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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                   |                                                                                         
|-------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended September 30, 2002
|Or                                          
|o                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to          

Commission file number 1-9481

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ARCHON CORPORATION(Exact name of registrant as specified in its charter)

|NevadaState or other jurisdiction of
incorporation or organization | 88-0304348(I.R.S. Employer
Identification No.)
|------------------------------------------------------------------ | ----------------------------------------------

|3993 Howard Hughes Parkway, Suite 630, Las Vegas, Nevada(Address of principal executive offices) | 89109(Zip Code)
|------------------------------------------------------------------------------------------------ | ---------------

|Registrant's telephone number, including area code(702) 732-9120
|----------------------------------------------------------------
|Securities registered pursuant to Section 12(b) of the Act:None 
|Securities registered pursuant to section 12(g) of the Act:     
|Common Stock, par value $.01 per share                          
|(Title of class)                                                
|Exchangeable Redeemable Preferred Stock                         
|(Title of class)                                                

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Indicate
by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 of 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 ý    No o

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. ý

The
number of shares of common stock outstanding as of December 16, 2002 was 6,221,431. The market value of the common stock held by non-affiliates of the registrant as of
December 16, 2002 was approximately 2,658,466. The market value was computed by reference to the average bid and asked price of the common stock on December 16, 2002.

DOCUMENTS
INCORPORATED BY REFERENCE

Part
III hereof incorporates by reference portions of the proxy statement for the 2003 Annual Meeting of Stockholders (to be filed with the Securities and Exchange Commission within 120 days after
September 30, 2002).

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ARCHON CORPORATION AND SUBSIDIARIES  ANNUAL REPORT ON FORM 10-K FOR THE FISCAL  YEAR ENDED SEPTEMBER 30, 2002        TABLE OF CONTENTS

|         |          |    |                                                                                                 |                                  |    | Page
|-------- | -------- | -- | ----------------------------------------------------------------------------------------------- | -------------------------------- | -- | ----
|PART I   |          | 1 
|         | Item 1.  |    | Business                                                                                        |                                  | 1 
|         |          |    |                                                                                                 | General                          |    | 1   
|         |          |    |                                                                                                 | Hotel and Casino Operations      |    | 1   
|         |          |    |                                                                                                 | Investment Properties            |    | 3   
|         |          |    |                                                                                                 | Land Held for Development        |    | 3   
|         |          |    |                                                                                                 | Nevada Regulations and Licensing |    | 3   
|         | Item 2.  |    | Properties                                                                                      |                                  | 6 
|         | Item 3.  |    | Legal Proceedings                                                                               |                                  | 7 
|         | Item 4.  |    | Submission of Matters to a Vote of Security Holders                                             |                                  | 8 
|PART II  |          | 8 
|         | Item 5.  |    | Market for the Registrant's Common Stock and Related Security Holders Matters                   |                                  | 8 
|         | Item 6.  |    | Selected Financial Data                                                                         |                                  | 9 
|         | Item 7.  |    | Management's Discussion and Analysis of Financial Condition and Results of Operations           |                                  | 10
|         | Item 7A. |    | Market Risk Disclosure                                                                          |                                  | 20
|         | Item 8.  |    | Financial Statements and Supplementary Data                                                     |                                  | 21
|         | Item 9.  |    | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            |                                  | 50
|PART III |          | 50
|         | Item 10. |    | Directors and Executive Officers of the Registrant Executive Compensation and Other Information |                                  | 50
|         | Item 11. |    | Executive Compensation                                                                          |                                  | 50
|         | Item 12. |    | Security Ownership of Certain Beneficial Owners and Management                                  |                                  | 50
|         | Item 13. |    | Certain Relationships and Related Transactions                                                  |                                  | 50
|         | Item 14. |    | Controls and Procedures                                                                         |                                  | 50
|PART IV  |          | 50
|         | Item 15. |    | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                 |                                  | 50

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PART I

Item 1.Business

General

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

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

On
December 29, 2000, the Company entered into a series of agreements to exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986, as amended (the "Code"),
the real and personal property, excluding gaming equipment, and intangible assets used in the operations of the Pioneer to a third party and agreed to lease and license the assets sold for up to
20 years, during which period the Company will operate the Pioneer (collectively, the "Pioneer Transactions").

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

In
November 1999, Sahara Las Vegas Corporation, an indirect wholly-owned subsidiary of the Company ("SLVC"), sold real property located in Henderson, Nevada for
$37.2 million. In connection with the sale, the Company, SLVC, SFHI, Paul W. Lowden and members of Mr. Lowden's family entered into non-compete agreements, in which they
agreed not to compete through November 15, 2014 within a five-mile radius of two of the buyer's casinos located in the Henderson area.

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

Hotel and Casino Operations

The Pioneer

The Pioneer, built in 1982, features a classical western architecture style, and is located in Laughlin, Nevada, an unincorporated town on the Colorado River
bordering Arizona. The Pioneer is located on approximately 12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated near the center of Laughlin's Casino Drive. The
property is leased from a third party under a lease that expires in December 2020, subject to two five-year options to extend the term. The third party in turn leases approximately
61/2 acres of the 12 acres under a 99-year ground lease which, by its terms, is scheduled to terminate in December 2078. The leased land lies between and separates
the remaining two parcels of land that are held in fee simple. The Pioneer is comprised of four buildings.

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One of the three motel buildings together with a portion of both the Pioneer's casino building and a second motel building are located on land subject to the Pioneer Ground Lease. The casino is
located in the main building, totaling approximately 50,000 square feet of which approximately 21,500 square feet house the casino. The first floor includes the casino, two bars, snack bar and gift
shop, as well as a twenty-four hour restaurant, kitchen, smoke shop, special events area, restrooms and storage areas. A partial second floor houses a gourmet restaurant, administrative
offices and banquet rooms. The three motel buildings were built in 1984 and comprise approximately 66,000, 54,000 and 30,000 square feet,
respectively. A total of 417 motel rooms are housed in the three buildings and improvements include a swimming pool and spa.

Revenues

The primary source of revenues to the Company's hotel-casino operations is gaming, which represented 60.3%, 68.9% and 79.0% in 2002, 2001 and 2000, respectively,
of total revenues. The Pioneer contributed 100% to total gaming revenues in fiscal 2002 and 2001 and approximately 35.6% in fiscal 2000. As of September 30, 2002 the Pioneer had 819 slot
machines, nine blackjack tables ("21"), two craps tables, one roulette wheel and three other gaming tables. In addition, the Pioneer offers keno.

The
Pioneer targets primarily mature, out-of-town customers residing in Central Arizona and Southern California, retirees who reside in the Northeast and Midwest
United States and Canada and travel to the Southwest United States during the winter months, and local residents who reside in Laughlin, Nevada, and in Bullhead City, Kingman and Lake Havasu, Arizona.
The occupancy rate at the Pioneer was 75.0%, 74.0% and 74.3%, respectively, in fiscal years 2002, 2001 and 2000, respectively.

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

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

Management and Personnel

At September 30, 2002, the Company employed 12 executive and administrative personnel and the Pioneer employed 625 persons.

Competition

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

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Investment Properties

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

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

See
also Item 2., "Properties."

Land Held for Development

The Company owns, through SLVC, an approximately 27-acre parcel of real property on the Strip. In connection with the acquisition of the property, the
Company assumed an operating lease under which a water theme park operates. The lease may be terminated at any time by the Company. A loan owed
by the tenant to the former owner would have been payable by SLVC if it terminated the lease prior to December 31, 2004; however, that loan was paid in full by the tenant in July 2002.

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

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

See
also Item 2., "Properties."

Nevada Regulations and Licensing

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

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

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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, controlling persons or others who exercise significant
influence upon the management or affairs of a gaming licensee may be deemed to have such a relationship or involvement.

Beneficial
owners of more than 10% of the voting securities of a corporation or partner interests of a partnership registered with the Nevada Gaming Authorities that is "publicly traded"
(a "Registered Entity") must be found suitable by the Nevada Gaming Authorities, and any person who acquires more than 5% of the voting securities or partner interests, as the case may be, of a
Registered Entity must report the acquisition to the Nevada Gaming Authorities in a filing similar to the beneficial ownership filings required by the Federal securities laws. Under certain
circumstances an institutional investor, as such term is defined in the Gaming Control Act and the regulations of the Commission

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

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

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

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

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investment merits of the securities offered. Any public offering requires the approval of the Commission.

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

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

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

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

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

Item 2.Properties

The Pioneer is located on approximately 12 acres of land, with Colorado River frontage of approximately 770 feet, and is situated near the center of Laughlin's
Casino Drive. The Company leases the Pioneer under a lease that expires in December 2020, subject to two five-year options to extend the term. Rental payments are $285,000 per month
through December 2003, and will increase to

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$339,000 per month in 2004, and thereafter at 3% per year through December 2007. See Item 1., "BusinessHotel and Casino Operations," for more detailed information regarding the
Pioneer.

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

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

The
Company owns approximately 27 acres of real property located on the Strip. The property is subject to a ground lease, which the Company may terminate at any time. A loan owed by the
tenant to the former owner would have been payable by SLVC if it terminated the lease prior to December 31, 2004; however, that loan was paid in full by the tenant in July 2002.

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

Item 3.Legal Proceedings

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

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

In
response to the complaints, all of the defendants, including the Company, filed motions attacking the pleadings for failure to state a claim, seeking to dismiss the complaints for
lack of personal jurisdiction and venue. As a result of those motions, the Court has required the Plaintiffs in the four consolidated cases to file a single consolidated amended complaint.
Subsequent to Plaintiffs' filing of their consolidated amended complaint, the defendants refiled numerous motions attacking the amended complaint upon many of the bases as the prior motions. The Court
heard the arguments on those motions and ultimately denied the motions. Plaintiffs then filed their motion to certify a class. Defendants vigorously opposed the motion. On June 26, 2002, the
court denied the motion to certify

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the class. Plaintiffs then sought discretionary review by the Ninth Circuit of the order denying class certification. On August 15, 2002, the Ninth Circuit granted review. The Plaintiffs have
not yet filed their briefs, and the Ninth Circuit has been conducting a mediation to attempt to resolve the case.

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

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

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

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

There were no matters submitted to a vote of the Company's security holders during the fourth quarter of fiscal 2002. Subsequent to the end of fiscal 2002, Paul
W. Lowden, President and Chief Executive Officer of the Company, acting in his capacity as the holder of more than two-thirds of the outstanding common stock, voted to remove Thomas K.
Land as a director of the Company. The removal was effective as of November 27, 2002.

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".

8

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The
closing sales price of the Common Stock on December 16, 2002 was $2.15 per share. The tables below set forth the high and low sales prices by quarter for the fiscal years
ended September 30, 2002 and 2001 for the Common Stock, as reported by the OTCBB.

Fiscal 2002

First
Quarter

Second
Quarter

Third
Quarter

Fourth
QuarterHigh

$
4.00

$
3.55

$
3.55

$
3.35Low


3.10


3.10


3.10


2.50Fiscal 2001High


5.63


5.06


5.25


4.70Low


3.75


4.38


4.38


3.10


The
Company has never paid cash dividends on its Common Stock, nor does it anticipate paying such dividends in the foreseeable future. There were approximately 735 common stockholders of
record as of December 16, 2002.

