,933         |   |  |                                            | (47,742,393 | )                            |  |   | 1,363,078     |  |   | 0       |   |  |   | (87,774 | ) |  |   | 21,383,686  |  
|Net loss                                 |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            | (3,355,709  | )                            |  |   |               |  |   |         |   |  |   |         |   |  |   | (3,355,709  | )
|Exercise of stock options                |  |             | 4,364  |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | 4,364       |  
|Stock-based compensation expense         |  |             |        |                |   |           |                          |  |   | 3,139,261          |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   | 3,139,261   |  
|Unrealized gain on marketable securities |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   | 561,031       |  |   |         |   |  |   |         |   |  |   | 561,031     |  
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |             |  
|Balances, September 30, 2006             |  | $           | 66,723 |                | $ | 9,445,483 |                          |  | $ | 61,482,194         |   |  | $                                          | (51,098,102 | )                            |  | $ | 1,924,109     |  | $ | 0       |   |  | $ | (87,774 | ) |  | $ | (21,732,633 | )
|                                         |  |             |        |                |   |           |                          |  |   |                    |   |  |                                            |             |                              |  |   |               |  |   |         |   |  |   |         |   |  |   |             |  

See the accompanying Notes to Consolidated Financial Statements.



31



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##### Table of Contents

Archon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

For the Years Ended September 30,



|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                |  | 2006 |            |   | 2005 |   |             | 2004 | 
|Cash flows from operating activities:                                           |  |      |            |   |      |   |             |      |  |   |             |  
|Net loss                                                                        |  | $    | (3,355,709 | ) |      | $ | (4,911,778  | )    |  | $ | (1,881,742  | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |      |            |   |      |   |             |      |  |   |             |  
|Depreciation and amortization                                                   |  |      | 5,502,009  |   |      |   | 5,834,726   |      |  |   | 5,980,476   |  
|Interest expense from amortization of debt issuance costs                       |  |      | 379,032    |   |      |   | 615,976     |      |  |   | 342,934     |  
|Stock-based compensation expense                                                |  |      | 3,139,261  |   |      |   | 3,929,634   |      |  |   | 50,000      |  
|Provision for doubtful receivables                                              |  |      | (17,701    | ) |      |   | 36,916      |      |  |   | 31,220      |  
|Loss (gain) on sale of assets                                                   |  |      | 14,523     |   |      |   | 244,648     |      |  |   | (3,953,148  | )
|Negative amortization of debt                                                   |  |      | 0          |   |      |   | 0           |      |  |   | 344,685     |  
|Change in assets and liabilities:                                               |  |      |            |   |      |   |             |      |  |   |             |  
|Accounts receivable, net                                                        |  |      | (26,634    | ) |      |   | 2,197,754   |      |  |   | (139,745    | )
|Inventories                                                                     |  |      | (58,574    | ) |      |   | (61,297     | )    |  |   | (5,215      | )
|Prepaid expenses and other                                                      |  |      | (284,347   | ) |      |   | 44,272      |      |  |   | (50,041     | )
|Deferred income taxes                                                           |  |      | (410,472   | ) |      |   | (2,594,181  | )    |  |   | (725,498    | )
|Other assets                                                                    |  |      | 176,547    |   |      |   | (255,069    | )    |  |   | (67,659     | )
|Accounts payable                                                                |  |      | 674,332    |   |      |   | (41,471     | )    |  |   | 175,273     |  
|Interest payable                                                                |  |      | 55,700     |   |      |   | (684,654    | )    |  |   | (310,204    | )
|Accrued and other liabilities                                                   |  |      | 326,740    |   |      |   | (862,212    | )    |  |   | 5,465,248   |  
|Nonrefundable option payment                                                    |  |      | 5,750,000  |   |      |   | 0           |      |  |   | 0           |  
|Other liabilities                                                               |  |      | (2,969,450 | ) |      |   | 26,957,686  |      |  |   | 0           |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Net cash provided by operating activities                                       |  |      | 8,895,257  |   |      |   | 30,450,950  |      |  |   | 5,256,584   |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Cash flows from investing activities:                                           |  |      |            |   |      |   |             |      |  |   |             |  
|Proceeds from sale of assets                                                    |  |      | 63,203     |   |      |   | 0           |      |  |   | 5,770,000   |  
|Decrease in restricted cash                                                     |  |      | 0          |   |      |   | 0           |      |  |   | 13,898,971  |  
|Capital expenditures                                                            |  |      | (186,744   | ) |      |   | (458,926    | )    |  |   | (989,102    | )
|Marketable securities purchased                                                 |  |      | (199,131   | ) |      |   | (946,133    | )    |  |   | (272,214    | )
|Marketable securities sold                                                      |  |      | 1,855,000  |   |      |   | 111,459     |      |  |   | 2,817,330   |  
|Investment in partnerships                                                      |  |      | (410,333   | ) |      |   | (825,000    | )    |  |   | (525,000    | )
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Net cash provided by (used in) investing activities                             |  |      | 1,121,995  |   |      |   | (2,118,600  | )    |  |   | 20,699,985  |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Cash flows from financing activities:                                           |  |      |            |   |      |   |             |      |  |   |             |  
|Proceeds from long-term debt                                                    |  |      | 683,069    |   |      |   | 2,408,865   |      |  |   | 18,565,751  |  
|Paid on long-term debt and obligation under capital lease                       |  |      | (6,633,860 | ) |      |   | (31,669,935 | )    |  |   | (51,203,512 | )
|Note receivable                                                                 |  |      | 0          |   |      |   | 0           |      |  |   | 4,884,301   |  
|Debt issuance costs                                                             |  |      | 0          |   |      |   | 0           |      |  |   | (437,414    | )
|Preferred stock acquired                                                        |  |      | 0          |   |      |   | (416,410    | )    |  |   | (249,374    | )
|Stock subscription received                                                     |  |      | 0          |   |      |   | 0           |      |  |   | 73,743      |  
|Stock options exercised                                                         |  |      | 4,364      |   |      |   | 19,420      |      |  |   | 0           |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Net cash used in financing activities                                           |  |      | (5,946,427 | ) |      |   | (29,658,060 | )    |  |   | (28,366,505 | )
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Increase (decrease) in cash and cash equivalents                                |  |      | 4,070,825  |   |      |   | (1,325,710  | )    |  |   | (2,409,936  | )
|Cash and cash equivalents, beginning of year                                    |  |      | 2,116,708  |   |      |   | 3,442,418   |      |  |   | 5,852,354   |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  
|Cash and cash equivalents, end of year                                          |  | $    | 6,187,533  |   |      | $ | 2,116,708   |      |  | $ | 3,442,418   |  
|                                                                                |  |      |            |   |      |   |             |      |  |   |             |  

See the accompanying Notes to Consolidated Financial Statements.



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ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended September 30, 2006, 2005 and 2004



|1. | BASIS OF PRESENTATION AND GENERAL INFORMATION
|-- | ---------------------------------------------

Archon Corporation, (the Company or Archon), is a Nevada corporation. The Companys primary business operations are conducted through a wholly-owned subsidiary corporation, Pioneer Hotel Inc. (PHI),
which operates the Pioneer Hotel & Gambling Hall (the Pioneer) in Laughlin, Nevada. In addition, the Company, owns real estate on Las Vegas Boulevard South (the Strip) in Las Vegas, Nevada, and also owns investment
properties in Dorchester, Massachusetts and Gaithersburg, Maryland. In June 2006, the Company entered into an option agreement whereby it sold an option to another party for the purchase of the real estate it owns on the Strip for a total sale price
of $450 million, subject to the terms of the agreement.

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



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Principles of Consolidation

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

Cash and Cash Equivalents

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

Investment in Marketable Securities

Debt securities available-for-sale are stated at market value with unrealized gains or losses reported as a component of accumulated other comprehensive income. Gains or losses on disposition are based on the net
proceeds and the adjusted carrying amount of the securities. Debt securities available-for-sale at September 30, 2006 and 2005 include investments in corporate securities.

Equity securities available-for-sale are reported at fair value with unrealized gains or losses reported as a component of accumulated other
comprehensive income. Realized gains and losses are determined on a specific



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identification method. At September 30, 2006 and 2005, equity securities available-for-sale included investments in common and preferred stock.

Included in Other income with the consolidated statements of operations are approximately $(8,000), $112,000 and $94,000 of
realized gains/(losses) for the years ended September 30, 2006, 2005 and 2004, respectively. The Company recorded approximately $561,000, $371,000 and $147,000 of other comprehensive gain associated with unrealized gains or losses on these
securities during the years ended September 30, 2006, 2005 and 2004, respectively.

The following is a summary of available-for-sale
marketable securities as of September 30, 2006 and 2005:



|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|--------------------- |  | ---- | --------- | -------------- | - | ---------------- |  | ------------------- | ------- |  | - | ---------
|                      |  | 2006
|                      |  | Cost |           | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Other debt securities |  | $    | 745,000   |                | $ | 0                |  | $                   | 137,182 |  | $ | 607,818  
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|Total debt securities |  |      | 745,000   |                |   | 0                |  |                     | 137,182 |  |   | 607,818  
|Equity securities     |  |      | 2,306,056 |                |   | 3,158,424        |  |                     | 61,073  |  |   | 5,403,407
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|Total                 |  | $    | 3,051,056 |                | $ | 3,158,424        |  | $                   | 198,255 |  | $ | 6,011,225
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          



|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|--------------------- |  | ---- | --------- | -------------- | - | ---------------- |  | ------------------- | ------- |  | - | ---------
|                      |  | 2005
|                      |  | Cost |           | UnrealizedGain |   | UnrealizedLosses |  | Market orFair Value
|Other debt securities |  | $    | 2,600,000 |                | $ | 46.900           |  | $                   | 146,800 |  | $ | 2,500,100
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|Total debt securities |  |      | 2,600,000 |                |   | 46,900           |  |                     | 146,800 |  |   | 2,500,100
|Equity securities     |  |      | 2,106,925 |                |   | 2,272,134        |  |                     | 75,192  |  |   | 4,303,867
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          
|Total                 |  | $    | 4,706,925 |                | $ | 2,319,034        |  | $                   | 221,992 |  | $ | 6,803,967
|                      |  |      |           |                |   |                  |  |                     |         |  |   |          

All debt contractually matures more than ten years in the future as of September 30, 2006 and
2005.

Accounts Receivable

Accounts receivable are stated at cost, net of related allowance for doubtful accounts. The allowance for doubtful accounts is determined based on a specific identification method.

Inventories

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

Property and Equipment

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

The Company periodically assesses the recoverability of property and equipment and evaluates such assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not



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be recoverable. Asset impairment is determined to exist if estimated future cash flows, undiscounted and without interest charges, are less than the carrying
amount in accordance with Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).

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

Nonrefundable Option Payment

The nonrefundable option payment at September 30, 2006 is a nonrefundable
option payment of $5.0 million and a nonrefundable extension fee of $750,000 received from a third party which has an option to acquire certain land on the Las Vegas strip owned by the Company.