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, 2002, 2001, 2000, 1999 and 1998:

|                                     |                                          | 2002 |         | 2001   |   | 2000    |        | 1999 |         | 1998   |  
|------------------------------------ | ---------------------------------------- | ---- | ------- | ------ | - | ------- | ------ | ---- | ------- | ------ | -
|
|Net operating revenues(1)            |                                          | $    | 48,765  |        | $ | 48,003  |        | $    | 128,595 |        | $
|Net income (loss)                    |                                          |      |         |        |   |         |        |      |         |        |  
|                                     | before extraordinary items, net of taxes |      |         | (7,707 | ) |         | 89,182 |      |         | 15,124 |  
|                                     | per common share                         |      |         | (1.25  | ) |         | 14.43  |      |         | 2.44   |  
|Net income (loss)(2)                 |                                          |      | (9,262  | )      |   | 87,231  |        |      | 12,802  |        |  
|                                     | per common share                         |      |         | (1.50  | ) |         | 14.11  |      |         | 2.07   |  
|Total assets                         |                                          |      | 242,086 |        |   | 249,485 |        |      | 145,596 |        |  
|Long-term debt, less current portion |                                          |      | 153,029 |        |   | 157,667 |        |      | 350     |        |  
|Redeemable preferred stock(3)        |                                          |      | 18,147  |        |   | 16,747  |        |      | 26,440  |        |  

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

Critical Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses Archon's consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to customer incentives, bad debts, inventories,
investments, 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 policy, among others, affects its more significant judgments and estimates used in the preparation of its consolidated financial
statements:

Results of OperationsFiscal 2002 Compared to Fiscal 2001

Consolidated

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

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

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

Operating Income.Consolidated operating income for the year ended September 30, 2002 was $6.3 million, a
$2.3 million, or 58.2%, increase from $4.0 million for the same period in fiscal 2001. Operating income decreased by $1.2 million at the Pioneer. Operating income from the
investment properties increased $3.2 million, related to the fact that the properties were owned for the entire fiscal

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year. Operating loss of the Company other than the Pioneer and the investment properties improved by $300,000, due to the decrease in operating expenses.

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

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

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

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

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

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

Pioneer

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

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

Hotel
revenues increased $100,000, or 3.9% to $2.7 million in fiscal 2002 from $2.6 million in fiscal 2001. Occupancy rate increased to 75.0% from 74.0% and the average
daily room rate increased by 0.3%. Food and beverage revenues decreased $700,000, or 7.7%, to $7.8 million in fiscal 2002 from

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$8.5 million in fiscal 2001 primarily due to a decline in the number of casino patrons. Other revenues decreased $1.4 million, or 37.2%, to $2.3 million in fiscal 2002 from
$3.7 million in fiscal 2001 due to decreased sales in retail outlets as a result of competition from retail establishments in other casinos.

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

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

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

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

Results of OperationsFiscal 2001 Compared to Fiscal 2000

Consolidated

Net Operating Revenues.Consolidated net operating revenues for the year ended September 30, 2001 were
$48.0 million, an $80.6 million, or 62.7%, decrease from $128.6 million for the same period in fiscal 2000. The year ended September 30, 2000 included net revenues of
approximately $83.4 million at the Santa Fe Hotel and Casino (the "Santa Fe"), which was sold on October 2, 2000. The year ended September 30, 2001 included revenues of
$40.0 million at the Pioneer and rental income of $7.2 million from the investment properties, which were purchased in the fiscal year ended September 30, 2001. Revenues decreased
by $4.6 million in fiscal 2001 at the Pioneer.

In
fiscal 2001, 83.4% of the Company's net revenues were derived from the Pioneer and 15.0% from the investment properties. The Company's business strategy at the Pioneer emphasizes slot
and video poker machine play. For fiscal 2001, 82.7% of the Pioneer's net revenues were derived from casino operations. Approximately 87.6% of gaming revenues at the Pioneer was derived from slot and
video poker machines, while 10.9% of such revenues was from table games and 1.4% was from other gaming activities such as keno.

12

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Operating Expenses.Total operating expenses decreased $73.2 million, or 62.4%, to $44.0 million for the year
ended September 30, 2001 from $117.2 million in the year ended September 30, 2000. Total operating expenses as a percentage of revenue increased to 91.7% in the year ended
September 30, 2001 from 91.2% in the year ended September 30, 2000. The year ended September 30, 2000 included operating expenses of approximately $72.4 million at the
Santa Fe. Operating expenses at the Pioneer, excluding reorganization expenses of $3.4 million in fiscal 2000, decreased by $1.1 million, or 2.8%. Operating expenses of Sahara Las Vegas
Corp. ("SLVC") decreased by $700,000, attributable to loan issue costs being fully amortized by December 1999. The investment properties had $1.7 million in operating expenses in fiscal
2001.

Operating Income.Consolidated operating income for the year ended September 30, 2001 was $4.0 million, a
$7.3 million, or 65.0%, decrease from $11.3 million for the same period in fiscal 2000. The year ended September 30, 2000 included operating income of approximately
$11.0 million at the Santa Fe. Operating income decreased by $3.5 million at the Pioneer, excluding reorganization expenses in
fiscal 2000, and increased $500,000 at SLVC. Operating income from the investment properties was $5.5 million in fiscal 2001.

Interest Expense.Consolidated interest expense for the year ended September 30, 2001 was $11.1 million, an
$11.0 million decrease compared to $22.2 million in fiscal 2000, due to the repayment of substantially all of the Company's then outstanding debt in October 2000, offset by
$3.3 million related to obligations under lease at the Pioneer and interest expense from the investment properties of $7.3 million.

Interest Income.Consolidated interest income for the 2001 fiscal year was $2.0 million compared to $500,000 in the
2000 fiscal year. Due to the sale of the Santa Fe, the Company had increased cash and cash equivalents and investments which contributed to the increase in interest income.

Gain on Sale of Assets.The Company recorded a $137.2 million gain on the sale of substantially all of the assets of
SFHI, Inc., formerly known as Santa Fe Hotel, Inc. ("SFHI") in the quarter ended December 31, 2000. The Company recorded a $12.1 million gain on the sale of real property
in Henderson, Nevada and related agreements in the quarter ended December 31, 1999.

Litigation Settlement, net.The Company recorded an approximate $3.4 million net gain from litigation settlements in
fiscal 2001.

Other Expenses.During fiscal year 2000, the Company reported a charge to earnings of approximately $350,000 associated with
costs and expenses of a proposed offering of debt securities which was not consummated.

Income Before Income Tax.Consolidated income before income tax for the year ended September 30, 2001 was
$135.5 million, a $131.2 million improvement compared to $4.3 million in the prior year, principally due to the gain on sale of the Santa Fe assets. Income before income tax at
SLVC was $100,000, compared to $11.1 million in 2000, which included the $12.1 million gain on the sale of assets. Excluding reorganization costs in fiscal 2000, loss increased at the
Pioneer by $1.4 million to $2.8 million. Loss from the investment properties was $1.8 million.

Federal Income Tax.The Company recorded a federal income tax provision of $46.3 million in fiscal 2001. The Company
recorded a goodwill reserve in fiscal 2001. The valuation allowance was reversed with respect to the fiscal 2000 period due to the sale of substantially all of the assets of SFHI in
October 2000 resulting in a federal income tax benefit of $10.9 million.

Preferred Share Dividends.Dividends of approximately $2.0 million and $2.3 million for fiscal 2001 and 2000,
respectively, accrued on the preferred stock. The accrued dividend rate increases 50 basis points at each semi-annual dividend payment date, subject to a maximum of 16.0%. Dividends for
the

13

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twelve months ended September 30, 2001 are reported net of shares of preferred stock acquired and retired by the Company.

Net Income.Consolidated net income applicable to common shares was $87.2 million, or $14.11 per common share, in the
2001 period compared to $12.8 million, or $2.07 per common share, in the prior year period.

Pioneer

Net Operating Revenues.Revenues at the Pioneer decreased $4.6 million, or 10.3%, to $40.0 million in fiscal
2001 from $44.6 million in fiscal 2000. The decline in revenues at the Pioneer is consistent with a continuing general decline in the Laughlin market, which management believes is due primarily
to expansion of Native American gaming facilities in Southern California.

Casino
revenues decreased $3.1 million, or 8.6%, to $33.1 million in fiscal 2001 from $36.2 million in fiscal 2000. Slot and video poker revenues decreased
$2.6 million, or 8.1%, to $29.0 million in fiscal 2001 from $31.6 million in fiscal 2000. Other gaming revenues, including table games, decreased $500,000, or 11.8%, due primarily
to decreased table game win of $600,000, or 13.7%. Casino promotional allowances increased $100,000, or 0.7%, to $7.8 million in fiscal 2001 from $7.7 million in fiscal 2000.

Hotel
revenues were relatively unchanged at $2.6 million in fiscal 2001 and 2000. Occupancy rate decreased to 74.0% from 74.3% and the average daily room rate decreased by 0.3%.
Food and beverage revenues decreased $100,000, or 1.0%, to $8.5 million in fiscal 2001 from $8.6 million in fiscal 2000 primarily due to a decline in the number of casino patrons. Other
revenues decreased $1.3 million, or 25.9%, to $3.7 million in fiscal 2001 from $4.9 million in fiscal 2000 due to decreased sales in retail outlets, caused by increased
competition from retail establishments in other casinos.

Operating Expenses.Excluding reorganization expenses of $3.4 million in fiscal 2000, operating expenses decreased
$1.1 million, or 2.8%, to $38.5 million in fiscal 2001 from $39.6 million in fiscal 2000 and operating expenses as a percentage of revenue increased to 96.3% in fiscal 2001 from
88.9% in fiscal 2000.

Casino
expenses increased $100,000, or 0.8%, to $17.4 million in fiscal 2001 from $17.3 million in fiscal 2000 due to an increase in labor costs. Casino expenses as a
percentage of casino revenues increased to 52.6% in the year ended September 30, 2001 from 47.7% in the year ended September 30, 2000. Hotel expenses were unchanged at $800,000 in the
2001 and 2000 years. Food and beverage expenses decreased $300,000, or 6.1%, to $4.4 million in fiscal 2001, primarily due to decreased costs of sales and decreased supplies expense.
Food and beverage expenses as a percentage of food and beverage revenues decreased to 52.4% in the 2001 period from 55.2% in the 2000 period. Other expenses decreased $1.3 million, or 27.0% to
$3.4 million for fiscal 2001 compared to $4.6 million for fiscal 2000 related to the decrease in retail sales. Other expenses as a percentage of other revenues decreased to 92.4% in the
2001 period from 93.8% in the 2000 period.

Selling,
general and administrative expenses were relatively unchanged at $5.5 million in fiscal 2001 and 2000. Selling, general and administrative expenses as a percentage of
revenues increased to 13.8% in fiscal 2001 from 12.3% in fiscal 2000. Utilities and property expenses increased $700,000, or 17.9%, to $4.9 million in fiscal 2001 compared to
$4.2 million in fiscal 2000 primarily due to rent expense increase of $600,000 associated with the lease of gaming equipment. Utilities and property expenses as a percentage of revenues
increased to 12.3% in fiscal 2001 from 9.4% in fiscal 2000. Depreciation and amortization expenses decreased $400,000 or 17.1% to $2.1 million in fiscal 2001 from $2.5 million in fiscal
2000, due to the sale of gaming equipment. During fiscal 2000, PHI incurred approximately $3.4 million in reorganization expenses related to the restructuring of 131/2% First
Mortgage Notes issued by Pioneer Finance Corp. (the "131/2% Notes").

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Interest Expense.Interest expense decreased $2.1 million, or 32.4%, to $4.4 million in fiscal 2001 from
$6.5 million in fiscal 2000 due to the repayment of the 131/2% Notes during the 2000 period, offset by $3.3 million related to obligations under lease and
$1.0 million of intercompany interest.

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, 2002:

|                        |                    | 2003 |   | 2004   |  | 2005 |        | 2006 and Thereafter |   | Total 
|----------------------- | ------------------ | ---- | - | ------ |  | ---- | ------ | ------------------- | - | ------
|
|Non-recourse debt       |                    |      |   |        |  |      |        |                     |   |       
|                        | Gaithersburg       |      | $ | 1,204  |  | $    | 1,411  |                     | $ | 1,658 
|                        | Sovereign          |      |   | 4,530  |  |      | 5,004  |                     |   | 28,400
|Obligations under lease |                    |      |   |        |  |      |        |                     |   |       
|                        | Pioneer Hotel Inc. |      |   | 3,415  |  |      | 3,902  |                     |   | 4,155 
|Long-term debt          |                    |      |   |        |  |      |        |                     |   |       
|                        | Building           |      |   | 53     |  |      | 61     |                     |   | 70    
|                        | Other              |      |   | 40     |  |      | 34     |                     |   | 3     
|Operating leases        |                    |      |   |        |  |      |        |                     |   |       
|                        | Ground lease       |      |   | 792    |  |      | 792    |                     |   | 792   
|                        | Corporate offices  |      |   | 146    |  |      | 127    |                     |   | 108   
|                        |                    |      |   |        |  |      |        |                     |   |       
|                        | Total              |      | $ | 10,180 |  | $    | 11,331 |                     | $ | 35,186
|                        |                    |      |   |        |  |      |        |                     |   |       

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

Liquidity.As of September 30, 2002, the Company held cash and cash equivalents of $8.6 million compared to
$16.2 million at September 30, 2001. In addition, the Company had $12.2 million in investment in marketable securities at September 30, 2002 compared to $9.8 million
at September 30, 2001. Management believes that the Company will have sufficient available cash and cash resources to meet its cash requirements through the twelve month period ending
September 30, 2003.

Cash Flows from Operating Activities.The Company's cash provided by operations was $1.6 million for the year ended
September 30, 2002 as compared to cash used in operations of $200,000 in the prior year. The primary changes were due to the decrease in Accounts receivable, net of $166,000 in 2002 compared to
a decrease of $2.1 million in 2001, an increase in Accounts payable of $923,000 in 2002 compared to a decrease of $1.4 million in 2001, and an increase in Accrued and other liabilities
of $4.0 million in 2002 compared to an increase of $163,000 in 2001.

Cash Flows from Investing Activities.Cash used in investing activities was $3.9 million during the year ended
September 30, 2002, compared to cash provided by investing activities of $109.7 million during the year ended September 30, 2001. In the current year, the Company invested
$2.1 million, net, in marketable securities and made $4.4 million in capital expenditures. These capital expenditures were

15

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funded in part by the use of cash in the amount of $2.5 million, net of interest income, from the restricted cash accounts. Cash provided by investing activities in the prior year included
proceeds received in October 2000 from the sale of substantially all of the Santa Fe assets for total consideration of $205.0 million. In the prior year, $67.7 million was used in
the acquisition of the investment properties and $9.7 million was invested in marketable securities. In December 2000, pursuant to contractual obligations entered into in connection with
the December 2000 sale/leaseback of the Pioneer (the "Pioneer Transactions"), $15.0 million of cash was restricted in use. Of the restricted funds, $3.3 million
had been used for the purchase of gaming equipment and capital expenditures as of September 30, 2002. See "Pioneer Transactions."

Cash Used in Financing Activities.Cash used in financing activities was $5.3 million in the year ended
September 30, 2002 compared to $100.3 million during fiscal 2001. In the current year, the Company repaid $5.1 million of non-recourse long-term debt. In
the prior year, the Company used approximately $175.2 million of the proceeds from the sale of substantially all of the Santa Fe assets to retire substantially all of the Company's
then-outstanding debt. This use was offset in part by (i) cash proceeds of $32.5 million from the creation of the obligation under lease attributable to the Pioneer
Transactions in December 2000, and (ii) the issuance in March 2001 of $55.4 million of non-recourse first mortgage indebtedness in connection with the
acquisition of an investment property. The Company incurred an aggregate $3.2 million of costs in conjunction with issuing the $55.4 million of non-recourse debt and assuming
$77.3 million principal amount of non-recourse debt in connection with the acquisition of another investment property. In addition, the Company used $5.9 million in
connection with the settlement of litigation with a former director, which included the acquisition by the Company of shares of its common and preferred stock.

The
Company's primary source of cash is from Pioneer's operations and from interest income on available cash and cash equivalents and investments in marketable securities. However, the
ability of PHI to make distributions is restricted, as described below. See "Pioneer Transactions." Rental income from the Company's two investment properties is contractually committed to reducing
the non-recourse indebtedness issued or assumed in conjunction with the acquisition of the investment properties. Under the two leases, the tenants are responsible for substantially all
obligations related to the property. SLVC, an indirect wholly-owned subsidiary of the Company, owns an approximately 27-acre parcel of real property on Las Vegas Boulevard South which is
subject to a lease with a water theme park operator. SLVC generates minimal cash from the lease after payment of property costs. The lease may be terminated at any time by SLVC. A loan owed by the
tenant to the former owner would have been payable by SLVC if it terminated the lease prior to December 31, 2004; however, that loan was paid in full by the tenant in July 2002.

Earnings
before interest expense, taxes, depreciation and amortization ("EBITDA") increased $3.5 million, or 34.4%, to $13.6 million in the year ended September 30,
2002 from $10.1 million in the year ended September 30, 2001. EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flow from
operating, investing and financing activities, which are determined in accordance with generally accepted accounting principles ("GAAP"), and it is included herein to provide additional information
with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. The Company's definition of EBITDA may not be the same as that of
similarly captioned measures used by other companies.

The
Company's primary use of cash, excluding operations at the Pioneer, is for selling, general and administrative expenses of the Company and its subsidiaries, including lease costs
relating to corporate offices and costs to evaluate development opportunities. The agreements relating to the Pioneer Transactions restrict the ability of PHI to make distributions to the Company and,
under certain circumstances, to pay management fees to the Company. Cash from PHI is not currently, and is not expected in the foreseeable future to be, available for distribution to the Company.
Additionally, the Company has been and will be required to make capital contributions to PHI and, in certain

16

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circumstances, cash payments to the restricted cash accounts if the ratio of fixed charges to operating cash flow at the Pioneer is not maintained at 1.00 to 1.00. See "Pioneer Transactions."

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

Pioneer Transactions

Results of operations at the Pioneer for the year ended September 30, 2002 generated EBITDA, as defined, of $2.3 million compared to
$3.7 million of EBITDA in fiscal 2001. The EBITDA margin decreased to 6.4% in fiscal 2002 from 9.1% in fiscal 2001. PHI's principal uses of cash are for payments of obligations under lease,
capital expenditures to maintain the facility and, to the extent permitted to be paid, the management fee payable to the Company. Payments of obligations under lease were $3.4 million and
$2.6 million in the fiscal years 2002 and 2001, respectively. Payments of obligations under lease began in January 2001. Rent expense was $1.3 million in both the 2002 and 2001
fiscal years. Rent expense increased in January 2001 as a result of the lease of gaming equipment and decreased in May 2002 as a result of the repurchase of gaming equipment under lease.
Capital expenditures at the Pioneer were $3.8 million in fiscal 2002, including approximately $1.0 million for a new slot tracking system and $2.1 million used to purchase gaming
equipment under lease, and were $800,000 in fiscal 2001. Capital expenditures in fiscal 2002 have been funded primarily from the restricted cash account. Future capital expenditures are also expected
to be funded from the restricted cash account, to the extent permitted by the agreements relating to the Pioneer Transactions.

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

Archon
and SFHI guaranteed the payments under the lease and license agreements and agreed to certain covenants, including restrictions on paying management fees to Archon, competing in
the Laughlin, Nevada area and paying dividends with respect to the Archon preferred stock. In addition,
Archon agreed to maintain consolidated liquidity (as defined in the agreements relating to the Pioneer Transactions) of not less than $25.0 million. As of September 30, 2002, Archon's
consolidated liquidity, as defined, was $66.8 million. Archon has agreed to forgo all or a portion of the management fees payable by PHI if PHI's ratio of operating cash flow to fixed charges
falls below 1.20 to 1.00. Further, Archon has agreed to contribute capital to PHI and in certain events to deposit cash to restricted cash accounts in the event PHI's ratio of fixed charges to
operating cash flow falls below 1.00 to 1.00 during any rolling four-quarter period, calculated on a quarterly basis.

Specifically,
if the ratio of fixed charges to operating cash flow is less than 1.00 to 1.00 for any four-quarter period ending on or before December 31, 2003, Archon
will be obligated to contribute capital to PHI in the amount of the deficiency and, if the fixed charge coverage ratio is less than 1.00 to 1.00 for three consecutive quarters during that period, to
deposit additional cash to restricted cash

17

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

Pursuant
to the agreements relating to the Pioneer Transactions, Archon has foregone the management fee otherwise payable to it since April 2001. Additionally, PHI's ratio of
fixed charges to operating cash flow for the four quarters ended June 30, 2002 and September 30, 2002 were 0.92 to 1.00 and 0.87 to 1.00, respectively. As a result, Archon made capital
contributions to PHI in the amount of approximately $375,000 and $275,000 with respect to the June and September 2002 quarters, respectively. If PHI's ratio of fixed charges to operating cash
flows is less than 1.00 to 1.00 for the quarter ending December 31, 2002, Archon will be obligated to make deposits to the restricted cash account in addition to making capital contributions to
PHI.

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

The
agreements related to the Pioneer Transactions provide an option for the Company to purchase the assets under the lease and license agreements to PHI between the end of the third and
seventh years, at purchase price amounts ranging between $35.5 million and $38.7 million, which, as of the date of the agreements, approximated estimated fair market value at the
relevant purchase dates, and at the end of the lease term for fair market value.

Preferred Stock

The Company's preferred stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company
satisfied the semi-annual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company has accrued the
semi-annual preferred stock dividends since October 1, 1996. 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% of $2.14 for each share of preferred stock. The dividend continues to increase by an additional 50 basis points on each succeeding
semi-annual dividend payment date up to a

18

---

maximum of 16.0% per annum. In October 2002, the dividend rate increased to 15.0% per annum of $2.14 for each share of preferred stock. The accrued stock dividends have been recorded as an
increase to the preferred stock account. As of September 30, 2002, the aggregate liquidation preference of the preferred stock was $18.1 million, or $3.57 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 to the Company's board of directors. The agreements relating to the Pioneer Transactions restrict the payment of dividends
on the preferred stock.

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. As of
December 16, 2002, the Company has purchased 674,177 shares of preferred stock for $1,003,307. In addition, in April 2001 the Company acquired approximately 3.5 million shares of
preferred stock as part of a litigation settlement agreement.

Recently Issued Accounting Standards

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 146, Accounting for Costs
Associated with Exit or Disposal Activities("SFAS 146"). SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires that a liability for a cost associated
with an exit or disposal activity be recognized when the liability is incurred. A fundamental conclusion reached by the FASB in this statement is that an entity's commitment to a plan, by itself, does
not create a present obligation to others that meets the definition of a liability. SFAS 146 also establishes that fair value is the objective for initial measurement of the liability. The
provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company has determined that
SFAS 146 will not have a material impact on its financial position and results of operations.

In
April 2002, the FASB issued SFAS No. 145 ("SFAS 145"),"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections."SFAS 145 rescinds FASB Statement No. 4,Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64,"Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements."This Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers."This Statement amends FASB Statement
No. 13,"Accounting for Leases,"to eliminate an inconsistency between the required accounting
for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company does
not believe that the adoption of SFAS 145 will have a significant impact on its financial statements. The Company adopted SFAS 145 in the current fiscal year. Therefore, a gain on the
early extinguishment of debt has been reclassified from extraordinary income to ordinary income.

In
August 2001, the FASB issued SFAS No. 144 ("SFAS 144"),"Accounting for the Impairment or Disposal of Long-Lived
Assets."SFAS 144 requires one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued
operations to include more disposal transactions. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The

19

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Company does not believe that the adoption of SFAS 144 will have a significant impact on its financial statements.

Effects of Inflation

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

Private Securities Litigation Reform Act

Certain statements in this Annual Report on Form 10-K which are not historical facts are forward-looking statements, such as statements
relating to future operating results, existing and expected competition, financing and refinancing sources and availability and plans for future development or expansion activities, capital
expenditures and expansion of business operations into new areas. Such forward-looking statements involve a number of risks and uncertainties that may significantly affect the Company's liquidity and
results in the future and, accordingly, actual results may differ materially from those expressed in any forward-looking statements. Such risks and uncertainties include, but are not limited to, those
related to effects of competition, leverage and debt service, general economic conditions, changes in gaming laws or regulations (including the legalization of gaming in various jurisdictions) and
risks related to development activities and the startup of non-gaming operations.