Slot Club Liability

The Pioneer has a
program called the Bounty Hunter Round-Up Club (the Club) established to encourage repeat business from frequent and active slot and table game customers. A member of the Club accumulates points in the members account
for play on slot machines and table games that can be redeemed for cash, free gifts, food and beverages and additional points redeemable for free play. Included in accrued liabilities is approximately $1.4 million and $1.5 million at
September 30, 2006 and 2005, respectively, for estimated redemption value of points accumulated by patrons. This value is estimated based on historical amounts of free gift costs redeemed.

Federal Income Taxes

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

Treasury Stock

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

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):



|                  |  |      |       |      |   |       |  |   |      
|----------------- |  | ---- | ----- | ---- | - | ----- |  | - | -----
|                  |  | 2006 |       | 2005 |   | 2004 
|Food and beverage |  | $    | 4,531 |      | $ | 4,061 |  | $ | 5,217
|Hotel             |  |      | 436   |      |   | 409   |  |   | 855  
|Other             |  |      | 201   |      |   | 195   |  |   | 138  
|                  |  |      |       |      |   |       |  |   |      
|Total             |  | $    | 5,168 |      | $ | 4,665 |  | $ | 6,210
|                  |  |      |       |      |   |       |  |   |      



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

Indirect Expenses

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

Earnings Per Share

The Company presents its per share results in accordance with SFAS
No. 128, Earnings Per Share (SFAS 128). SFAS 128 requires the presentation of basic net loss per share and diluted net loss per share. Basic per share amounts are computed by dividing net loss by average shares outstanding
during the period, while diluted per share amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options. Stock options of approximately 830,000, 830,000 and 430,000, respectively were not included
in the computation of diluted net loss per share for the years ended September 30, 2006, 2005 and 2004, since the Company incurred a net loss and their effect would be antidilutive.

The Board of Directors of the Company has authorized the purchase from time-to-time by the Company of preferred stock for total consideration of up to
$2.5 million. Pursuant to the Certificate of Designation of the preferred stock, shares of preferred stock acquired by the Company are retired.

Accounting for Stock-Based Compensation

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

The Company adopted FAS 123R using the modified-prospective-transition method. Under that transition method, compensation
cost recognized in future interim and annual reporting periods includes: (1) compensation cost for all share-based payments granted prior to, but not yet vested as of October 1, 2005, based on the grant-date fair value estimated in accordance with
the original provisions of FAS 123, and (2) compensation cost for all share-based payments granted subsequent to October 1, 2005, based on the grant-date fair value estimated in accordance with the provisions of FAS 123R. The results for the prior
periods have not been restated.



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Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates used by the Company include estimated useful lives for depreciable and amortizable assets, certain other estimated liabilities and valuation reserves and estimated cash flows in assessing the recoverability of
long-lived assets. Actual results may differ from estimates.

Recently Issued Accounting Standards

SFAS 157. In September 2006, the FASB issued SFAS 157, Fair Value Measurements, which defines fair value, establishes a framework for
measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarch used to classify
the source of the information. This statement is effective beginning in October 2008. The Company is evaluating whether adoption of this statement will result in a change to its fair value measurements.

SAB 108. In September 2006, the SEC issued SAB 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements. SAB 108 requires analysis of misstatements using both an income statement (rollover approach) and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect
transition adjustment. SAB 108 is effective for the Companys fiscal year 2007 annual financial statements. The Company does not expect the adoption of the statement to have a material impact on its consolidated results of operations, financial
position or cash flows.

SFAS 154. In May 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, Requiring
Retrospective Application to Prior-Period Financial Statements of Changes in Accounting Principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 also redefines
restatement as the revising of previously issued financial statements to reflect the corrections of errors. This statement is effective for the Company beginning in October 2006. Although the Company has no current application for this
statement, the adoption of this statement may affect its future consolidated results of operations, financial position or cash flows.

SFAS 123R. In the first quarter of fiscal 2006, the Company adopted SFAS 123R, Share-Based Payment, and recognized share-based compensation expense in our financial statements. See Notes to Consolidated Financial Statements
 Notes 2 and 11, Accounting for Stock-Based Compensation for a discussion of the impact to operating results for the year on the Companys Consolidated Financial Statements for additional information regarding the adoption of SFAS
123R.

FIN 48 In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48). This interpretation, among other things, creates a two-step approach for evaluating uncertain tax positions. Recognition (step one) occurs when an enterprise concludes that a tax position, based solely on its
technical merits, is more-likely-than-not to be sustained upon examination. Measurement (step two) determines the amount of benefit that more-likely-than-not will be realized upon settlement. Derecognition of a tax position that was previously
recognized would occur when a company subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for derecognition
of tax positions, and it has expanded disclosure requirements. FIN 48 is effective for fiscal years beginning after December 15, 2006, in which the impact of adoption should be accounted



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for as a cumulative-effect adjustment to the beginning balance of retained earnings. The Company is evaluating FIN 48 and has not yet determined the impact
the adoption will have on the consolidated financial statements.

EITF 04-5. In June 2005, the U.S. Emerging Issues Task Force
(EITF) reached a consensus on EITF Issue 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF
04-5), addressing when a general partner, or general partners as a group, control and should therefore, consolidate a limited partnership. Under EITF 04-5, a sole general partner is presumed to control a limited partnership when certain
conditions are met. As a result, for the fiscal year ended September 30, 2007, the Company will be required to include the accounts of Santa Fe Mining Corp (SFMC) for U.S. GAAP purposes.

The Company currently accounts for its 50% ownership in SFMC using the equity method of accounting whereby its equity in SFMC is reflected in the caption
Other assets within its consolidated balance sheets. After adopting this accounting guidance, the Company will consolidate all accounts of SFMC into its consolidated financial statements.

Fair Value of Financial Instruments

The Company estimates the fair value of its preferred stock to be approximately $23.4 million at September 30, 2006 based upon available market prices. The Company estimates that its debt and all other financial instruments have a fair
value that materially approximates their recorded value, except for its non-recourse debt associated with an investment property owned in Massachusetts. The debt, which bears interest at 12.18% and matures in 2020, has a fair market value
approximately $6 million greater than its carrying value at September 30, 2006 of approximately $31.2 million. The interest rate used to discount the notes and estimate the fair value was 7%, the same interest rate that is associated with
similar non-recourse debt of the Company.

Other Income

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

Comprehensive Loss

Comprehensive loss is the total of net loss and all other
non-stockholder changes in stockholders equity. Comprehensive loss for each of the three years ended September 30, 2006, 2005 and 2004 is as follows (in thousands):



|                                                                                                                         |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                                                                         |  | 2006 |        |   | 2005 |   |        | 2004 | 
|Net loss                                                                                                                 |  | $    | (3,356 | ) |      | $ | (4,912 | )    |  | $ | (1,882 | )
|Unrealized gain on marketable securities, net of income taxes of $302, $199 and $79 in 2006, 2005 and 2004, respectively |  |      | 561    |   |      |   | 371    |      |  |   | 147    |  
|                                                                                                                         |  |      |        |   |      |   |        |      |  |   |        |  
|Comprehensive loss                                                                                                       |  | $    | (2,795 | ) |      | $ | (4,541 | )    |  | $ | (1,735 | )
|                                                                                                                         |  |      |        |   |      |   |        |      |  |   |        |  

Reclassification

Certain amounts included in the 2004 statement of operations have been reclassified to conform with the proper presentation of similar amounts in the 2005
and 2006 statements of operations. Specifically, gains on the sale of certain land and other assets of approximately $4.0 million in fiscal 2004 had previously been included as nonoperating income but have been reclassified as operating income
within these consolidated financial statements.



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|3. | ACCOUNTS RECEIVABLE, NET
|-- | ------------------------

Accounts
receivable at September 30, 2006 and 2005 consisted of the following:



|                                      |  |      |           |   |      |   |           |  
|------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                                      |  | 2006 |           |   | 2005 |  
|Casino and hotel                      |  | $    | 177,849   |   |      | $ | 178,873   |  
|Rental properties                     |  |      | 950,018   |   |      |   | 950,018   |  
|                                      |  |      |           |   |      |   |           |  
|Subtotal                              |  |      | 1,127,867 |   |      |   | 1,128,891 |  
|Less: allowance for doubtful accounts |  |      | (31,534   | ) |      |   | (76,893   | )
|                                      |  |      |           |   |      |   |           |  
|Total                                 |  | $    | 1,096,333 |   |      | $ | 1,051,998 |  
|                                      |  |      |           |   |      |   |           |  

Changes in the allowance for doubtful accounts for the years ended September 30, 2006, 2005,
and 2004 were as follows:



|                           |  |      |         |   |      |   |          |      |  |   |          |  
|-------------------------- |  | ---- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                           |  | 2006 |         |   | 2005 |   |          | 2004 | 
|Balance, beginning of year |  | $    | 76,893  |   |      | $ | 195,875  |      |  | $ | 586,637  |  
|Provision                  |  |      | (17,701 | ) |      |   | 36,916   |      |  |   | 31,220   |  
|Accounts written-off       |  |      | (27,658 | ) |      |   | (155,898 | )    |  |   | (421,982 | )
|                           |  |      |         |   |      |   |          |      |  |   |          |  
|Balance, end of year       |  | $    | 31,534  |   |      | $ | 76,893   |      |  | $ | 195,875  |  
|                           |  |      |         |   |      |   |          |      |  |   |          |  



|4. | PROPERTY HELD FOR SALE
|-- | ----------------------

In October 1995, the
Company acquired an approximately 27-acre parcel on Las Vegas Boulevard South which was recorded at approximately $21.5 million. The Company assumed an operating lease under which a water theme park operated on the 27-acre parcel. The lease was
terminated by the Company in September 2004 and the tenant had until January 2005 to vacate the premises. Under the terms of the lease, as amended, the water theme park remitted a base rent of approximately $19,000 monthly plus an annual rent
payment based on gross receipts. Subsequent to September 30, 2004, the Company entered into an agreement to lease a small portion of this property for 16 months at a rate of approximately $42,000 per month. The month-to-month lease amount is
currently $65,000 per month with the lessee for the land.

In 1994, Santa Fe Hotel, Inc. (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 declined to exercise the option to purchase the property and the property was sold in September 2004 to a third party for approximately $5.6 million. A gain of approximately $4.2 million was recorded
in the fourth fiscal quarter ended September 30, 2004 and is included in Gain on sale of assets in the accompanying consolidated statements of operations.



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|5. | RENTAL PROPERTY HELD FOR INVESTMENT, NET
|-- | ----------------------------------------

The property in Dorchester, Massachusetts is located on 12 acres and includes several buildings with approximately 425,000 square feet of commercial office space. The property was acquired for approximately $82.4 million plus $0.5 million
in debt issuance costs. The Company paid $5.6 million in cash and assumed $77.3 million in non-recourse debt associated with the property. The property is under a net lease through 2020 with a single tenant with an investment grade credit rating.
Under the lease, the tenant is responsible for substantially all obligations related to the property. The Company allocated approximately $15.0 million of the purchase price to land and the balance to building and improvements. The loan issue costs
incurred to acquire the property recorded in Other assets in the accompanying Consolidated Balance Sheets are being amortized over the remaining loan period. Deferred rent at September 30, 2006 and 2005 in the amount of $45.0 million and $48.0
million, respectively, is included in Other liabilities on the accompanying Consolidated Balance Sheets. See Note 8

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 (approximately $2.7 million) are recorded in Other assets in the accompanying Consolidated Balance Sheets and are being amortized over the remaining loan period.
Deferred rent at September 30, 2006 and 2005 in the amount of $2.9 million and $2.7 million, respectively, is included in Other assets on the accompanying Consolidated Balance Sheets. See Note 8



|6. | OTHER ASSETS
|-- | ------------

Included in Other assets at
September 30, 2006 and 2005 are unamortized loan issue costs, which were incurred during the acquisition of certain rental property and certain debt, and deferred rents of approximately $4.6 million and $4.7 million, respectively. The
unamortized loan issue costs are being amortized on the straight-line basis over the loan period, which closely approximates the effective interest method, and the deferred rents are being amortized on the straight-line basis over the lease period.

Additionally, Other assets at September 30, 2006 and 2005 include $0.1 million and $0.3 million, respectively, of commercial and
residential mortgage loans, representing loans originally funded by J & J Mortgage to unaffiliated third parties as well as loans made directly to J & J Mortgage under a master loan agreement. The loans purchased by the Company were
purchased for the principal amount, plus accrued interest, if any. The advances to J & J Mortgage under the master loan agreement bear interest at the prime rate plus 2%. J & J Mortgage is owned by LICO, which in turn is wholly-owned by Paul
W. Lowden, the President, Chief Executive Officer and majority stockholder of the Company. John W. Delaney, a director of the Company, is the president of J & J Mortgage.

Other assets also include amounts for the cash surrender value of life insurance of approximately $0.8 million and $0.7 million on September 30,
2006 and 2005, respectively, and investments in unconsolidated entities of approximately $1.8 million and $1.7 million on September 30, 2006 and 2005, respectively. One of the unconsolidated entities is a 50% owned LLC which has the following
financial profile at and for the years ended September 30, 2006: current and total assets of approximately $0.2 million and $1.0 million, respectively; current and total liabilities of approximately $0.1 million and $0.3 million, respectively;
total equity of approximately $0.7 million; revenues of approximately $2.0 million and pretax income of approximately $0.4 million. As of and for the year ended September 30, 2005, current and total assets of approximately $0.3 million and $1.1
million, respectively; current and total liabilities of approximately $0.1 million and $0.4 million,



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respectively; total equity of approximately $0.7 million; revenues of approximately $1.9 million and pretax income of approximately $0.3 million. In
accordance with accounting literature, the Company plans to consolidate this entity into its consolidated financial statements in fiscal 2007 because it is the general partner (controlling member) but accounts for this investment presently under the
equity method.



|7. | DEBT
|-- | ----

As of September 30, 2006, the
Companys long-term debt was comprised primarily of the following obligations: a loan payable to a bank with a balance of approximately $10.1 million, secured by land held for development on the Las Vegas Strip, monthly payments of
approximately $120,000, including interest of prime plus 1% (9.25% at September 30, 2006) with a balloon payment of approximately $10.0 million in December 2006 and various loans with a total balance of $1.5 million collateralized by slot
equipment with interest rates between 0% and 10.0%, current monthly principal payments of approximately $60,000 with maturities thru September 2009.

The Companys loan with a balance of approximately $10.1 million includes a financial covenant which requires the Company to maintain certain levels of earnings before interest, taxes, depreciation and
amortization without including financial results related to the Companys investment properties in Massachusetts and Maryland. At September 30, 2005 and 2004, the Company was not in compliance with this covenant. The bank has informed the
Company that it does not intend to accelerate the payment of the note, which includes a balloon payment of principal in December 2006 of approximately $10.1 million, but does not plan to grant a waiver to the Company relating to the default. As
such, the Company has included all principal amounts owing to the bank in current debt at September 30, 2006 and 2005. The Bank has informed the Company of its commitment to extend the maturity date of the note obligation to January 2008. The
terms of the extension include monthly principal and interest payments of approximately $120,000 with interest at a rate of prime plus 1% and a balloon payment of approximately $9.5 million in January 2008 with no prepayment penalties. The extended
note continues to be secured by the land owned on the Las Vegas strip by the Company and by a personal guaranty of the Companys Chairman of the Board and CEO, Paul W. Lowden. Although the Company believes the banks commitment to extend
the maturity date of the loan will be made formal in the near-term, it can not give any assurances that the extension will occur on terms and conditions ultimately acceptable to the Company.

As of September 30, 2005, the Companys long-term debt was comprised primarily of the following obligations: a loan payable to a bank with a
balance of approximately $12.1 million, secured by land held for development on the Las Vegas Strip, monthly payments of approximately $120,000, including interest of prime plus 1% (7.75% at September 30, 2005) with a balloon payment of
approximately $11.4 million in December 2006; borrowings of $1.9 million from a margin account (collateralized by securities owned by the Company) at a brokerage firm with a variable rate of interest (7.25% at September 30, 2005); a loan with a
balance of $1.3 million collateralized by slot equipment with an approximate interest rate of 7.25%, monthly principal payments of approximately $70,000 through October 2007; and a loan with a balance of $90,000 collateralized by real property with
an interest rate of 13.5%, monthly payments of $8,000 through November 2006.

The scheduled maturities of long-term debt as of
September 30, 2006 are as follows:



|      |  |                        |           
|----- |  | ---------------------- | ----------
|      |  | As ofSeptember 30,2006
|2007  |  | $                      | 11,427,277
|2008  |  |                        | 171,042   
|2009  |  |                        | 52,264    
|      |  |                        |           
|Total |  | $                      | 11,650,583
|      |  |                        |           



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|8. | NON-RECOURSE DEBT OBLIGATIONS
|-- | -----------------------------

The Company
assumed $77.3 million of indebtedness, consisting of approximately $75.1 million of first mortgage indebtedness, $43.9 million with an interest rate of 10.2% and $31.2 million with an interest rate of 12.18% and $2.1 million of indebtedness under
Section 467 of the Code, in connection with its acquisition on March 2, 2001 of the commercial office building located in Dorchester, Massachusetts. The building is under a net lease through June 2020, which requires the tenant to make
higher semi-annual lease payments through June 2005 and lower semi-annual lease payments thereafter. The lease payments are applied to the outstanding indebtedness and reduced 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. The first mortgage indebtedness is non-recourse and matures in June 2020 to coincide with the end of the lease term. See Note 5.

The Company issued approximately $55.4 million of first mortgage debt with a 7.01% interest rate per annum in connection with its acquisition of a
commercial office building located in Gaithersburg, Maryland. The building is under lease through April 2014. The monthly lease payments are applied against the outstanding indebtedness. Monthly principal and interest payments amortize the debt to
approximately $22.3 million by the end of the lease in April 2014. The Company anticipates that the future tenant payments related to the net leases will be sufficient to fund required payments under the first mortgage notes and Section 467
debt. See Note 5

The scheduled maturities of non-recourse debt as of September 30, 2006 are as follows:



|           |  |                        |           
|---------- |  | ---------------------- | ----------
|           |  | As ofSeptember 30,2006
|2007       |  | $                      | 2,195,326 
|2008       |  |                        | 2,490,198 
|2009       |  |                        | 2,828,304 
|2010       |  |                        | 3,185,888 
|2011       |  |                        | 3,573,478 
|Thereafter |  |                        | 64,740,732
|           |  |                        |           
|Total      |  | $                      | 79,013,926
|           |  |                        |           



|9. | 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, 2006, the Company had an
operating lease for real property that expires in 2078 and operating leases for corporate offices. The Company had no significant property and equipment under capital leases at September 30, 2006.



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Future minimum lease payments as of September 30, 2006 are as follows:



|           |  |                        |           
|---------- |  | ---------------------- | ----------
|           |  | As ofSeptember 30,2006
|2007       |  | $                      | 385,886   
|2008       |  |                        | 363,710   
|2009       |  |                        | 363,710   
|2010       |  |                        | 363,710   
|2011       |  |                        | 363,710   
|Thereafter |  |                        | 24,459,524
|           |  |                        |           
|Total      |  | $                      | 26,300,250
|           |  |                        |           

Rent expense was $313,435, $629,470 and $1,084,533 for the years ended September 30, 2006,
2005 and 2004, respectively.



|10. | PREFERRED STOCK
|--- | ---------------

The Companys
preferred stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends.
The Company has not declared the semiannual preferred stock dividends since October 1, 1996. As originally drafted, the Certificate of Designation of the Exchangeable Redeemable Preferred Stock(Certificate of Designation)
provided in part that:

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

During the quarter ended June 30,
2006, a holder of the Companys preferred stock advised the Company that the holder had concluded that the Companys calculation of the dividends on the preferred stock would accumulate at a compounded rate and is therefore erroneous, and
that as a result the aggregate liquidation preference of the preferred stock is significantly greater than that calculated by the Company. Based upon the Companys review to date of the relevant documents, the Company does not agree with the
holders position. The Company is continuing its review of the 1993 transaction in which the preferred stock was issued.



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On November 9, 2006, the Company was served with a legal action in the United States District Court
for the District of Connecticut styled as Mercury Real Estate Securities Fund, LP and Mercury Real Estate Securities Offshore Limited v. Archon Corporation, Case No. 306CV1740 (SRU), dated and filed November 1, 2006. The Complaint
alleges, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 13 years ago. The Complaint
further alleges that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. At September 30, 2006, the difference between
the Companys liquidation preference calculation and the amount asserted by the preferred shareholder is approximately $11.5 million. The Company plans to vigorously defend this Complaint and has both procedural and substantive defenses and may
have rights against other persons or parties related to the purported claim.

The accrued stock dividends have not been recorded as an
increase to the preferred stock account. As of September 30, 2006, the aggregate liquidation preference of the preferred stock was approximately $21.7 million, or $4.93 per share.

Pursuant to the Certificate of Designation of Preferred Stock, dividends are payable only when, as and if declared by the Board of Directors and the
liquidation preference is payable only upon a liquidation, dissolution or winding up of the Company. Because dividends in an amount equal to dividend payments for one dividend period have accrued and remain unpaid for at least two years, the
preferred stockholders, voting as a separate class, are entitled to elect two directors. Accordingly, one of the Companys current six board members has been elected by the preferred shareholders while one was appointed by the Board. The
Preferred Stockholders right to elect two directors will continue until all dividend arrearages have been paid.

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 20, 2006, the Company had purchased 709,305 shares of preferred stock for $1,370,042 under this
program. Previously, the Company had purchased 276,627 shares for $452,232. During the year ended September 30, 2006, the Company did not purchase any preferred shares.

Pursuant to the terms of the Certificate of Designation with respect to the Preferred Stock, dividends that are not declared are cumulative and accrue.
The dividend rate per annum was equal to 8.0% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11.0%. Beginning October 1, 1999, the dividend rate increased by an additional
50 basis points on each succeeding semi-annual dividend payment date up to a maximum of 16.0% per annum. The dividend rate is 16.0% effective October 1, 2003.

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

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

The Company has not declared dividends on the Preferred Stock since September 30, 1996. Cumulative dividends in arrears were approximately $12.3 million and $10.8 million as of September 30, 2006 and 2005, respectively.