Item 7A.Market Risk Disclosure

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

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

20

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Item 8.Financial Statements and Supplementary Data

INDEX  TO CONSOLIDATED FINANCIAL STATEMENTS  AND FINANCIAL STATEMENT SCHEDULES  For the Years Ended September 30, 2002, 2001 and 2000

|                                                                                                                   |  | Page
|------------------------------------------------------------------------------------------------------------------ |  | ----
|Independent Auditors' Report                                                                                       |  | 22  
|Consolidated Balance Sheets as of September 30, 2002 and 2001                                                      |  | 23  
|Consolidated Statements of Operations for the Years Ended September 30, 2002, 2001 and 2000                        |  | 25  
|Consolidated Statements of Stockholders' Equity (Deficiency) for the Years Ended September 30, 2002, 2001 and 2000 |  | 26  
|Consolidated Statements of Cash Flows for the Years Ended September 30, 2002, 2001 and 2000                        |  | 27  
|Notes to Consolidated Financial Statements                                                                         |  | 28  

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.

21

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INDEPENDENT AUDITORS' REPORT

To
the Stockholders of Archon Corporation:

We
have audited the accompanying consolidated balance sheets of Archon Corporation and subsidiaries (the "Company") as of September 30, 2002 and 2001, and the related consolidated
statements of operations, stockholders' equity (deficiency), and cash flows for each of the three years in the period ended September 30, 2002. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Archon Corporation and subsidiaries as of September 30,
2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2002 in conformity with accounting principles generally
accepted in the United States of America.

DELOITTE &
TOUCHE LLP
Las Vegas, Nevada
December 19, 2002

22

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Archon Corporation and Subsidiaries  Consolidated Balance Sheets  as of September 30, 2002 and 2001

|ASSETS                      |                                     | 2002 |             | 2001        |  
|--------------------------- | ----------------------------------- | ---- | ----------- | ----------- | -
|Current assets:             |                                     |      |             |             |  
|                            | Cash and cash equivalents           |      | $           | 8,615,412   |  
|                            | Investment in marketable securities |      |             | 12,180,399  |  
|                            | Restricted cash                     |      |             | 13,021,550  |  
|                            | Accounts receivable, net            |      |             | 3,352,179   |  
|                            | Inventories                         |      |             | 286,585     |  
|                            | Prepaid expenses and other          |      |             | 975,199     |  
|                            |                                     |      |             |             |  
|Total current assets        |                                     |      | 38,431,324  |             |  
|Property and equipment:     |                                     |      |             |             |  
|                            | Land held for development           |      |             | 23,109,400  |  
|                            | Property held for investment, net   |      |             | 139,996,477 |  
|                            | Land used in operations             |      |             | 8,125,589   |  
|                            | Buildings and improvements          |      |             | 35,710,958  |  
|                            | Machinery and equipment             |      |             | 11,863,817  |  
|                            | Accumulated depreciation            |      |             | (21,529,072 | )
|                            |                                     |      |             |             |  
|Property and equipment, net |                                     |      | 197,277,169 |             |  
|Other assets                |                                     |      | 6,377,072   |             |  
|                            |                                     |      |             |             |  
|Total assets                |                                     | $    | 242,085,565 |             | $
|                            |                                     |      |             |             |  

See
the accompanying Notes to Consolidated Financial Statements.

23

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Archon Corporation and Subsidiaries  Consolidated Balance Sheets  as of September 30, 2002 and 2001

|LIABILITIES and STOCKHOLDERS' EQUITY             |                                                                                                                                                                                                                                            | 2002 |             | 2001       |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---- | ----------- | ---------- | -
|Current liabilities:                             |                                                                                                                                                                                                                                            |      |             |            |  
|                                                 | Accounts payable                                                                                                                                                                                                                           |      | $           | 1,926,804  |  
|                                                 | Interest payable                                                                                                                                                                                                                           |      |             | 2,285,248  |  
|                                                 | Accrued and other liabilities                                                                                                                                                                                                              |      |             | 2,360,996  |  
|                                                 | Current portion of long-term debt                                                                                                                                                                                                          |      |             | 93,100     |  
|                                                 | Current portion of non-recourse debt                                                                                                                                                                                                       |      |             | 5,733,795  |  
|                                                 |                                                                                                                                                                                                                                            |      |             |            |  
|Total current liabilities                        |                                                                                                                                                                                                                                            |      | 12,399,943  |            |  
|Long-term debtless current portion              |                                                                                                                                                                                                                                            |      | 261,966     |            |  
|Non-recourse debtless current portion           |                                                                                                                                                                                                                                            |      | 117,401,909 |            |  
|Obligation under lease                           |                                                                                                                                                                                                                                            |      | 35,365,308  |            |  
|Deferred income taxes                            |                                                                                                                                                                                                                                            |      | 34,091,076  |            |  
|Other liabilities                                |                                                                                                                                                                                                                                            |      | 11,269,374  |            |  
|Commitments                                      |                                                                                                                                                                                                                                            |      |             |            |  
|Stockholders' equity:                            |                                                                                                                                                                                                                                            |      |             |            |  
|                                                 | Common stock, $.01 par value; authorized100,000,000 shares;
    issued and outstanding6,221,431 shares at September 30,
    2002 and 6,153,256 at September 30, 2001                                                                     |      |             | 62,214     |  
|                                                 | Preferred stock, exchangeable, redeemable 13.5% cumulative,
    stated at $2.14 liquidation value, authorized10,000,000
    shares; issued and outstanding5,077,720 shares at
    September 30, 2002 and 5,123,082 at September 30, 2001 |      |             | 18,146,756 |  
|Additional paid-in capital                       |                                                                                                                                                                                                                                            |      | 57,437,482  |            |  
|Accumulated deficit                              |                                                                                                                                                                                                                                            |      | (44,094,268 | )          |  
|Accumulated other comprehensive loss             |                                                                                                                                                                                                                                            |      | (94,678     | )          |  
|                                                 |                                                                                                                                                                                                                                            |      |             |            |  
|                                                 | Subtotal                                                                                                                                                                                                                                   |      |             | 31,457,506 |  
|Less stock subscriptions receivable              |                                                                                                                                                                                                                                            |      | (73,743     | )          |  
|Less treasury common stock4,875 shares, at cost |                                                                                                                                                                                                                                            |      | (87,774     | )          |  
|                                                 |                                                                                                                                                                                                                                            |      |             |            |  
|Total stockholders' equity                       |                                                                                                                                                                                                                                            |      | 31,295,989  |            |  
|                                                 |                                                                                                                                                                                                                                            |      |             |            |  
|Total liabilities and stockholders' equity       |                                                                                                                                                                                                                                            | $    | 242,085,565 |            | $
|                                                 |                                                                                                                                                                                                                                            |      |             |            |  

See
the accompanying Notes to Consolidated Financial Statements.

24

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Archon Corporation and Subsidiaries  Consolidated Statements of Operations  For the Years Ended September 30, 2002, 2001 and 2000

|                                                        |                                     | 2002 |             | 2001       |   | 2000        |           
|------------------------------------------------------- | ----------------------------------- | ---- | ----------- | ---------- | - | ----------- | ----------
|Revenues:                                               |                                     |      |             |            |   |             |           
|                                                        | Casino                              |      | $           | 29,415,497 |   | $           | 33,087,526
|                                                        | Hotel                               |      |             | 2,659,335  |   |             | 2,558,935 
|                                                        | Food and beverage                   |      |             | 7,831,579  |   |             | 8,483,624 
|                                                        | Investment properties               |      |             | 12,402,247 |   |             | 7,204,361 
|                                                        | Other                               |      |             | 3,197,838  |   |             | 4,442,936 
|                                                        |                                     |      |             |            |   |             |           
|Gross revenues                                          |                                     |      | 55,506,496  |            |   | 55,777,382  |           
|                                                        | Less casino promotional allowances  |      |             | (6,741,025 | ) |             | (7,774,291
|                                                        |                                     |      |             |            |   |             |           
|Net operating revenues                                  |                                     |      | 48,765,471  |            |   | 48,003,091  |           
|                                                        |                                     |      |             |            |   |             |           
|Operating expenses:                                     |                                     |      |             |            |   |             |           
|                                                        | Casino                              |      |             | 15,978,110 |   |             | 17,390,831
|                                                        | Hotel                               |      |             | 816,471    |   |             | 786,342   
|                                                        | Food and beverage                   |      |             | 4,084,003  |   |             | 4,441,273 
|                                                        | Other                               |      |             | 1,988,276  |   |             | 3,406,857 
|                                                        | Selling, general and administrative |      |             | 5,062,358  |   |             | 5,680,787 
|                                                        | Corporate expenses                  |      |             | 2,815,467  |   |             | 2,662,194 
|                                                        | Utilities and property expenses     |      |             | 5,701,546  |   |             | 5,530,873 
|                                                        | Depreciation and amortization       |      |             | 6,035,038  |   |             | 4,132,320 
|                                                        | Reorganization expenses             |      |             | 0          |   |             | 0         
|                                                        |                                     |      |             |            |   |             |           
|Total operating expenses                                |                                     |      | 42,481,269  |            |   | 44,031,477  |           
|                                                        |                                     |      |             |            |   |             |           
|Operating income                                        |                                     |      | 6,284,202   |            |   | 3,971,614   |           
|Interest expense                                        |                                     |      | (16,413,145 | )          |   | (11,140,111 | )         
|Gain on sale of assets                                  |                                     |      | 0           |            |   | 137,238,005 |           
|Litigation settlement, net                              |                                     |      | 0           |            |   | 3,374,482   |           
|Interest income                                         |                                     |      | 1,288,887   |            |   | 2,021,747   |           
|Gain on early extinguishment of debt                    |                                     |      | 0           |            |   | 0           |           
|Other expenses                                          |                                     |      | 0           |            |   | 0           |           
|                                                        |                                     |      |             |            |   |             |           
|Income (loss) before income tax (expense) benefit       |                                     |      | (8,840,056  | )          |   | 135,465,737 |           
|Federal income tax (expense) benefit                    |                                     |      | 1,133,000   |            |   | (46,284,078 | )         
|                                                        |                                     |      |             |            |   |             |           
|Net income (loss)                                       |                                     |      | (7,707,056  | )          |   | 89,181,659  |           
|Dividends accrued on preferred shares                   |                                     |      | (1,555,246  | )          |   | (1,950,401  | )         
|                                                        |                                     |      |             |            |   |             |           
|Net income (loss) applicable to common shares           |                                     | $    | (9,262,302  | )          | $ | 87,231,258  |           
|                                                        |                                     |      |             |            |   |             |           
|Average common shares outstanding                       |                                     |      | 6,180,152   |            |   | 6,181,664   |           
|                                                        |                                     |      |             |            |   |             |           
|Average common and common equivalent shares outstanding |                                     |      | 6,180,152   |            |   | 6,808,185   |           
|                                                        |                                     |      |             |            |   |             |           
|Income (loss) per common share:                         |                                     |      |             |            |   |             |           
|                                                        | Basic                               |      | $           | (1.50      | ) | $           | 14.11     
|                                                        |                                     |      |             |            |   |             |           
|                                                        | Diluted                             |      | $           | (1.50      | ) | $           | 12.81     
|                                                        |                                     |      |             |            |   |             |           

See
the accompanying Notes to Consolidated Financial Statements.