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|11. | STOCK OPTION PLAN
|--- | -----------------

The Companys Stock
Option Plan provided for the grant of up to 1.2 million shares of its common stock to key employees. The Stock Option Plan provided for both incentive stock options and non-qualified stock options. Stock option grants had generally vested over a
three-year period from the employees hire date. The Stock Option Plan ceased granting options as of September 30, 2003 as the plan had expired. However, in July 2005, the Stock Option Plan was reinstated for an additional 10-year period.
During fiscal 2005, there were 300,000 fully vested stock options granted under the Stock Option Plan. No options were granted during the fiscal year 2006. As of September 30, 2006, 2005 and 2004, there were approximately 830,000, 830,000 and
430,000 options, respectively, outstanding and exercisable under the Stock Option Plan. During fiscal years 2006 and 2005, 436,350 and 2,000 options, respectively, were exercised. No options were exercised during fiscal year 2004.

The Company received notice of the exercise of stock option grants from Mr. David Lowden and from Mr. Chris Lowden in September, 2006 in exchange for notes totaling approximately $6.3 million. In accordance with SFAS 123R, the Company
recorded compensation expense of approximately $1.7 million with no tax benefit recorded. At the time of exercise of the stock option grants, the Company and Messrs. Lowden believed the grants to be of the type designated pursuant to Internal
Revenue Code Section 422 (Section 422), commonly called qualified stock option grants (sometimes referred to as incentive stock options). To exercise the purported incentive option grants, certain loans were made to the optionees which
loans were documented in written form. Upon further review of the original basis for the grant and later exercise, it was subsequently determined by the Company and its advisors that the grants believed to be exercised as incentive stock option
grants did not qualify as qualified stock options. As the timing and tax treatment for the exercise of qualified and non-qualified stock option grants is materially different, the exercise was recognized as being induced by a significant error in
designating the options as qualified stock options and subsequent to year end the exercise was fully reversed at the request of the optionees and the shares have been fully restored to the Company (with the corresponding optionee grants also being
restored). The Company has reserved $300,000 it deems sufficient to pay any penalties or interest that may be due for the period of 2006 regarding the reversal of the option exercise should that reversal be determined to not comply with applicable
tax laws, rules and regulations.

The outstanding options have expiration dates through 2007 and have an average remaining life of
approximately 3.3 years. The average exercise price of the outstanding options at September 30, 2006 is approximately $19.84.

In December
1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (the Non-Employee Director Plan) that provided for the grant of up to 100,000 shares of its common stock to the directors. Under the Non-Employee Director Plan,
directors were automatically granted an option to purchase 12,500 shares of the common stock at an exercise price equal to the market value of such shares on the date of such election to the board. Stock option grants vested immediately. The
Non-Employee Director Plan ceased granting options on March 21, 2002. As of September 30, 2006, 2005 and 2004, there were 25,000, 25,000 and 37,500 options, respectively, outstanding and exercisable under this plan. During fiscal 2005, 12,500
options were exercised. During fiscal years 2006 and 2004, no options were granted or exercised. The outstanding options have an expiration date through 2007 and have an average remaining life of approximately 2 years. The average exercise price of
the outstanding options at September 30, 2006 is approximately $1.00.

SFHI, SLVC and PHI (collectively, the Subsidiaries),
have adopted subsidiary stock option plans (the Subsidiary Plans). The Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such
Subsidiarys Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries and the Company to attract, retain and motivate
their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As of September 30, 2006, no options had been granted under any of the Subsidiary Plans.

Accounting for Stock-Based Compensation

During the fiscal third quarter 2005, certain stock options were granted by the compensation committee of the Companys board of directors to Christopher Lowden, David Lowden and Paul Lowden. Each individual received a grant of 150,000
stock options (Paul Lowden, however, notified the compensation committee in May 2005 that he was forfeiting the award that was to be granted to him). The options were granted in April 2005 and included terms of immediate vesting and were intended to
be issued with an exercise price of $1.00 per share. However, the Compensation Committee decided in June 2005 that the options granted in April 2005 were to be granted with an exercise price equal to the closing market price of the Companys
common stock on the date of grant. The Company recognized stock-based compensation associated with the issuance of the stock options of approximately $1.6 million, net of taxes, representing the difference in the Companys common stock price
between the date of grant and the measurement date of the options. In September 2006, Christopher and David Lowden exercised all of their outstanding stock options (218,175 each) and signed promissory notes dated August 30, 2006 with the Company to
finance the purchase of the options. The notes receivable from Christopher and David Lowden total approximately $6.3 million in total, have a term of three (3) years, bear interest at 4.0% and are generally unsecured. As set forth above, the stock
option exercises related to these notes were reversed. The Company has returned the notes to Messrs. Lowden and will not seek payment therefrom. Under SFAS 123R, the value of the notes relative to the stock options exercised was approximately $1.7
million and was recorded as compensation expense with a related credit to additional paid-in-capital.



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Additionally, the compensation committee approved an extension of other previously issued stock options
which otherwise would have expired. A charge of approximately $1.0 million related to this extension of stock options was recorded, net of taxes. The following table illustrates the effect on net loss and loss per share as if the Company had applied
the fair value recognition provisions of FASB Statement No. 123R, Accounting for Stock-Based Compensation, to stock-based employee compensation (in thousands except for per share amounts):



|                                               |  |                                                                                                                                     |        |                           |        |   |        |   |       |  
|---------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------- | ------ | ------------------------- | ------ | - | ------ | - | ----- | -
|                                               |  |                                                                                                                                     |        | Years Ended September 30, |       
|                                               |  |                                                                                                                                     |        | 2005                      |        |   | 2004   |  
|Net loss applicable to common shares           |  | $                                                                                                                                   | (6,423 | )                         |        | $ | (3,444 | )
|Add:                                           |  | Compensation cost recorded on the consolidated statements of operations, net of related tax effects                                 |        |                           | 2,554  |   |        |   | 33    |  
|Deduct                                         |  | Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |        |                           | (2,383 | ) |        |   | (33   | )
|                                               |  |                                                                                                                                     |        |                           |        |   |        |   |       |  
|Pro forma net loss applicable to common shares |  | $                                                                                                                                   | (6,252 | )                         |        | $ | (3,444 | )
|                                               |  |                                                                                                                                     |        |                           |        |   |        |   |       |  
|Loss per common share:                         |  |                                                                                                                                     |        |                           |        |   |        |  
|                                               |  | Basic and diluted  as reported                                                                                                     |        | $                         | (1.03  | ) |        | $ | (0.55 | )
|                                               |  |                                                                                                                                     |        |                           |        |   |        |   |       |  
|                                               |  | Basic and diluted  pro forma                                                                                                       |        | $                         | (1.03  | ) |        | $ | (0.55 | )
|                                               |  |                                                                                                                                     |        |                           |        |   |        |   |       |  

There was no net impact on the Companys net loss for the twelve months ended September 30,
2006 a result of adopting the fair value recognition provisions of SFAS 123R. There were no unvested share-based payments as of October 1, 2005 and no share-based payments have been granted subsequent to October 1, 2005. However, effective in March
and April 2006, certain stock options were extended for an additional period of exercise and the Company recorded stock-based compensation expense of approximately $1.4 million during the year ended September 30, 2006. In addition, approximately,
436,000 were exercised in the fourth quarter for which the Company recorded stock-based compensation expense of approximately $1.7 million.

There is also no material impact on net loss per share for the years ended September 30, 2005 and 2004 if the Company had applied the fair value recognition provisions of SFAS 123R. The company recognized stock-based compensation expense
associated with the issuance of stock options of approximately $3.9 million and $50,000 during the years ended September 30, 2005 and 2004, respectively.

SFAS 123R requires the Company to disclose pro forma net loss and net loss per share assuming compensation cost for employee stock options had been determined using the fair value-based method for the year ended
September 30, 2005. The weighted average assumptions used in estimating the fair value of each option grant on the date of grant using the Black-Scholes option pricing model, and the estimated weighted average fair value of the options granted
should also be disclosed. No such stock options were granted in 2004, and therefore, no information has been included for that year.

The
Companys valuation model assumes no expected future dividend payments on the Companys common stock for the options granted in 2006 and 2005 (dollars in thousands, except per share data).



|                                                             |  |      |       |   |      |   |       |      |  |    
|------------------------------------------------------------ |  | ---- | ----- | - | ---- | - | ----- | ---- |  | ---
|                                                             |  | 2006 |       |   | 2005 |   |       | 2004
|Weighted average assumptions:                                |  |      |       |   |      |   |       |      |  |    
|Expected stock price volatility                              |  |      | 42.0  | % |      |   | 80.0  | %    |  | N/A
|Risk-free interest rate                                      |  |      | 8.82  | % |      |   | 5.0   | %    |  | N/A
|Expected option lives (in years)                             |  |      | 3     |   |      |   | 2     |      |  | N/A
|Expected dividend yield                                      |  |      | N/A   |   |      |   | N/A   |      |  | N/A
|Estimated fair value of options, net of tax effect           |  | $    | 1,722 |   |      | $ | 1,399 |      |  | N/A
|Estimated fair value of options per share, net of tax effect |  | $    | 0.17  |   |      | $ | 0.22  |      |  | N/A

The following table summarizes stock option activity during fiscal 2006 under all plans:



|                                           |  |                          |  |                                         |       |                                          |           |                                   |   |       
|------------------------------------------ |  | ------------------------ |  | --------------------------------------- | ----- | ---------------------------------------- | --------- | --------------------------------- | - | ------
|                                           |  | Number of Shares (000s) |  | Weighted-AverageExercise Price PerShare |       | Weighted-AverageRemainingContractualTerm |           | AggregateIntrinsic Value ($000s)
|Options outstanding at September 30, 2005: |  | 830                      |  | $                                       | 8.05  |                                          | 4.5 years |                                   | $ | 24,656
|Granted                                    |  | 436                      |  | $                                       | 36.85 |                                          | 3 years   |                                   | $ | 1,898 
|Exercised                                  |  | 436                      |  | $                                       | 14.44 |                                          | 6.3 years |                                   | $ | 1,898 
|Canceled                                   |  | 0                        |  |                                         | N/A   |                                          | N/A       |                                   |   | N/A   
|Options outstanding at September 30, 2006: |  | 830                      |  | $                                       | 19.84 |                                          | 3.3 years |                                   | $ | 10,829
|Options exercisable at September 30, 2006: |  | 830                      |  | $                                       | 19.84 |                                          | 3.3 years |                                   | $ | 10,829

As of September 30, 2006, there was no unrecognized compensation cost related to unvested stock
options. There were no unvested shares at September 30, 2006.

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

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

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



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|12. | FEDERAL INCOME TAXES
|--- | --------------------

The Company accounts
for income taxes under SFAS No. 109, Accounting for Income Taxes (SFAS 109). In accordance with SFAS 109, deferred income taxes reflect the net effects of (i) temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (ii) operating loss and tax credit carryforwards. The provision (benefit) for income taxes attributable to pre-tax loss
consisted of:



|                          |  |                        |      |   |      |   |        |      |  |   |      |  
|------------------------- |  | ---------------------- | ---- | - | ---- | - | ------ | ---- |  | - | ---- | -
|                          |  | 2006                   |      |   | 2005 |   |        | 2004 | 
|                          |  | (dollars in thousands) |     
|Current                   |  | $                      | 0    |   |      | $ | 0      |      |  | $ | 0    |  
|Deferred                  |  |                        | (410 | ) |      |   | (2,594 | )    |  |   | (913 | )
|                          |  |                        |      |   |      |   |        |      |  |   |      |  
|Total provision (benefit) |  | $                      | (410 | ) |      | $ | (2,594 | )    |  | $ | (913 | )
|                          |  |                        |      |   |      |   |        |      |  |   |      |  

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



|                         |  |                        |        |   |      |   |        |      |  |   |      |  
|------------------------ |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ---- | -
|                         |  | 2006                   |        |   | 2005 |   |        | 2004 | 
|                         |  | (dollars in thousands) |       
|Amount at statutory rate |  | $                      | (1,318 | ) |      | $ | (2,594 | )    |  | $ | (978 | )
|Stock options            |  |                        | 603    |   |      |   | 0      |      |  |   | 0    |  
|Tax credits              |  |                        | 199    |   |      |   | 0      |      |  |   | 0    |  
|Other                    |  |                        | 106    |   |      |   | 0      |      |  |   | 65   |  
|                         |  |                        |        |   |      |   |        |      |  |   |      |  
|Total                    |  | $                      | (410   | ) |      | $ | (2,594 | )    |  | $ | (913 | )
|                         |  |                        |        |   |      |   |        |      |  |   |      |  

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



|                                                     |  |                        |         |   |      |   |         |  
|---------------------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2006                   |         |   | 2005 |  
|                                                     |  | (dollars in thousands) |        
|Deferred tax liabilities:                            |  |                        |         |   |      |   |         |  
|Prepaid expenses                                     |  | $                      | 304     |   |      | $ | 263     |  
|Fixed asset cost, depreciation and amortization, net |  |                        | 29,275  |   |      |   | 31,373  |  
|Land                                                 |  |                        | 2,236   |   |      |   | 2,236   |  
|Unrealized gains                                     |  |                        | 1,036   |   |      |   | 727     |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax liabilities                             |  |                        | 32,851  |   |      |   | 34,599  |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax assets:                                 |  |                        |         |   |      |   |         |  
|Net operating loss carryforward                      |  |                        | 4,027   |   |      |   | 5,508   |  
|Reserves for accounts and contracts receivable       |  |                        | 51      |   |      |   | 27      |  
|Other                                                |  |                        | 536     |   |      |   | 1,014   |  
|Stock option SFAS 123R                               |  |                        | 496     |   |      |   | 0       |  
|Deferred payroll                                     |  |                        | 169     |   |      |   | 171     |  
|Tax credits and charitable contribution carryover    |  |                        | 326     |   |      |   | 525     |  
|                                                     |  |                        |         |   |      |   |         |  
|Deferred tax assets                                  |  |                        | 5,605   |   |      |   | 7,245   |  
|                                                     |  |                        |         |   |      |   |         |  
|Net deferred tax (liability)                         |  | $                      | (27,246 | ) |      | $ | (27,354 | )
|                                                     |  |                        |         |   |      |   |         |  

At September 30, 2006, the Company had a net operating loss carryforward for regular income
tax purposes of approximately $63 million, which will fully expire by the year 2025 and begins expiring in 2010. AMT credits of approximately $268,000 are carried forward indefinitely. Charitable contributions of approximately $166,000 will fully
expire in 2009 and begin expiring in 2007. Included in this amount is approximately $53.0 million that was not recorded related to the Pioneer Transaction for which the Company has not taken benefit in its financial statements until the uncertainty
related to the tax deduction is resolved.

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



|13. | BENEFIT PLANS
|--- | -------------

The Company has a savings
plan (the Savings Plan) qualified under Section 401(k) of the Code. The Plan covers substantially all employees, including the Companys executive officers. Employee contributions to the Plan are discretionary. The Plan allows
eligible employees to contribute, on a pre-tax basis, up to 6% of their gross salary to the plan; the Company matches 25% of such employee contributions made. Employees may also contribute, on a pre-tax basis, up to an additional 9% of their gross
salary, and, on a post-tax basis, up to an additional 10% of their salary. Such contributions are not matched by the Company. The Companys matching contributions paid in 2006, 2005 and 2004 were $55,000, $49,000 and $48,000, respectively.



|14. | RELATED PARTIES
|--- | ---------------

The Company has entered
into a Patent Rights and Royalty Agreement with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect
to the technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect
to the technology, which will be automatically renewed for additional two-year terms unless the Company terminates the agreement within thirty days prior to the renewal or the agreement is otherwise earlier terminated in accordance with its terms.
The Company also has an understanding with David Lowden that it will pay for the costs of commercial development of the technology. As of September 30, 2006 and 2005, the Company had expended approximately $0.4 million for commercial
development of the technology, of which $30,000 was expensed in fiscal 2006 and $50,000 in fiscal 2005.



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

During an approximate 2-year period ended June 30, 2006, the Company
had expended approximately $800,000 in legal fees associated with Dukes litigation against a contractor. Dukes had entered into an agreement to reimburse the Company for legal fees and other amounts owed the Company depending on
potential amounts recovered from the litigation. Through September 30, 2006, the Company received approximately $1.0 million, of which $800,000 has been credited against legal expense and the balance has been included in operating income in the
fiscal 2006 consolidated statement of operations. The Company may recover additional amounts of approximately $60,000 monthly depending on several factors.

See Note 6 for information regarding transactions between the Company and J & J Mortgage.



|15. | CONTINGENCIES AND COMMITMENTS
|--- | -----------------------------

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

Poulos v. Caesars World, Inc., et al. and Ahern v. Caesars World, Inc., et al. The
Company is a defendant in a class action lawsuit originally filed in the United States District Court of Florida in 1994, Orlando Division, entitled Poulos v. Caesars World, Inc., et al., Ahern v. Caesars World, Inc., et al. and
Schrier v. Caesars World, Inc., et al., along with a fourth action against cruise ship gaming operators and which have been consolidated in a single action now pending in the United States District Court, District of Nevada (the
Court). Also named as defendants in these actions are many of the largest gaming companies in the United States and certain gaming equipment manufacturers. Each complaint is identical in its material allegations. The actions allege that
the defendants have engaged in fraudulent and misleading conduct by inducing people to play video poker machines and electronic slot machines based on false beliefs concerning how the machines operate and the extent to which there is actually an
opportunity to win on a given play. The complaints allege that the defendants acts constitute violations of the Racketeer Influenced and Corrupt Organizations Act and also give rise to claims for common law fraud and unjust enrichment, and
seek compensatory, special consequential, incidental and punitive damages of several billion dollars.

In response to the complaints, all
of the defendants, including the Company, filed motions attacking the pleadings for failure to state a claim, seeking to dismiss the complaints for lack of personal jurisdiction and venue. As a result of those motions, the Court has required the
Plaintiffs in the four consolidated cases to file a single consolidated amended complaint. Subsequent to Plaintiffs filing of their consolidated amended complaint, the defendants filed numerous motions attacking the amended complaint upon many
of the bases as the prior motions. The Court heard the arguments on those motions and ultimately denied the motions. Plaintiffs then filed their motion to certify a class. Defendants have vigorously opposed the motion. In June 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. In August 2002, the Ninth Circuit granted review. The briefing is complete and an oral hearing took place in
January 2004. In September 2005, the federal district court granted the defendants motion for dismissal. On October 19, 2005, the plaintiffs appealed to the Ninth Circuit. The Company has not recorded a reserve under the provisions of SFAS
No. 5 for this matter, as management does not believe that it is probable that a liability has been incurred.



48



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Pioneer Hotel and Gambling Hall adv. Eckstrom.The Company was
a defendant in a lawsuit filed in the Eighth Judicial District Court entitled Pioneer Hotel and Gambling Hall adv. Eckstrom.The complaint alleged that the plaintiffs were exposed to potentially hazardous levels of carbon monoxide from a
malfunctioning water heater in a hotel room at the Pioneer and that one of the plaintiffs suffered, among other things, a myocardial infarction as a result of the exposure. The Company has defended this lawsuit vigorously and has asserted its rights
under its insurance coverage which included a self-insured retention of $25,000. The plaintiffs were seeking damages amounting to $750,000. The Company has recorded a reserve of its $25,000 self-insured retention under the provisions of SFAS No. 5
for this matter. The lawsuit was recently settled and the Company believes it has no further financial exposure, other than the $25,000 self-insured retention already recorded.

Douglas Medley v. Pioneer Hotel & Casino/Archon Corporation.The Company is a defendant in a lawsuit
entitled Douglas Medley v. Pioneer Hotel & Casino/Archon Corporation dated March 2006. The complaint alleges unpaid wages for overtime and the plaintiff is seeking approximately $160,000 in damages. The
Company plans to defend this lawsuit vigorously and has not recorded a reserve under the provisions of SFAS No. 5 for this matter, as management does not believe that it is probable that a liability has been incurred.

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.



|16. | SUBSEQUENT EVENTS
|--- | -----------------

Subsequent to September
30, 2006, the Company with the approval of the Board, sold an investment in real estate with a net book value of approximately $0.4 million for $1.8 million.



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|17. | SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION
|--- | ------------------------------------------------

Supplemental statement of cash flows information for the years ended September 30, 2006, 2005 and 2004 consisted of:



|                                                                                      |  |                        |       |      |   |        |  |   |       
|------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ---- | - | ------ |  | - | ------
|                                                                                      |  | 2006                   |       | 2005 |   | 2004  
|                                                                                      |  | (dollars in thousands)
|Operating activities:                                                                 |  |                        |       |      |   |        |  |   |       
|Cash paid during the year for interest                                                |  | $                      | 8,386 |      | $ | 11,128 |  | $ | 12,502
|                                                                                      |  |                        |       |      |   |        |  |   |       
|Investing and financing non-cash activities:                                          |  |                        |       |      |   |        |  |   |       
|Long-term debt incurred in connection with the acquisition of machinery and equipment |  | $                      | 286   |      | $ | 0      |  | $ | 267   
|                                                                                      |  |                        |       |      |   |        |  |   |       
|Accounts payable converted to debt                                                    |  | $                      | 0     |      | $ | 0      |  | $ | 407   
|                                                                                      |  |                        |       |      |   |        |  |   |       
|Reduction of property and equipment from the acquisition of capital leases            |  | $                      | 0     |      | $ | 0      |  | $ | 1,412 
|                                                                                      |  |                        |       |      |   |        |  |   |       
|Reduction of accounts payable from disposal of machinery and equipment                |  | $                      | 0     |      | $ | 0      |  | $ | 299   
|                                                                                      |  |                        |       |      |   |        |  |   |       
|Unrealized gain on marketable securities                                              |  | $                      | 561   |      | $ | 371    |  | $ | 147   
|                                                                                      |  |                        |       |      |   |        |  |   |       



|18. | 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.