25

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Archon Corporation and Subsidiaries  Consolidated Statements of Stockholders' Equity (Deficiency)  For the Years Ended September 30, 2002, 2001 and 2000

|                                                             |  | Common
Stock |        | Preferred
Stock |   | Additional
Paid-In
Capital |   | Accumulated
Deficit |            | Accumulated
Other
Comprehensive
Loss |   | Stock
Subscriptions
Receivable |   | Treasury
Stock |          | Total |  
|------------------------------------------------------------ |  | ------------ | ------ | --------------- | - | -------------------------- | - | ------------------- | ---------- | ------------------------------------ | - | ------------------------------ | - | -------------- | -------- | ----- | -
|Balances, October 1, 1999                                    |  | $            | 61,954 |                 | $ | 24,117,989                 |   | $                   | 51,513,504 |                                      | $ | (134,865,256                   | ) | $              | 0        |       | $
|Net income                                                   |  |              |        |                 |   |                            |   |                     |            |                                      |   | 15,123,803                     |   |                |          |       |  
|Preferred stock dividend accrued                             |  |              |        |                 |   | 2,321,771                  |   |                     |            |                                      |   | (2,321,771                     | ) |                |          |       |  
|Stock options exercised                                      |  |              | 50     |                 |   |                            |   |                     | 7,450      |                                      |   |                                |   |                |          |       |  
|                                                             |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                |          |       |  
|Balances, September 30, 2000                                 |  |              | 62,004 |                 |   | 26,439,760                 |   |                     | 51,520,954 |                                      |   | (122,063,224                   | ) |                | 0        |       |  
|Net income                                                   |  |              |        |                 |   |                            |   |                     |            |                                      |   | 89,181,659                     |   |                |          |       |  
|Preferred stock dividend accrued                             |  |              |        |                 |   | 1,950,401                  |   |                     |            |                                      |   | (1,950,401                     | ) |                |          |       |  
|Common and preferred stock acquired in litigation settlement |  |              | (536   | )               |   | (10,800,869                | ) |                     | 5,364,422  |                                      |   |                                |   |                |          |       |  
|Preferred stock purchased                                    |  |              |        |                 |   | (842,706                   | ) |                     | 390,473    |                                      |   |                                |   |                |          |       |  
|Unrealized loss on marketable securities                     |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                | (406,701 | )     |  
|Stock options exercised                                      |  |              | 65     |                 |   |                            |   |                     | 7,935      |                                      |   |                                |   |                |          |       |  
|                                                             |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                |          |       |  
|Balances, September 30, 2001                                 |  |              | 61,533 |                 |   | 16,746,586                 |   |                     | 57,283,784 |                                      |   | (34,831,966                    | ) |                | (406,701 | )     |  
|Net loss                                                     |  |              |        |                 |   |                            |   |                     |            |                                      |   | (7,707,056                     | ) |                |          |       |  
|Preferred stock dividend accrued                             |  |              |        |                 |   | 1,555,246                  |   |                     |            |                                      |   | (1,555,246                     | ) |                |          |       |  
|Preferred stock purchased                                    |  |              |        |                 |   | (155,076                   | ) |                     | 79,955     |                                      |   |                                |   |                |          |       |  
|Stock options exercised                                      |  |              | 681    |                 |   |                            |   |                     | 73,743     |                                      |   |                                |   |                |          |       |  
|Unrealized gain on marketable securities                     |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                | 312,023  |       |  
|                                                             |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                |          |       |  
|Balances, September 30, 2002                                 |  | $            | 62,214 |                 | $ | 18,146,756                 |   | $                   | 57,437,482 |                                      | $ | (44,094,268                    | ) | $              | (94,678  | )     | $
|                                                             |  |              |        |                 |   |                            |   |                     |            |                                      |   |                                |   |                |          |       |  

See the accompanying Notes to Consolidated Financial Statements.

26

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Archon Corporation and Subsidiaries  Consolidated Statements of Cash Flows  For the Years Ended September 30, 2002, 2001 and 2000

|                                                                                                   |                                             | 2002                                                                                     |            | 2001       |           | 2000         |             
|-------------------------------------------------------------------------------------------------- | ------------------------------------------- | ---------------------------------------------------------------------------------------- | ---------- | ---------- | --------- | ------------ | ------------
|Cash flows from operating activities:                                                              |                                             |                                                                                          |            |            |           |              |             
|Net income (loss)                                                                                  |                                             | $                                                                                        | (7,707,056 | )          | $         | 89,181,659   |             
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |                                             |                                                                                          |            |            |           |              |             
|                                                                                                   |                                             | Depreciation and amortization                                                            |            |            | 6,035,038 |              |             
|                                                                                                   |                                             | Gain on sale of assets                                                                   |            |            | 0         |              |             
|                                                                                                   |                                             | Negative amortization of debt                                                            |            |            | 1,117,411 |              |             
|                                                                                                   |                                             | Gain on early extinguishment of debt                                                     |            |            | 0         |              |             
|                                                                                                   |                                             | Debt discount amortization                                                               |            |            | 0         |              |             
|                                                                                                   |                                             | Reorganization expenses paid in connection with Chapter 11 and related legal proceedings |            |            | 0         |              |             
|Change in assets and liabilities:                                                                  |                                             |                                                                                          |            |            |           |              |             
|                                                                                                   | Accounts receivable, net                    |                                                                                          |            | (165,917   | )         |              | (2,116,020  
|                                                                                                   | Inventories                                 |                                                                                          |            | (12,542    | )         |              | 495,175     
|                                                                                                   | Prepaid expenses and other                  |                                                                                          |            | (5,629     | )         |              | 3,030,599   
|                                                                                                   | Deferred income taxes                       |                                                                                          |            | (633,000   | )         |              | 45,706,083  
|                                                                                                   | Other assets                                |                                                                                          |            | (1,846,292 | )         |              | (1,126,285  
|                                                                                                   | Accounts payable                            |                                                                                          |            | 922,826    |           |              | (1,437,275  
|                                                                                                   | Interest payable                            |                                                                                          |            | (91,770    | )         |              | (1,745,170  
|                                                                                                   | Accrued and other liabilities               |                                                                                          |            | 3,987,202  |           |              | 162,999     
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Net cash provided by (used in) operating activities before
    reorganization items                |                                             |                                                                                          | 1,600,271  |            |           | (206,023     | )           
|Reorganization expenses paid in connection with
    Chapter 11 and related legal proceedings       |                                             |                                                                                          | 0          |            |           | 0            |             
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Net cash provided by (used in) operating activities                                                |                                             |                                                                                          | 1,600,271  |            |           | (206,023     | )           
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Cash flows from investing activities:                                                              |                                             |                                                                                          |            |            |           |              |             
|                                                                                                   | Proceeds from sale of assets                |                                                                                          |            | 0          |           |              | 207,500,000 
|                                                                                                   | Decrease (increase) in restricted cash      |                                                                                          |            | 2,485,305  |           |              | (15,506,855 
|                                                                                                   | Cost and expenses related to sale of assets |                                                                                          |            | 0          |           |              | (3,691,166  
|                                                                                                   | Capital expenditures                        |                                                                                          |            | (4,352,497 | )         |              | (68,936,475 
|                                                                                                   | Marketable securities purchased             |                                                                                          |            | (7,314,325 | )         |              | (9,673,334  
|                                                                                                   | Marketable securities sold                  |                                                                                          |            | 5,262,028  |           |              | 0           
|                                                                                                   | Development costs                           |                                                                                          |            | 0          |           |              | 0           
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Net cash provided by (used in) investing activities                                                |                                             |                                                                                          | (3,919,489 | )          |           | 109,692,170  |             
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Cash flows from financing activities:                                                              |                                             |                                                                                          |            |            |           |              |             
|                                                                                                   | Long-term debt                              |                                                                                          |            | 0          |           |              | 0           
|                                                                                                   | Non-recourse debt                           |                                                                                          |            | 0          |           |              | 55,434,006  
|                                                                                                   | Obligation under lease                      |                                                                                          |            | 0          |           |              | 32,500,000  
|                                                                                                   | Paid on long-term debt                      |                                                                                          |            | (5,203,337 | )         |              | (177,618,484
|                                                                                                   | Paid on note payableofficer                |                                                                                          |            | 0          |           |              | (1,500,000  
|                                                                                                   | Proceeds of note payableofficer            |                                                                                          |            | 0          |           |              | 0           
|                                                                                                   | Debt issue costs                            |                                                                                          |            | 0          |           |              | (3,194,349  
|                                                                                                   | Capital stock acquired                      |                                                                                          |            | (75,121    | )         |              | (5,889,216  
|                                                                                                   | Stock options exercised                     |                                                                                          |            | 0          |           |              | 8,000       
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Net cash used in financing activities                                                              |                                             |                                                                                          | (5,278,458 | )          |           | (100,260,043 | )           
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Increase (decrease) in cash and cash equivalents                                                   |                                             |                                                                                          | (7,597,676 | )          |           | 9,226,104    |             
|Cash and cash equivalents, beginning of year                                                       |                                             |                                                                                          | 16,213,088 |            |           | 6,986,984    |             
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             
|Cash and cash equivalents, end of year                                                             |                                             | $                                                                                        | 8,615,412  |            | $         | 16,213,088   |             
|                                                                                                   |                                             |                                                                                          |            |            |           |              |             

See the accompanying Notes to Consolidated Financial Statements.

27

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ARCHON CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  For the years ended September 30, 2002, 2001 and 2000

1.    Basis of Presentation and General Information

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

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

On
December 29, 2000, the Company entered into a series of agreements to exchange, pursuant to Sections 721 and 351 of the Internal Revenue Code of 1986, as amended (the
"Code"), the real and personal property, excluding gaming equipment, and intangible assets used in the operation of the Pioneer to a third party and agreed to lease and license the assets sold for up
to 20 years, during which period the Company will operate the Pioneer (collectively, the "Pioneer Transactions").

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

In
November 1999, Sahara Las Vegas Corporation, an indirect wholly-owned subsidiary of the Company ("SLVC"), sold real property located in Henderson, Nevada for
$37.2 million. The Company recorded a pre-tax gain on the sale of approximately $12.1 million in the quarter ended December 31, 1999. In connection with the sale, the
Company, SLVC, SFHI, Paul W. Lowden and members of Mr. Lowden's family entered into non-compete agreements, in which they agreed not to compete through November 15, 2014
within a five-mile radius of two of the buyer's casinos located in the Henderson area.

2.    Summary of Significant Accounting Policies

Principles of Consolidation

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

28

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Cash and Cash Equivalents

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

Investment in Marketable Securities

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

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

The
Company recorded $312,000 of other comprehensive gain and $407,000 of other comprehensive loss associated with unrealized gains or losses on these securities during the years ended
September 30, 2002 and 2001, respectively. At September 30, 2000, market value approximated cost; therefore, the Company did not record any other comprehensive income (loss).

The
following is a summary of available-for-sale marketable securities as of September 30, 2002 and 2001:

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

|                                  |       | 2001
|--------------------------------- | ----- | ----
|
|Government and agency obligations |       | $   
|Other debt securities             |       |     
|                                  |       |     
|Total debt securities             |       |     
|Equity securities                 |       |     
|                                  |       |     
|                                  | Total |     
|                                  |       |     

29

---

The
cost and estimated fair value of debt securities as of September 30, 2002 and 2001 by contractual maturity are shown below:

2002Cost

Fair ValueDue in one year or less

$
259,535

$
248,785Due after one year through five years


569,741


573,196Due after five years through ten years


1,763,694


1,755,170Due after ten years


3,502,012


3,590,060Mortgage backed securities


3,781,128


3,765,849Total

$
9,876,110

$
9,933,060


2001Cost

Fair ValueDue in one year or less

$
0

$
0Due after one year through five years


356,702


369,711Due after five years through ten years


1,000,000


1,004,528Due after ten years


3,268,946


3,224,588Mortgage backed securities


3,700,000


3,751,211Total

$
8,325,648

$
8,350,038


Inventories

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

Property and Equipment

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

The
Company periodically assesses the recoverability of property and equipment and evaluates such assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Asset impairment is determined to exist if estimated future cash flows,
undiscounted and without interest charges, are less than the carrying amount in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,Impairment
of Long-Lived Assets("SFAS 121").

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

Pre-Opening Expenses and Capitalized Interest

Beginning in fiscal 2000, the Company was required to expense development costs as incurred. Previously, pre-opening expenses directly related to
development of gaming operations were capitalized as incurred and included in other assets and expensed within the first year of operations. Interest costs

30

---

are capitalized on funds disbursed during the development phase of projects and expensed pursuant to depreciation and amortization methods over the asset's estimated useful life.