50



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Segment information for the years ended September 30, 2006, 2005 and 2004 consisted of:



|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|------------------------------------- |  | ---------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                      |  | 2006                   |         |   | 2005 |   |         | 2004 | 
|                                      |  | (dollars in thousands) |        
|Pioneer Hotel:                        |  |                        |         |   |      |   |         |      |  |   |         |  
|Net operating revenues                |  | $                      | 30,985  |   |      | $ | 29,697  |      |  | $ | 32,188  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating loss                        |  | $                      | (46     | ) |      | $ | (839    | )    |  | $ | (302    | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization         |  | $                      | 2,200   |   |      | $ | 2,477   |      |  | $ | 2,507   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense                      |  | $                      | 1,439   |   |      | $ | 1,291   |      |  | $ | 2,298   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest and other income             |  | $                      | 12      |   |      | $ | 11      |      |  | $ | 15      |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Net loss before income taxes          |  | $                      | (1,473  | ) |      | $ | (2,119  | )    |  | $ | (2,585  | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(2)               |  | $                      | 462     |   |      | $ | 179     |      |  | $ | 2,460   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(1)                |  | $                      | 30,100  |   |      | $ | 31,380  |      |  | $ | 34,539  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Investment Properties:                |  |                        |         |   |      |   |         |      |  |   |         |  
|Net operating revenues                |  | $                      | 12,402  |   |      | $ | 12,402  |      |  | $ | 12,402  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income                      |  | $                      | 9,230   |   |      | $ | 9,230   |      |  | $ | 9,230   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization         |  | $                      | 3,172   |   |      | $ | 3,172   |      |  | $ | 3,172   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense                      |  | $                      | 7,494   |   |      | $ | 9,897   |      |  | $ | 10,660  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest and other income             |  | $                      | 2       |   |      | $ | 1       |      |  | $ | 0       |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Net income (loss) before income taxes |  | $                      | 1,738   |   |      | $ | (666    | )    |  | $ | (1,430  | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(2)               |  | $                      | 0       |   |      | $ | 0       |      |  | $ | 0       |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(1)                |  | $                      | 132,911 |   |      | $ | 136,065 |      |  | $ | 141,401 |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Other and Eliminations:               |  |                        |         |   |      |   |         |      |  |   |         |  
|Net operating revenues                |  | $                      | 1,767   |   |      | $ | 1,589   |      |  | $ | 1,103   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating loss                        |  | $                      | (4,340  | ) |      | $ | (6,106  | )    |  | $ | (2      | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization         |  | $                      | 130     |   |      | $ | 186     |      |  | $ | 301     |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense                      |  | $                      | (78     | ) |      | $ | (129    | )    |  | $ | (78     | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest and other income             |  | $                      | 231     |   |      | $ | 1,256   |      |  | $ | 1,144   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Net loss before income taxes          |  | $                      | (4,031  | ) |      | $ | (4,721  | )    |  | $ | 1,220   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(2)               |  | $                      | 10      |   |      | $ | 280     |      |  | $ | (1,204  | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(1)                |  | $                      | 35,039  |   |      | $ | 32,193  |      |  | $ | 30,992  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Total:                                |  |                        |         |   |      |   |         |      |  |   |         |  
|Net operating revenues                |  | $                      | 45,154  |   |      | $ | 43,688  |      |  | $ | 45,693  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Operating income                      |  | $                      | 4,844   |   |      | $ | 2,285   |      |  | $ | 8,926   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization         |  | $                      | 5,502   |   |      | $ | 5,835   |      |  | $ | 5,980   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest expense                      |  | $                      | 8,855   |   |      | $ | 11,059  |      |  | $ | 12,880  |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Interest and other income             |  | $                      | 245     |   |      | $ | 1,268   |      |  | $ | 1,159   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Net loss before income taxes          |  | $                      | (3,766  | ) |      | $ | (7,506  | )    |  | $ | (2,795  | )
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Capital expenditures(2)               |  | $                      | 472     |   |      | $ | 459     |      |  | $ | 1,256   |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  
|Identifiable assets(1)                |  | $                      | 198,050 |   |      | $ | 199,638 |      |  | $ | 206,932 |  
|                                      |  |                        |         |   |      |   |         |      |  |   |         |  

---

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



|(2) | Includes acquisition of capital assets through non-cash activities.
|--- | -------------------------------------------------------------------



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|19. | QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
|--- | -------------------------------------------



|                                               |  |                                                 |        |   |      |   |        |  
|---------------------------------------------- |  | ----------------------------------------------- | ------ | - | ---- | - | ------ | -
|                                               |  | 2006                                            |        |   | 2005 |  
|                                               |  | (dollars in thousands,except per share amounts) |       
|Revenues:                                      |  |                                                 |        |   |      |   |        |  
|First Quarter                                  |  | $                                               | 10,439 |   |      | $ | 10,175 |  
|Second Quarter                                 |  |                                                 | 12,449 |   |      |   | 12,042 |  
|Third Quarter                                  |  |                                                 | 11,126 |   |      |   | 10,974 |  
|Fourth Quarter                                 |  |                                                 | 11,140 |   |      |   | 10,497 |  
|                                               |  |                                                 |        |   |      |   |        |  
|Total                                          |  | $                                               | 45,154 |   |      | $ | 43,688 |  
|                                               |  |                                                 |        |   |      |   |        |  
|Operating income (loss):                       |  |                                                 |        |   |      |   |        |  
|First Quarter                                  |  | $                                               | 1,285  |   |      | $ | 366    |  
|Second Quarter                                 |  |                                                 | 2,875  |   |      |   | 2,614  |  
|Third Quarter                                  |  |                                                 | 434    |   |      |   | (1,887 | )
|Fourth Quarter                                 |  |                                                 | 250    |   |      |   | 1,192  |  
|                                               |  |                                                 |        |   |      |   |        |  
|Total                                          |  | $                                               | 4,844  |   |      | $ | 2,285  |  
|                                               |  |                                                 |        |   |      |   |        |  
|Net income (loss):                             |  |                                                 |        |   |      |   |        |  
|First Quarter                                  |  | $                                               | (530   | ) |      | $ | (1,531 | )
|Second Quarter                                 |  |                                                 | 482    |   |      |   | 261    |  
|Third Quarter                                  |  |                                                 | (1,152 | ) |      |   | (2,995 | )
|Fourth Quarter                                 |  |                                                 | (2,156 | ) |      |   | (647   | )
|                                               |  |                                                 |        |   |      |   |        |  
|Total                                          |  | $                                               | (3,356 | ) |      | $ | (4,912 | )
|                                               |  |                                                 |        |   |      |   |        |  
|Net income (loss) applicable to common shares: |  |                                                 |        |   |      |   |        |  
|First Quarter                                  |  | $                                               | (908   | ) |      | $ | (1,917 | )
|Second Quarter                                 |  |                                                 | 104    |   |      |   | (126   | )
|Third Quarter                                  |  |                                                 | (1,529 | ) |      |   | (3,361 | )
|Fourth Quarter                                 |  |                                                 | (2,534 | ) |      |   | (1,019 | )
|                                               |  |                                                 |        |   |      |   |        |  
|Total                                          |  | $                                               | (4,867 | ) |      | $ | (6,423 | )
|                                               |  |                                                 |        |   |      |   |        |  
|Net income (loss) per common share:            |  |                                                 |        |   |      |   |        |  
|First Quarter                                  |  | $                                               | (0.15  | ) |      | $ | (0.31  | )
|Second Quarter                                 |  |                                                 | 0.02   |   |      |   | (0.02  | )
|Third Quarter                                  |  |                                                 | (0.25  | ) |      |   | (0.54  | )
|Fourth Quarter                                 |  |                                                 | (0.40  | ) |      |   | (0.16  | )
|                                               |  |                                                 |        |   |      |   |        |  
|Total                                          |  | $                                               | (0.78  | ) |      | $ | (1.03  | )
|                                               |  |                                                 |        |   |      |   |        |  

Operating income (loss) amounts have been adjusted to reflect a reclassification of amortization
of loan issue costs from depreciation and amortization to interest expense for the 2005 quarters shown except for the fourth quarter.



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|Item 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Evaluation of Disclosure
Controls and Procedures

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

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

Changes in Internal Controls

In response to the material weakness discussed above and as of the end of the period covered by this report, the Company has
implemented a more thorough periodic review process to review cash flow statement classifications and to review debt covenants and perform appropriate covenant calculations to determine compliance.

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



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PART III



|Item 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
|-------- | --------------------------------------------------

Directors and Executive Officers

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



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

---

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



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

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

Paul W. Lowden

Paul Lowden, 63, has
served as President, Chairman of the Board and Chief Executive Officer of the Company since its formation in September 1993. Mr. Lowden held the same positions with the Companys predecessor, Sahara Resorts, from 1982 through September
1993. Mr. Lowden is married to Suzanne Lowden. Mr. Lowdens term as a director of the Company expires at the annual meeting of stockholders in 2008.

Suzanne Lowden

Suzanne Lowden, 54, has served as a director and Executive Vice President of the Company since
its formation, and had served as a director of Sahara Resorts since 1987. Mrs. Lowden was elected Vice President of Sahara Resorts in July 1992. She is also a founding board member of Commercial Bank of Nevada. Mrs. Lowden served as a
Nevada State Senator from November 1992 through 1996. She worked for the CBS affiliate in Las Vegas from 1977 to 1987 as an anchorwoman, reporter, writer and producer of television news. In December 2005, Mrs. Lowden was nominated to and
continues to serve on the board of the Muscular Dystrophy Association as its Treasurer. Mrs. Lowden is married to Paul W. Lowden. Mrs. Lowdens term as a director of the Company expires at the annual meeting of stockholders in 2007.

John W. Delaney

John W.
Delaney, 58, has served as a director of the Company since January 1997. Mr. Delaney is currently president and chief executive officer of Central Banc Corporation., a mortgage banking firm, where he has been employed since 1978.
Mr. Delaneys term as a director of the Company expires at the annual meeting of stockholders in 2009.



54



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William J. Raggio

William J. Raggio, 80, has served as a director, Vice President, Secretary and Corporate Counsel of the Company since its formation in September 1993 until May 1999. Mr. Raggio held the same position with Sahara
Resorts from 1982 until September 1993. Mr. Raggio resigned his position on the board of directors of the Company and certain of its subsidiaries in May 1999 due to a potential conflict caused by his position on the board of another gaming
company, a position that Mr. Raggio no longer holds. Mr. Raggio was reappointed to the board of directors of the Company in December 2000. Mr. Raggio is a shareholder and member of the law firm Jones Vargas of Reno, Nevada. Since 1972
he has been a Nevada State Senator. Mr. Raggio was a director of Sierra Health Services, Inc., a Nevada corporation until May 2006. He currently has been designated director emeritus. Mr. Raggios term as a director of the Company
expires at the annual meeting of stockholders in 2008.

Howard E. Foster

Howard E. Foster, 62, has served as a special director of the Company elected by holders of the Companys Exchangeable, Redeemable Preferred Stock
since May 2000. Since 1980, Mr. Foster has been the President of Howard Foster and Company, an investment advisor firm specializing in small capitalization stocks, turnaround situations and financially distressed companies. Prior to that time,
Mr. Foster served as chief financial officer of two publicly-held companies, Associated Products and Bio-Rad Laboratories, and previously worked in the audit, tax and management consulting divisions of Arthur Andersen & Co.
Mr. Foster has served on the boards of directors of Bio-Rad Laboratories, Barringer Technologies and Nevada National Bancorporation, where he served as a director elected by preferred stockholders of Nevada National Bancorporation.
Mr. Fosters term as a special director of the Company expires at the annual meeting of stockholders in 2009, or, if earlier, the date on which all dividend arrearages on the Exchangeable Redeemable Preferred Stock have been paid.