Federal Income Taxes

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

Treasury Stock

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

Revenue Recognition

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

|                  |       | 2002 |       | 2001  |   | 2000 
|----------------- | ----- | ---- | ----- | ----- | - | -----
|Food and beverage |       | $    | 4,530 |       | $ | 5,120
|Hotel             |       |      | 825   |       |   | 843  
|Other             |       |      | 72    |       |   | 133  
|                  |       |      |       |       |   |      
|                  | Total |      | $     | 5,427 |   | $    
|                  |       |      |       |       |   |      

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

Indirect Expenses

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

Earnings Per Share

The Company presents its per share results in accordance with SFAS No. 128, "Earnings Per Share"
("SFAS 128"). SFAS 128 requires the presentation of basic net income (loss) per share and diluted net income (loss) per share. Basic per share amounts are computed by dividing net income
(loss) by average shares outstanding during the period, while diluted per share amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options. The
effect of options outstanding was included in diluted calculations during the years ended September 30, 2001 and 2000 but was not included in diluted calculations during fiscal years 2002 since
the Company incurred a net loss. The dilutive effect of the assumed exercise of stock options increased the weighted average

31

---

number of shares of common stock by 626,521 and 627,035 shares for the years ended September 30, 2001 and 2000, respectively.

The
Board of Directors of the Company has authorized the purchase from time to time by the Company of preferred stock for total consideration of up to $2.5 million. Additionally,
as discussed in Note 16, in connection with the settlement of litigation initiated by the Company, the Company, among other items, acquired 3,456,942 shares of preferred stock. Pursuant to the
Certificate of Designation of the preferred stock, shares of preferred stock acquired by the Company are retired. See Note 27

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

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 146, Accounting for Costs
Associated with Exit or Disposal Activities("SFAS 146"). SFAS 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when
the liability is incurred. A fundamental conclusion reached by the FASB in this statement is that an entity's commitment to a plan, by itself, does not create a present
obligation to others that meets the definition of a liability. SFAS 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of this
statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company has determined that SFAS 146 will not
have a material impact on its financial position and results of operations.

In
April 2002, FASB issued SFAS No. 145 ("SFAS 145"),"Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections."SFAS 145 rescinds FASB Statement No. 4,Reporting Gains and Losses from Extinguishment of
Debt, and an amendment of that Statement, FASB Statement No. 64,"Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements." This Statement also rescinds FASB Statement No. 44,"Accounting for Intangible Assets of Motor Carriers."
This Statement amends FASB Statement No. 13,"Accounting for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This
Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company does
not believe that the adoption of SFAS 145 will have a significant impact on its financial statements. The Company adopted SFAS 145 in the current fiscal year. Therefore, a gain on the
early extinguishment of debt has been reclassified from extraordinary income to ordinary income. See Note 21

In
August 2001, the FASB issued SFAS No. 144 ("SFAS 144"),"Accounting for the Impairment or Disposal of Long-Lived
Assets."SFAS 144 requires one accounting model be used for long-lived assets

32

---

to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions. SFAS 144 is effective for fiscal years beginning after
December 15, 2001. The Company does not believe that the adoption of SFAS 144 will have a significant impact on its financial statements.

Fair Value of Financial Instruments

The Company estimates the fair value of its preferred stock to be $6.3 million at September 30, 2002 based upon available market prices. The Company
estimates that its debt and all other financial instruments have a fair value which approximates their recorded value.

Reclassifications

Certain reclassifications have been made in the prior years' consolidated financial statements to conform to the presentation used in 2002.

3.    Cash and Cash Equivalents

At September 30, 2002, the Company held cash and cash equivalents of $8.6 million compared to $16.2 million at September 30, 2001.
Approximately $1.7 million was held by PHI and was subject to certain restrictions and limitations on its use, including restrictions on its availability for distribution to the Company, by the
terms of the agreements entered into in the Pioneer Transactions. See Note 12

At
September 30, 2002, approximately $1.6 million was held in escrow pursuant to the agreements related to the SFHI Asset Sale.

4.    Restricted Cash

At September 30, 2002 and 2001, approximately $13.0 million and $15.5 million, respectively, were held by SFHI is restricted in use and has
been pledged to secure SFHI's guaranty of PHI's lease and license obligations. The permitted investments for the restricted cash are investment grade commercial paper, money market accounts,
government backed securities and preferred stock of the Purchaser. Additionally, $1.7 million of the $13.0 million may be used for capital expenditures at the Pioneer and acquisition of
real property and equipment under lease at the Pioneer. See Note 12

5.    Accounts Receivable, Net

Accounts receivable at September 30, 2002 and 2001 consisted of the following:

2002

2001Casino and hotel

$
679,200

$
1,095,500Investment properties


3,021,562


3,021,562Other


258,016


565,0593,958,778


4,682,121Less allowance for doubtful accounts


(606,599
)

(1,495,859
)Total

$
3,352,179

$
3,186,262


33

---

Changes
in the allowance for doubtful accounts for the years ended September 30, 2002, 2001 and 2000 were as follows:

|                           |  | 2002 |           | 2001 |   | 2000      |  
|-------------------------- |  | ---- | --------- | ---- | - | --------- | -
|Balance, beginning of year |  | $    | 1,495,859 |      | $ | 2,081,913 |  
|Provision                  |  |      | 35,714    |      |   | 156,302   |  
|Accounts written-off       |  |      | (924,974  | )    |   | (742,356  | )
|                           |  |      |           |      |   |           |  
|Balance, end of year       |  | $    | 606,599   |      | $ | 1,495,859 |  
|                           |  |      |           |      |   |           |  

6.    Land Held for Development

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

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

7.    Property and Equipment, Net

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

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

Included
in Property and equipment, net in the accompanying Consolidated Balance Sheets at September 30, 2002 and 2001 are certain assets held under lease at the Pioneer with a
net carrying value of approximately $29.2 million and $30.5 million, respectively. See Note 12

8.    Rental Property Held for Investment, Net

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

34

---

allocated approximately $15.0 million of the purchase price to land and the balance to building and improvements. The expense incurred to acquire the property is recorded in Other assets in
the accompanying Consolidated Balance Sheets and is being amortized over the remaining term of the lease. Deferred rent at September 30, 2002 in the amount of $11.3 million is included
in Other liabilities on the accompanying Consolidated Balance Sheets. See Note 11

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

9.    Other Assets

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

10.  Long-Term Debt

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

2003

$
93,1002004


95,4312005


72,5282006


79,6572007


14,350Thereafter


0Total

$
355,066


11.  Non-Recourse Debt Obligations

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

35

---

The first mortgage indebtedness is non-recourse and matures in June 2019 to coincide with the end of the lease term. See Note 8

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

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

2003

$
5,733,7952004


6,414,7292005


30,057,7752006


1,915,4782007


2,195,326Thereafter


76,818,601Total

$
123,135,704


12.  Obligations Under Lease

On December 29, 2000, the Company entered into the Pioneer Transactions and agreed to lease and license the real and personal property (excluding gaming
equipment) and intangible assets used by the Pioneer for up to 20 years, during which period the Company will operate the Pioneer. The consideration for the Pioneer Transactions consisted of
the assumption and repayment by the Purchaser of $32.5 million of debt owed by PHI to SFHI and the issuance of preferred stock of the Purchaser having a $1.0 million liquidation
preference. See Notes 4 and 8

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

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

2003

$
3,414,9692004


3,901,6022005


4,155,2482006


4,279,9062007


4,408,303Thereafter


92,489,381112,649,409Less amount representing interest


77,284,101Present value of minimum lease payments

$
35,365,308


Archon
and SFHI guaranteed the payments under the lease and license agreements and agreed to certain covenants, including restrictions on the payment of management fees, restriction on
competing in the Laughlin, Nevada area, limitations on the incurrence of recourse debt obligations by Archon and restrictions on dividend payments on the Archon preferred stock. In addition, Archon
agreed to maintain minimum consolidated liquidity amounts and agreed to forgo receipt of a management fee and to contribute capital to PHI and in certain events to the restricted cash account in the
event the ratio of fixed charges to operating cash flows at the Pioneer falls below 1.20 to 1.00 and 1.00 to 1.00,

36

---

respectively, during any twelve month period, determined on a quarterly basis beginning March 31, 2001. The Company has an option to purchase the assets under the lease and license agreements
between the end of the third and seventh years of the lease and license arrangements, at purchase price amounts which, at the date of the Pioneer Transactions, approximated estimated fair market value
at the relevant purchase dates, and at the end of the lease term for fair market value. See Notes 4 and 7

Pursuant
to the agreements relating to the Pioneer Transactions, Archon has foregone the management fee otherwise payable to it since April 2001. Additionally, PHI's ratio of
fixed charges to operating cash flow for the four quarters ended June 30, 2002 and September 30, 2002 were 0.92 to 1.00 and 0.87 to 1.00, respectively. As a result, Archon made capital
contributions to PHI in the amount of approximately $375,000 and $275,000 with respect to the June and September 2002 quarters, respectively. If PHI's ratio of fixed charges to operating cash
flows is less than 1.00 to 1.00 for the quarter ending December 31, 2002, Archon will be obligated to make deposits to the restricted cash account in addition to making capital contributions to
PHI.

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

13.  Leases

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

At
September 30, 2002, the Company had an operating lease for real property which expires in 2078 and operating leases for corporate offices. The Company had no property and
equipment under capital leases, other than the real and personal property described in Note 12.

37

---

Future
minimum lease payments as of September 30, 2002 are as follows:

Operating2003

$
938,1632004


919,1552005


900,1472006


846,2612007


792,375Thereafter


56,456,700$
60,852,801


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

Rent
expense was $1,457,869, $1,338,048 and $862,373 for the years ended September 30, 2002, 2001 and 2000, respectively.

14.  Gain on Sale of Assets

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

In
November 1999, SLVC sold real property located in Henderson, Nevada it had acquired in March 1999 for $37.2 million. The Company recorded a pre-tax
gain on the sale of approximately $12.1 million in the quarter ended December 31, 1999. In connection with the sale, the Company, SLVC, SFHI, Paul W. Lowden and members of the family of
Paul W. Lowden entered into non-compete agreements, in which they agreed not to compete through November 15, 2014 within a five-mile radius of two of the buyer's casinos
located in the Henderson, Nevada area.

15.  Litigation Settlement, Net

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

On
April 20, 2001, the Company entered into a settlement agreement with David H. Lesser, Hudson Bay Partners, L.P. and certain of their affiliates. In accordance with the
settlement agreement, among other things: (i) the Company and its subsidiaries agreed to dismiss with prejudice pending litigation by the Company against HBP and Mr. Lesser styled Santa
Fe Gaming Corporation v. Hudson Bay Partners, L. P., et al., CV-5-99-00298-KJD (LRL) and Santa Fe Gaming Corporation v. Hudson Bay Partners L.P.
and David H. Lesser, CV-5-99-00416 LDG (LRL), and Mr. Lesser agreed to dismiss

38

---

with prejudice his application for reimbursement of approximately $1.1 million in attorneys' fees in connection with the PHI and PFC bankruptcies, pursuant to legal proceedings styled In re
Pioneer Finance Corp., Case No. BK-S-99-11404-LBR and In re Pioneer Hotel Inc., Case No.
BK-S-99-12854-LBR; (ii) the Company received the 3,456,942 shares of the Company's preferred stock and 53,600 shares of common stock held by the
Hudson Bay affiliates; (iii) Mr. Lesser agreed to forfeit options to acquire 12,500 shares of the Company's common stock; (iv) Mr. Lesser forfeited his claim to director
fees; (v) Mr. Lesser resigned from the Company's Board of Directors and withdrew his name as the nominee for election by preferred stockholders as a special director at the Company's
annual meeting held on May 11, 2001; and (vi) the Company paid Mr. Lesser $5.75 million.