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

Richard H. Taggart

Richard Taggart,
64, has served as a special director of the Companys Exchangeable, Redeemable Preferred Stock since October 2006, when he was appointed by the Board of Directors to fill a resignation. Over a twenty-six year career, Mr. Taggart held
various positions, such as, senior executive vice president, subsidiary president, board and executive committee member at Valley Bank and its parent, Valley Capital Corporation, where he retired from banking in 1992. He currently serves on the
boards of Haycock Petroleum, Colonial Bank of Nevada, Boulder Dam Council of the Boy Scouts of America Executive Board and the Las Vegas Country Club. Mr. Taggarts term as a special director of the Company expires at the annual meeting of
stockholders in 2007, or, if earlier, the date on which all dividend arrearages on the Exchangeable Redeemable Preferred Stock have been paid.

John M. Garner

John Garner, 47, was appointed Senior Vice President, Chief Financial Officer, Secretary and
Treasurer in February 2004. Prior to joining the Company, Mr. Garner, a Certified Public Accountant, served as Chief Financial Officer and Treasurer of Mikohn Gaming Corporation from August 2002 to January 2004 and Director of Finance from July
2001 to August 2002; served as Chief Financial Officer and Treasurer of Paul-Son Gaming Corporation from July 1998 to July 2001 and served as Corporate Controller-Vice President of Finance of Alliance Gaming Corporation/Bally Gaming, Inc. from 1989
through 1998. Prior to these positions, Mr. Garner practiced public accounting with Ernst & Young and Peat Marwick Mitchell.



55



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Section 16(a) Beneficial Ownership Reporting Compliance

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

Based solely on
our review of the copies of the reports we received and written representations from the Companys executive officers, directors and holders of 10% of the common stock, the Company believes that, during fiscal year 2006, there were no forms
filed late with the SEC.

Code of Ethics

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



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

Set forth below is
information concerning compensation for services in all capacities to the Company and its affiliates for the fiscal years ended September 30, 2006, 2005 and 2004 of Paul W. Lowden, the Chief Executive Officer and John M. Garner, the Chief
Financial Officer. There were no other executive officers serving as such at the end of the Companys fiscal year ended September 30, 2006 that earned a total annual salary and bonus in excess of $100,000 during the fiscal year ended
September 30, 2006.

Summary Compensation Table



|                            |  |                     |  |            |         |          |   |         |                                  |  |                          |   |  |   |        |    
|--------------------------- |  | ------------------- |  | ---------- | ------- | -------- | - | ------- | -------------------------------- |  | ------------------------ | - |  | - | ------ | ---
|                            |  | Annual Compensation | 
|Name and Principal Position |  | Fiscal Year         |  | Salary ($) |         | Bonus($) |   |         | Other Annual Compensation ($)(1) |  | All OtherCompensation($) |  
|Paul W. Lowden              |  | 2006                |  | $          | 550,000 |          | $ | 200,000 | (2)                              |  | $                        | 0 |  | $ | 37,203 | (3)
|President, Chairman         |  | 2005                |  |            | 550,000 |          |   | 200,000 | (2)                              |  |                          | 0 |  |   | 64,846 | (3)
|of the Board and CEO        |  | 2004                |  |            | 571,154 |          |   | 200,000 | (2)                              |  |                          | 0 |  |   | 79,755 | (3)
|John M. Garner              |  | 2006                |  | $          | 115,000 |          | $ | 0       | (4)                              |  | $                        | 0 |  | $ | 7,784  | (4)
|Chief Financial             |  | 2005                |  |            | 110,865 |          |   | 1,000   | (4)                              |  |                          | 0 |  |   | 5,709  | (4)
|Officer                     |  | 2004                |  |            | 95,000  |          |   | 0       | (4)                              |  |                          | 0 |  |   | 2,371  | (4)

---



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



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



|(3) | All Other Compensation for Mr. Lowden in fiscal 2006
includes $7,404 of life insurance premiums paid by the Company for the benefit of Mr. Lowden, auto and gas reimbursement of $4,017 for the benefit of Mr. Lowden, payment of $19,800 for household services for the benefit of Mr. Lowden,
medical reimbursement
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56



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| | of $2,682 for the benefit of Mr. Lowden and $3,300 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit
of Mr. Lowden. All Other Compensation for Mr. Lowden in fiscal 2005 includes $7,272 of life insurance premiums paid by the Company for the benefit of Mr. Lowden, auto and gas reimbursement of $5,413 for the benefit of
Mr. Lowden, payment of $17,525 for household services for the benefit of Mr. Lowden, medical reimbursement of $31,661 for the benefit of Mr. Lowden and $2,975 of matching contributions made by the Company to the Retirement Savings
401(k) Plan for the benefit of Mr. Lowden. All Other Compensation for Paul W. Lowden in fiscal 2004 includes $7,404 of life insurance premiums paid by the Company for the benefit of Mr. Lowden, auto and gas reimbursement of
$4,941 for the benefit of Mr. Lowden, payment of $31,356 for household services for the benefit of Mr. Lowden, medical reimbursement of $32,804 for the benefit of Mr. Lowden and $3,250 of matching contributions made by the Company to
the Retirement Savings 401(k) Plan for the benefit of Mr. Lowden.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | All Other Compensation for Mr. Garner in fiscal 2006 includes auto and gas reimbursement of $6,036 for the benefit of Mr. Garner, $23 of life
insurance premiums paid by the Company for the benefit of Mr. Garner and $1,725 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Garner. All Other Compensation for
Mr. Garner in fiscal 2005 includes auto and gas reimbursement of $4,880 for the benefit of Mr. Garner, and $829 of matching contributions made by the Company to the Retirement Savings 401(k) Plan for the benefit of Mr. Garner.
All Other Compensation for John Garner in fiscal 2004 includes auto and gas reimbursement of $2,371 for the benefit of Mr. Garner.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Compensation Arrangements with Mr. Lowden

The Compensation Committee approved Mr. Lowdens
compensation package for fiscal year 2006, which provided for an annual base salary of $550,000. Additionally, in recognition of Mr. Lowdens efforts, the Compensation Committee approved a bonus in the amount of $200,000 payable in
bi-weekly installments throughout fiscal year 2006.

Compensation of Directors

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

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

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



57



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Compensation Plans

Stock Option Plan

The Companys Stock Option Plan provided for the grant of options up
to an aggregate of 1,239,070 shares of its common stock to key employees as determined by the Compensation Committee. The Stock Option Plan provided for both incentive stock options and non-qualified stock options. The Company ceased granting
options under the Stock Option Plan as of September 30, 2003 as the plan had expired in 2002. However, the shareholders, in July 2005, approved amending the plan whereby the plan was extended until 2012. There were approximately 450,000 shares
issued evenly to three individuals in April 2005, one of which is the CEO of the Company, Paul W. Lowden. However, in May 2005, Mr. Lowden informed the Compensation Committee of the Board of Directors that he forfeited his 150,000 stock
options. David Lowden and Christopher Lowden, a brother and son of Paul W. Lowden, respectively, each exercised approximately 218,000 stock options in August 2006. As of September 30, 2006, there were approximately 380,000 options outstanding
under the Stock Option Plan and approximately 300,000 options which are available for issuance under the Stock Option Plan.

1998 Subsidiary Stock
Option Plans

The Company and certain of its subsidiaries, SFHI, Inc., Sahara Las Vegas Corp., and Pioneer Hotel Inc., have adopted
Subsidiary Plans. The Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such Subsidiarys common stock to employees, non-employee directors,
consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries, the Company and any subsidiaries of the Company or Subsidiaries to attract, retain and motivate their employees,
non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. Certain of the agreements under which the Companys long-term debt is issued provide that if the
Company ceases to own, directly or indirectly, 100% of the outstanding capital stock of specified Subsidiaries, an event of default will occur or an offer to repurchase the debt must be made. As a result, the Subsidiary Plans provide that options
granted under the Subsidiary Plans may not be exercised if the exercise would result in a default, or require an offer to repurchase the outstanding debt, under any agreement with respect to long-term debt of the Company or any of its Subsidiaries.
As of September 30, 2006, no options had been granted under any Subsidiary Plans.

Savings Plan

The Company has adopted a savings plan qualified under Section 401(k) of the Code (the Savings Plan). The Savings Plan covers
substantially all employees, including the Companys executive officers. Employee contributions to the Savings Plan are discretionary. The Savings Plan allows eligible employees to contribute, on a pre-tax basis, up to 6% of their gross salary
to the plan; the Company matches 25% of such employee contributions made. Employees may also contribute, on a pre-tax basis, up to an additional 9% of their gross salary, and, on a post-tax basis, up to an additional 10% of their salary. Such
contributions are not matched by the Company. The matching expense in fiscal 2006 was approximately $55,000 of which approximately $3,000 and $2,000 were contributed by the Company to the account of Mr. Lowden and all other executive officers
as a group, respectively, as matches for employee contributions made.

Compensation Committee Interlocks and Insider Participation

The members of the compensation committee, John W. Delaney and William J. Raggio, are non-employee directors. Mr. Delaney has
never been an officer of the Company or of any of its subsidiaries. Mr. Delaney is the president of J & J Mortgage, a mortgage banking company of which Paul W. Lowden is a director and sole stockholder. During fiscal 2001 through fiscal
2003, the Company purchased from J & J Mortgage an aggregate of $700,000 of commercial and residential loans originally funded by J & J Mortgage to unaffiliated third parties. See Item 13, Certain Relationships and Related
Transactions. William J. Raggio, who from 1982 to 1999 served as



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Vice-President, Secretary and General Counsel of the Company and its predecessors, is a shareholder and a member of the law firm of Jones Vargas. During
fiscal years 2006 and 2005, the Company retained Jones Vargas to advise the Company regarding various legal matters, and the Company continues to engage Jones Vargas for legal representation.



|Item 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|------- | --------------------------------------------------------------

The following sets forth information regarding beneficial ownership of the common stock and the exchangeable redeemable preferred stock of the Company, as of December 20, 2006, by (i) each person known to be
the beneficial owner of more than 5% of the outstanding common stock or preferred stock; (ii) each director of the Company; and (iii) all directors and officers of the Company as a group.