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

16.  Preferred Stock

The Company has outstanding redeemable exchangeable cumulative preferred stock ("Preferred Stock"). Prior to fiscal 1997, the Company satisfied the
semi-annual dividend payments on its Preferred Stock through the issuance of paid-in-kind dividends. Commencing in fiscal 1997, dividends paid on the
Preferred Stock, to the extent declared, must be paid in cash. Pursuant to the terms of the Certificate of Designation with respect to the Preferred Stock, dividends that are not declared are
cumulative and accrue. The dividend rate per annum was equal to 8.0% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11.0%.
Beginning October 1, 1999, the dividend rate increased by an additional 50 basis points on each succeeding semi-annual dividend payment date up to a maximum of 16.0% per annum. The
dividend rate is 15.0% effective October 1, 2002. The accrued stock dividends have been recorded as an increase to the Preferred Stock account. As of September 30, 2002, the aggregate
liquidation preference of the Preferred Stock was $18.1 million, or $3.57 per share.

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

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

The
Company has accrued, but not paid, dividends on the Preferred Stock since September 30, 1996. Dividends accrued but not paid were $7.3 million and $5.8 million
as of September 30, 2002 and 2001, respectively. Pursuant to the Certificate of Designation, because at least one full dividend payment has been accrued but not paid for two years, the holders
of the Preferred Stock, as a separate class, are entitled to elect two directors to the Company's board of directors. The two directors elected by Preferred Stockholders are in addition to the
directors elected by the holders of the Company's Common Stock. The Preferred Stockholders' right to elect two directors will continue until all dividend arrearages have been paid. The agreements
relating to the Pioneer Transactions prohibit the Company from paying dividends on the Preferred Stock.

17.  Stock Option Plan

The Company has a Key Employee Stock Option Plan (the "Stock Option Plan") providing for the grant of up to 1.2 million shares of its common stock to key
employees. The Stock Option Plan

39

---

provides for both incentive stock options and non-qualified stock options. As of September 30, 2002, there were 508,860 options outstanding under the Stock Option Plan. During
fiscal years 2002, 2001 and 2000, 68,175, 6,500 options and 5,000 options, respectively, were exercised. During fiscal year 2002, options with respect to 4,000 shares of common stock were granted. No
options were granted during the two prior years. The outstanding options have expiration dates through June 2010.

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

SFHI,
SLVC and PHI (collectively, the "Subsidiaries"), have adopted subsidiary stock option plans (the "Subsidiary Plans"). The Subsidiary Plans provide for the grant of options by each
of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such Subsidiary's Common Stock to employees, non-employee directors, consultants or affiliates of
the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries, the Company and any subsidiaries of the Company or Subsidiaries to attract, retain and motivate
their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As of September 30,
2002, no options had been granted under any Subsidiary Plans.

Accounting for Stock-Based Compensation

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

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

SFAS 123
requires a Company to disclose pro forma net income and net income per share assuming compensation cost for employee stock options had been determined using the fair
value-based method. The weighted average assumptions used in estimating the fair value of each option grant on the date of grant using the Black-Scholes option pricing model, and the estimated
weighted average fair value of the options granted should also be disclosed. No such stock options were granted in 2001 and 2000, and therefore, no information has been included for those years.

40

---

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

2002Net loss applicable to common shares:As reported

$
(9,262
)Pro forma


(9,273
)Loss per share:As reported


(1.50
)Pro forma


(1.50
)Weighted average assumptions:Expected stock price volatility


100.0
%Risk-free interest rate


4.35
%Expected option lives (in years)


5Estimated fair value of options


2.64


18.  Federal Income Taxes

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

The
expense (benefit) for income taxes attributable to pre-tax income (loss) consisted of:

|         |                         | 2002 |        | 2001   |   | 2000   |       
|-------- | ----------------------- | ---- | ------ | ------ | - | ------ | ------
|
|Current  |                         | $    | 0      |        | $ | 0      |       
|Deferred |                         |      | (1,133 | )      |   | 46,284 |       
|         |                         |      |        |        |   |        |       
|         | Total expense (benefit) |      | $      | (1,133 | ) | $      | 46,284
|         |                         |      |        |        |   |        |       

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

|                         |       | 2002 |        | 2001   |   | 2000    |       
|------------------------ | ----- | ---- | ------ | ------ | - | ------- | ------
|
|Amount at statutory rate |       | $    | (3,094 | )      | $ | 47,413  |       
|Goodwill                 |       |      | 0      |        |   | (17,843 | )     
|Goodwill reserve         |       |      | 1,925  |        |   | 16,691  |       
|Valuation allowance      |       |      | 0      |        |   | 0       |       
|Other                    |       |      | 36     |        |   | 23      |       
|                         |       |      |        |        |   |         |       
|                         | Total |      | $      | (1,133 | ) | $       | 46,284
|                         |       |      |        |        |   |         |       

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

41

---

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

2002

2001(dollars in thousands)Deferred tax liabilities:Prepaid expenses

$
361

$
181Fixed asset cost, depreciation and amortization, net


33,152


34,711Other


3,057


2,411Gross deferred tax liabilities


36,570


37,303Deferred tax assets:Net operating loss carryforward


18,541


16,691Reserves for accounts and contracts receivable


240


436Other


663


503Deferred payroll


199


188Tax credits


1,452


1,452Gross deferred tax assets


21,095


19,270Net deferred tax (liability) before goodwill reserve


(15,475
)

(18,033
)Goodwill reserve


(18,616
)

(16,691
)Net deferred tax (liability)

$
(34,091
)
$
(34,724
)


42

---



At September 30, 2002, the Company had a net operating loss carryforward for regular income tax purposes of approximately $53.0 million, which will fully expire by the year
2022.

19.  Benefit Plans

The Company has a savings plan (the "Plan") qualified under Section 401(k) of the Code. The Plan covers substantially all of the Company's employees. The
Company's matching contributions paid in 2002, 2001 and 2000 were $59,000, $67,000 and $124,000, respectively.

20.  Related Parties

In January 2000, the Company paid $50,000 to each of Messers. Paul W. Lowden, Christopher W. Lowden, son of Paul W. Lowden, and David G. Lowden, brother of
Paul W. Lowden, in exchange for each of them individually having entered into a fifteen year non-compete agreement in November 1999 in connection with the sale of the real property
in Henderson, Nevada and related agreements.

In
June 2000, the Company issued an unsecured note for $1.5 million with Paul W. Lowden which bore interest at the rate of 12% per annum. The unsecured note was due on the
earlier of the closing of the sale of substantially all the assets of SFHI or December 15, 2000. The proceeds from the note together with available working capital were used to make a
$3.0 million principal payment due June 20, 2000 on indebtedness of the Company. The note was repaid in connection with the SFHI Asset Sale.

In
October 2000, in connection with the SFHI Asset Sale, Paul W. Lowden and members of the family of Paul W. Lowden agreed to a three year non-compete agreement. In
November 2000, the Company agreed to pay $205,000 to Mr. David Lowden for services rendered in connection with the SFHI Asset Sale.

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

The
Company has entered into a Patent Rights and Royalty Agreement with David Lowden 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 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. At September 30, 2002, the Company had expended $245,000 for commercial development of the technology.

In
fiscal 2001, the Company purchased for $100,000 Class B member interests in Dukes, LLC, a Nevada limited liability company ("Dukes") that is developing a restricted slot
operation, restaurant

43

---

and entertainment facility. Christopher Lowden is a limited partner in the company that is the managing member of Dukes. A subsidiary of the Company entered into a casino space lease (the
"Duke's-Sparks Lease") with Duke's-Sparks LLC a Nevada limited liability company ("Duke's-Sparks") under which, subject to approval of the Nevada gaming authorities, a subsidiary of the Company would
have operated the casino operations of the Duke's facility upon commencement of operations. However, a subsidiary of the Company terminated that lease in accordance with the terms of the lease and
subsequent to September 30, 2002, entered into an amended casino space lease with Duke's-Sparks. At September 30, 2002, the Company had expended $126,000 for licensing and preopening
costs for Duke's facility, which amount is reflected as Accounts receivable, net in the accompanying Consolidated Balance Sheets. See Note 27

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

In
May 2002, the Company issued 68,175 shares of common stock to a former officer of the Company upon the former officer's exercise of outstanding stock options. In connection
with the option exercise, the Company loaned the former officer $73,743 to fund substantially all of the option exercise price. The loan, which is due in January 2008, is included in stock
subscriptions receivable in the equity section of the accompanying consolidated financial statements.

21.  Gain on Early Extinguishment of Debt

Between December 1999 and August 2000, SLVC purchased approximately $18.4 million principal amount of 131/2% first mortgage
notes due December 1998 (the "131/2% Notes"), plus accrued and unpaid interest. The Company reported a gain on the acquisition of the 131/2% Notes by SLVC of
approximately $2.8 million in the accompanying Consolidated Statements of Operations for the fiscal year ended September 30, 2000.

22.  Other Expense

During fiscal year 2000, the Company reported a charge to earnings of approximately $350,000 associated with costs and expenses of a proposed offering of debt
securities which was not consummated.

23.  Reorganization Expenses

On February 23, 1999, Pioneer Finance Corp. ("PFC"), an indirect wholly-owned subsidiary of the Company, voluntarily commenced a Chapter 11 proceeding. On
April 12, 1999, PHI voluntarily commenced its Chapter 11 proceeding to facilitate the reorganization of the 131/2% Notes. PFC and PHI (collectively, the "Debtors") filed on
February 7, 2000 a proposed Disclosure Statement to accompany their Fifth Amended Joint Plan of Reorganization (the "Modified Joint Plan"). The Bankruptcy Court approved a motion to amend the
Modified Joint Plan in accordance with terms contained in the Restated Fifth Amended Joint Plan of Reorganization (the "Restated Modified Joint Plan"). On April 28, 2000, the Bankruptcy Court
confirmed the Restated Modified Joint Plan.

In
August 2000, PHI borrowed from the purchaser of the SFHI assets $36.0 million under the terms of the credit agreement entered into in connection with the agreement for
the SFHI Asset Sale and used the proceeds of the borrowing, together with $5.0 million in additional borrowings and $2.0 million of existing working capital, as well as the retirement of
the 131/2% Notes owned by SLVC to retire all outstanding 131/2% Notes. On September 26, 2000, the Bankruptcy Court dismissed the case.

In
fiscal year 2000, PHI incurred approximately $3.4 million in reorganization expenses pursuant to PHI's petition for relief under Chapter 11 of the United States Bankruptcy
Code.

44

---

The
Company has accounted for all transactions related to the Chapter 11 case in accordance with Statement of Position 90-7 ("SOP 90-7"), "Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code."Accordingly, the Consolidated Statements of Operations and Consolidated
Statements of Cash Flows disclose expenses related to the Chapter 11 case and litigation relating to enforcement of the Company's guarantee of the 131/2% Notes under "Reorganization
Expenses."

24.  Contingencies

Litigation:

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

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

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

In
response to the complaints, all of the defendants, including the Company, filed motions attacking the pleadings for failure to state a claim, seeking to dismiss the complaints for
lack of personal jurisdiction and venue. As a result of those motions, the Court has required the Plaintiffs in the four consolidated cases to file a single consolidated amended complaint.
Subsequent to Plaintiffs' filing of their consolidated amended complaint, the defendants refiled numerous motions attacking the amended complaint upon many of the bases as the prior motions. The Court
heard the arguments on those motions and ultimately denied the motions. Plaintiffs then filed their motion to certify a class. Defendants have vigorously opposed the motion. On June 26, 2002,
the court denied the motion to
certify the class. Plaintiffs then sought discretionary review by the Ninth Circuit of the order denying class certification. On August 15, 2002, the Ninth Circuit granted review. The
plaintiffs have not yet filed their briefs, and the Ninth Circuit has been conducting a mediation to attempt to resolve the case.

Local
Joint Executive Board et al.