|                                                  |  |                        |        |  |         |   |  |                           |     |  |         |  
|------------------------------------------------- |  | ---------------------- | ------ |  | ------- | - |  | ------------------------- | --- |  | ------- | -
|Named Beneficial Owner                            |  | Shares of Common Stock |        |  | Percent |   |  | Shares of Preferred Stock |     |  | Percent |  
|Paul W. Lowden(1)                                 |  | 4,980,144              | (2)(3) |  | 70.8    | % |  | 810,000                   | (3) |  | 18.4    | %
|Suzanne Lowden                                    |  | 4,792                  | (4)(5) |  | *       |   |  | 2,524                     | (5) |  | *       |  
|John W. Delaney                                   |  | 13,750                 | (6)    |  | *       |   |  | 0                         |     |  | 0       |  
|William J. Raggio                                 |  | 17,972                 | (6)    |  | *       |   |  | 5,472                     |     |  | *       |  
|Howard Foster                                     |  | 5,300                  |        |  | *       |   |  | 84,126                    | (7) |  | 1.9     | %
|Richard H. Taggart                                |  | 200                    |        |  | 0       | % |  | 0                         |     |  | *       |  
|All Directors and Officers as a group (7 persons) |  | 5,022,158              |        |  | 71.5    | % |  | 902,122                   |     |  | 20.5    | %

---

|* | Less than 1.0%
|- | --------------



|(1) | The address for Paul W. Lowden is c/o Archon Corporation, 4336 Losee Road, Suite 5, North Las Vegas, Nevada 89030. The shares owned by each person, or by the group,
and the shares included in the total number of shares outstanding have been adjusted, and the percentage owned (where such percentage exceeds 1%) has been computed, in accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes 1,732,470 shares held by LICO, which is wholly owned by Mr. Lowden and 359,510
shares that may be acquired upon the exercise of outstanding stock options.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|(6) | Includes 12,500 shares that may be acquired upon the exercise of outstanding stock options.
|--- | -------------------------------------------------------------------------------------------



|(7) | Includes 69,426 shares owned by clients of Mr. Foster for which Mr. Foster has investment power but no pecuniary interest.
|--- | --------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|Item 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
|-------- | ----------------------------------------------

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

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

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, 2006, the Company had expended
approximately $400,000 for commercial development of the technology.

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

During an approximate two-year period ended June 30,
2006, the Company had expended approximately $0.8 million in legal fees associated with Dukes litigation against a contractor. Dukes had entered into an agreement to reimburse the Company for legal fees and other amounts owed the Company
depending on amounts recovered from the litigation judgment in excess of $3 million. Through September 30, 2006, the Company received approximately $1.0 million, of which $0.8 million has been credited against legal expense and the balance has
been included in operating income in the fiscal 2006 consolidated statement of operations. The Company may recover additional amounts of approximately $60,000 monthly.

During fiscal 2001 through fiscal 2003, the Company purchased an aggregate of $700,000 of commercial and residential loans originally funded by J & J Mortgage to unaffiliated third parties. The loans were
purchased by the Company for the principal amount, plus accrued interest, if any. J & J Mortgage is owned by LICO, which in turn is owned by Paul W. Lowden. John W. Delaney is the president of J & J Mortgage. At September 30, 2006, the
Company was owed approximately $50,000 from J and J Mortgage.

William J. Raggio, a director of the Company, is a shareholder and member of
the law firm of Jones Vargas. During fiscal year 2006 and 2005, the Company retained Jones Vargas to advise the Company regarding various legal matters, and the Company continues to engage Jones Vargas for legal representation.

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



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|Item 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The
following fees were billed by Ernst & Young, LLP for services provided to the Company for the fiscal years ended September 30, 2006 and 2005:



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2006 |         | 2005
|Audit Fees:        |  | $    | 184,156 |      | $ | 158,272
|                   |  |      |         |      |   |        
|Audit Related Fees |  | $    | 26,094  |      | $ | 21,625 
|                   |  |      |         |      |   |        
|Tax Fees           |  | $    | 0       |      | $ | 0      
|                   |  |      |         |      |   |        

Audit fees are the aggregate fees billed for professional services rendered in connection with the
engagement to audit the Companys annual financial statements for the fiscal years ended September 30, 2006 and 2005 including the reviews of the financial statements included in the Companys Form 10-Qs for those fiscal years.

Audit related fees billed in fiscal 2006 and 2005 are for professional services rendered in connection with the audit of the
Companys 401(k) retirement plan for the years ended December 31, 2005 and December 2004, respectively.

In 2006 and 2005, no
fees were paid to Ernst & Young, LLP and Deloitte & Touche LLP pursuant to the de minimus exception to the pre-approval policy permitted under the Securities and Exchange Act of 1934, as amended.

The Audit Committee Guidelines for Pre-Approval of Independent Auditor Services is attached to this 10-K as Exhibit 14.1. During the fiscal year
ended September 30, 2006, all services provided by the external auditor were pre-approved by the Companys Audit Committee.



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PART IV



|Item 15. | EXHIBITS AND REPORTS ON FORM 8-K
|-------- | --------------------------------



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

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



|(b) | Reports on Form 8-K filed during the fourth fiscal quarter of 2006.
|--- | -------------------------------------------------------------------



| | First Amendment to the Option Agreement was filed on September 19, 2006, between Sahara Las Vegas Corp. and LVTI, LLC agreeing to extend the date on which the second deposit is due
until December 31, 2006.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

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



|              |  |                                                                                                                                                                                                                                                                   
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                                                                                                                            
|3.1           |  | Articles of Incorporation and Bylaws of the Company (Previously filed with the Securities and Exchange Commission as an exhibit to the Companys S-4 (No. 33-67864) Registration Statement on
Form 10-K dated June 15, 1982 and incorporated herein by reference.)
|              | 
|3.2           |  | Certificate of Designation for Exchangeable Redeemable Preferred Stock. (Previously filed with the Securities and Exchange Commission as an exhibit to the Companys Registration Statement
on Form S-4 (No. 33-67864) and incorporated herein by reference.)     
|              | 
|3.3           |  | Amended and Restated By-laws of Santa Fe Gaming Corporation. (12)                                                                                                                                                                                                 
|              | 
|10.1          |  | Notes secured by liens on office building in Las Vegas, Nevada in the original principal amounts of $301,598.05, $23,337.96 and $649,063.99 bearing interest at 10%, 11% and 131/2% per annum, respectively. (1)                                                  
|              | 
|10.2          |  | Key Employee Stock Option Plan. (2)                                                                                                                                                                                                                               
|              | 
|10.3          |  | Lease Modification Letter dated August 24, 1995 by and between Wet N Wild Nevada, Inc. and Sahara Corporation. (3)                                                                                                                                               
|              | 
|10.4          |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998. (5)                                                                                                                                              
|              | 
|10.5          |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI. (6)                                                                                                                                                             
|              | 
|10.6          |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (6)                                                                                                                                                   
|              | 
|10.7          |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC. (6)                                                                                                                                
|              | 
|10.8          |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden. (7)                                                                                                                       
|              | 
|10.9          |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000. (9)                                                                                                                                              



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|              |  |                                                                                                                                                                                                                                                                    
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                                                                                                                             
|10.10         |  | Exchange Agreement among Pioneer LLC, as transferor; Pioneer Hotel Inc., as tenant; HAHF Pioneer LLC as transferee and Heller Affordable House of Florida, Inc., dated December 29, 2000.
(9)                                                                      
|              | 
|10.11         |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001. (10)                                                                                                                 
|              | 
|10.12         |  | Promissory Note dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc. (10)                                                                                         
|              | 
|10.13         |  | Deed of Trust and Security Agreement dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.
(10)                                                                    
|              | 
|10.14         |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999. (10)                                                                                                                               
|              | 
|10.15         |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC. (10)                                                                                                                                                 
|              | 
|10.16         |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc. (10)                                                                                                                                                                
|              | 
|10.17         |  | First Amendment dated December 26, 2000 to Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc. (10)                                                                                                                     
|              | 
|10.18         |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005. (10)                                                                                                                                                                         
|              | 
|10.19         |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020. (10)                                                                                                                                                                         
|              | 
|10.20         |  | Mortgage, Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing financing Statement dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC.
and First Security Bank, National Association as Indenture Trustee. (10)
|              | 
|10.21         |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank. (10)                                                                                                                                                       
|              | 
|10.22         |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee. (10)                                                                                                             
|              | 
|10.23         |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden. (11)                                                                                                                                                   
|              | 
|10.24         |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Dukes-Sparks, LLC. (13)                                                                                                                                                          
|              | 
|10.25         |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino. (13)                                                                                                                                                                                     
|              | 
|10.26         |  | Option Agreement dated October 8, 2002 between Endeavors North LLC and Archon Corporation. (13)                                                                                                                                                                    
|              | 
|10.27         |  | Loan Agreement dated December 15, 2003 between Colonial Bank, Archon Corporation and Sahara Las Vegas Corp. (14)                                                                                                                                                   
|              | 
|10.28         |  | Security Agreement and Second Deed of Trust Dated October 8, 2002 (15)                                                                                                                                                                                             
|              | 
|10.29         |  | Demand Note dated February 6, 2003 in favor of Archon Corporation. (16)                                                                                                                                                                                            
|              | 
|14.1          |  | Pre-approval Policy of Audit Committee*                                                                                                                                                                                                                            
|              | 
|21            |  | Subsidiaries of Archon Corporation (17)                                                                                                                                                                                                                            
|              | 
|23.1          |  | Consent of Ernst & Young LLP*                                                                                                                                                                                                                                      



63



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##### Table of Contents

|              |  |                                                                                                                                                                                                                          
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description of Exhibit                                                                                                                                                                                                   
|23.2          |  | Consent of Deloitte & Touche LLP*                                                                                                                                                                                        
|              | 
|31.1          |  | Certification of Paul W. Lowden, Principal Executive Officer, pursuant to Rule 13a- 15(e) or 15d-15(e) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|              | 
|31.2          |  | Certification of John M. Garner, Principal Financial Officer, pursuant to Rule 13a- 15(e) or 15d-15(e) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
|              | 
|32.0          |  | 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 EXHIBITS



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



|(18) | Previously filed with the Securities and Exchange Commission as an exhibit to Archon Corporations Proxy Statement on Schedule 14A dated May 7, 2004 and incorporated
herein by reference.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



64



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



| |  |                  |  |                    |  |     |  |                          
| |  | ---------------- |  | ------------------ |  | --- |  | -------------------------
| |  |                  |  | ARCHON CORPORATION
| |  |                  |  |                   
| |  | January 12, 2007 |  |                    |  | By: |  | /s/ Paul W. Lowden       
| |  | (Date Signed)    |  |                    |  |     |  | Paul W. Lowden, President

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



|                                          |  |                                                                                               |  |                 
|----------------------------------------- |  | --------------------------------------------------------------------------------------------- |  | ----------------
|Signature                                 |  | Title                                                                                         |  | Date            
|                                          |  |                                                                                              
|/s/ Paul W. Lowden Paul W. Lowden         |  | Chairman of the Board and President (Principal Executive Officer)                             |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ John Delaney John Delaney             |  | Director                                                                                      |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ Suzanne Lowden Suzanne Lowden         |  | Director                                                                                      |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ William J. Raggio William J. Raggio   |  | Director                                                                                      |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ Howard E. Foster Howard E. Foster     |  | Special Director                                                                              |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ Richard H. Taggart Richard H. Taggart |  | Special Director                                                                              |  | January 12, 2007
|                                          |  |                                                                                              
|/s/ John M. Garner John M. Garner         |  | Chief Financial Officer, Secretary and Treasurer (Principal Financial and Accounting Officer) |  | January 12, 2007



65