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

45

---

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

25.  Supplemental Statement of Cash Flows Information

Supplemental statement of cash flows information for the years ended September 30, 2002, 2001 and 2000 consisted of:

|                                    |                                                                                       | 2002 |   | 2001   |  | 2000
|----------------------------------- | ------------------------------------------------------------------------------------- | ---- | - | ------ |  | ----
|
|Operating activities:               |                                                                                       |      |   |        |  |     
|                                    | Cash paid during the year for interest                                                |      | $ | 15,388 |  | $   
|                                    |                                                                                       |      |   |        |  |     
|                                    | Cash paid during the year for income taxes                                            |      | $ | 0      |  | $   
|                                    |                                                                                       |      |   |        |  |     
|Investing and financing activities: |                                                                                       |      |   |        |  |     
|                                    | Non-recourse debt assumed with the acquisition of investment properties               |      | $ | 0      |  | $   
|                                    |                                                                                       |      |   |        |  |     
|                                    | Long-term debt incurred in connection with the acquisition of machinery and equipment |      | $ | 104    |  | $   
|                                    |                                                                                       |      |   |        |  |     
|                                    | Preferred stock dividends at liquidation value: Accrued                               |      | $ | 1,555  |  | $   
|                                    |                                                                                       |      |   |        |  |     
|                                    | Negative amortization of obligation under lease                                       |      | $ | 1,117  |  | $   
|                                    |                                                                                       |      |   |        |  |     
|                                    | Unrealized gain (loss) on marketable securities                                       |      | $ | 312    |  | $   
|                                    |                                                                                       |      |   |        |  |     

26.  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 & Eliminations" below includes financial information for the
Company's corporate operations, adjusted to reflect eliminations upon consolidation, and fiscal 2000 includes operations of the Santa Fe Hotel and Casino sold on October 2, 2000.

46

---

Segment
information for the years ended September 30, 2002, 2001 and 2000 consisted of:

|                              |  | 2002 |         | 2001 |   | 2000   
|----------------------------- |  | ---- | ------- | ---- | - | -------
|
|Pioneer Hotel                 |  |      |         |      |   |        
|Operating revenues            |  | $    | 35,468  |      | $ | 40,020 
|                              |  |      |         |      |   |        
|Operating income              |  | $    | 251     |      | $ | 1,483  
|                              |  |      |         |      |   |        
|Interest expense              |  | $    | 4,760   |      | $ | 4,370  
|                              |  |      |         |      |   |        
|Depreciation and amortization |  | $    | 2,001   |      | $ | 2,075  
|                              |  |      |         |      |   |        
|Reorganization expenses       |  | $    | 0       |      | $ | 0      
|                              |  |      |         |      |   |        
|Interest income               |  | $    | 17      |      | $ | 95     
|                              |  |      |         |      |   |        
|EBITDA(1)                     |  | $    | 2,269   |      | $ | 3,653  
|                              |  |      |         |      |   |        
|Capital expenditures          |  | $    | 4,143   |      | $ | 752    
|                              |  |      |         |      |   |        
|Identifiable assets(2)        |  | $    | 37,099  |      | $ | 36,070 
|                              |  |      |         |      |   |        
|Investment Properties(3)      |  |      |         |      |   |        
|Operating revenues            |  | $    | 12,402  |      | $ | 7,204  
|                              |  |      |         |      |   |        
|Operating income              |  | $    | 8,709   |      | $ | 5,508  
|                              |  |      |         |      |   |        
|Interest expense              |  | $    | 11,772  |      | $ | 7,297  
|                              |  |      |         |      |   |        
|Depreciation and amortization |  | $    | 3,693   |      | $ | 1,696  
|                              |  |      |         |      |   |        
|Interest income               |  | $    | 0       |      | $ | 0      
|                              |  |      |         |      |   |        
|EBITDA(1)                     |  | $    | 12,402  |      | $ | 7,204  
|                              |  |      |         |      |   |        
|Capital expenditures          |  | $    | 0       |      | $ | 145,019
|                              |  |      |         |      |   |        
|Identifiable assets(2)        |  | $    | 147,077 |      | $ | 150,019
|                              |  |      |         |      |   |        
|Other & Eliminations          |  |      |         |      |   |        
|Operating revenues            |  | $    | 895     |      | $ | 779    
|                              |  |      |         |      |   |        
|Operating income (loss)       |  | $    | (2,676  | )    | $ | (3,019 
|                              |  |      |         |      |   |        
|Interest expense              |  | $    | (119    | )    | $ | (527   
|                              |  |      |         |      |   |        
|Depreciation and amortization |  | $    | 341     |      | $ | 361    
|                              |  |      |         |      |   |        
|Interest income               |  | $    | 1,272   |      | $ | 1,927  
|                              |  |      |         |      |   |        
|EBITDA(1)                     |  | $    | (1,063  | )    | $ | (731   
|                              |  |      |         |      |   |        
|Capital expenditures          |  | $    | 313     |      | $ | 421    
|                              |  |      |         |      |   |        
|Identifiable assets(2)        |  | $    | 57,910  |      | $ | 63,396 
|                              |  |      |         |      |   |        

47

---

|Total                         |  |   |         |  |   |         |  |   |        
|----------------------------- |  | - | ------- |  | - | ------- |  | - | -------
|Operating revenues            |  | $ | 48,765  |  | $ | 48,003  |  | $ | 128,595
|                              |  |   |         |  |   |        
|Operating income              |  | $ | 6,284   |  | $ | 3,972   |  | $ | 11,349 
|                              |  |   |         |  |   |        
|Interest expense              |  | $ | 16,413  |  | $ | 11,140  |  | $ | 22,157 
|                              |  |   |         |  |   |        
|Depreciation and amortization |  | $ | 6,035   |  | $ | 4,132   |  | $ | 11,417 
|                              |  |   |         |  |   |        
|Reorganization expenses       |  | $ | 0       |  | $ | 0       |  | $ | 3,425  
|                              |  |   |         |  |   |        
|Interest income               |  | $ | 1,289   |  | $ | 2,022   |  | $ | 480    
|                              |  |   |         |  |   |        
|EBITDA(1)                     |  | $ | 13,608  |  | $ | 10,126  |  | $ | 23,246 
|                              |  |   |         |  |   |        
|Capital expenditures          |  | $ | 4,456   |  | $ | 146,192 |  | $ | 2,537  
|                              |  |   |         |  |   |        
|Identifiable assets(2)        |  | $ | 242,086 |  | $ | 249,485 |  | $ | 145,596
|                              |  |   |         |  |   |        

---

27.  Subsequent Events

In October 2002, the Board of Directors of the Company authorized an increase in the amount of cash that may be used under the Company's preferred stock
repurchase program to purchase preferred stock to $2.5 million.

On
October 8, 2002 the Company entered into a Subordinated Loan Agreement (the "Dukes Loan Agreement") with Duke's-Sparks, which owns Duke's Casino in Sparks, Nevada. Under the
Dukes Loan Agreement, Duke's-Sparks may borrow up to $1.1 million for construction, equipment, furnishings and other costs related to the completion and opening of Duke's Casino. The loan
matures on October 8, 2009 and bears interest at an annual rate of 15%, plus additional interest at an annual rate of 10% until the option described below is exercised. In connection with the
Dukes Loan Agreement, the Company received an option to acquire 70% of the equity in the entity that owns Duke's. As of December 16, 2002 Duke's had borrowed approximately $700,000 and the
Company expects that the entire amount under the loan will be borrowed by December 31, 2002.

On
October 4, 2002, a subsidiary of the Company entered into the Duke's-Sparks Lease with Dukes-Sparks under which a subsidiary of the Company will lease Duke's Casino. The
Duke's-Sparks Lease will become effective on the first day of the month immediately following the month in which

48

---

the Company has obtained all gaming approvals required in order for the Company to operate the casino at Duke's Casino and will expire on the date which is the earlier of three years after the
commencement date of the Duke's-Sparks Lease, or the date which is the first day of the month which immediately follows the month in which Dukes-Sparks receives the necessary approvals to operate the
casino. The Duke's-Sparks Lease provides for monthly base rent in the amount of $81,216.

28.  Quarterly Results of Operations (Unaudited)

2002

2001(Dollars in thousands, except per share)RevenuesFirst Quarter

$
12,406

$
10,014Second Quarter


14,027


12,202Third Quarter


11,383


13,790Fourth Quarter


10,949


11,997$
48,765

$
48,003Operating income (loss)First Quarter

$
1,586

$
(936
)Second Quarter


2,717


1,250Third Quarter


1,072


2,346Fourth Quarter


909


1,312$
6,284

$
3,972Net income (loss)First Quarter

$
(1,369
)
$
89,947Second Quarter


(827
)

2,823Third Quarter


(3,683
)

(1,704
)Fourth Quarter


(1,828
)

(1,884
)$
(7,707
)
$
89,182Net income (loss) per common shareFirst Quarter

$
(0.28
)
$
14.41Second Quarter


(0.20
)

0.35Third Quarter


(0.66
)

(0.34
)Fourth Quarter


(0.36
)

(0.31
)$
(1.50
)
$
14.11


49

---

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

Not
applicable.

PART III

Item 10.Directors and Executive Officers of the Registrant Executive Compensation and Other Information

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

Item 11.Executive Compensation

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

Item 12.Security Ownership of Certain Beneficial Owners and Management

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

Item 13.Certain Relationships and Related Transactions

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

Item 14Controls and Procedures

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

PART IV

Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K



|Exhibit Number |  | 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.)

50

---

|3.2   |  | Certificate of Designation for Exchangeable Redeemable Preferred Stock. (Previously filed with the Securities and Exchange Commission as an exhibit to the Company's Registration Statement on Form S-4
(No. 33-67864) and incorporated herein by reference.)
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.3   |  | Amended and Restated Bylaws of Santa Fe Gaming Corporation.(5)                                                                                                                                                                                               
|10.1  |  | Notes secured by liens on office building in Las Vegas, Nevada in the original principal amounts of $301,598.05, $23,337.96 and $649,063.99 bearing interest at 10%, 11% and 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  |  | Employment Agreement by and among Santa Fe Gaming Corporation and Thomas K. Land dated October 1, 1999.(4)                                                                                                                                                   
|10.5  |  | First amendment to the Employment Agreement, dated October 1, 1998 by and among Santa Fe Gaming Corporation and Thomas K. Land.(4)                                                                                                                           
|10.6  |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998.(5)                                                                                                                                          
|10.7  |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI.(6)                                                                                                                                                         
|10.8  |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                                               
|10.9  |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                            
|10.10 |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden.(7)                                                                                                                   
|10.11 |  | Asset Purchase Agreement dated June 12, 2000 by and among Santa Fe Hotel Inc., Santa Fe Gaming Corporation and Station Casinos, Inc.(8)                                                                                                                      
|10.12 |  | Credit Agreement dated as of June 12, 2000 by and between Pioneer Hotel Inc. and Station Casinos, Inc.(8)                                                                                                                                                    
|10.13 |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000.(9)                                                                                                                                          
|10.14 |  | Guaranty by Santa Fe Gaming Corporation, guarantor; Pioneer Hotel Inc., tenant and guarantor and Santa Fe Hotel Inc., guarantor dated December 29, 2000.(9)                                                                                                  
|10.15 |  | Exchange Agreement among Pioneer LLC, as transferor; Pioneer Hotel Inc., as tenant; HAHF Pioneer LLC as transferee and Heller Affordable House of Florida, Inc., dated December 29, 2000.(9)                                                                 
|10.16 |  | Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                                                       
|10.17 |  | Lease Schedule No. 1 to Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                               
|10.18 |  | Guaranty by and between PDS Gaming Corporation-Nevada and Santa Fe Gaming Corporation dated December 29, 2000.(9)                                                                                                                                            
|10.19 |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001.(10)                                                                                                            
|10.20 |  | Promissory Note dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.(10)                                                                                    
|10.21 |  | Deed of Trust and Security Agreement dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.(10)                                                               

51

---

|10.22 |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999.(10)                                                                                                                               
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.23 |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC.(10)                                                                                                                                                 
|10.24 |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                                                                
|10.25 |  | First Amendment dated December 26, 2000 to Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                     
|10.26 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005.(10)                                                                                                                                                                         
|10.27 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020.(10)                                                                                                                                                                         
|10.28 |  | Mortgage, Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing financing Statement dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank,
National Association as Indenture Trustee.(10)
|10.29 |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank. (10)                                                                                                                                                      
|10.30 |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee.(10)                                                                                                             
|10.31 |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden.(11)                                                                                                                                                   
|10.32 |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Duke's-Sparks, LLC.                                                                                                                                                              
|10.33 |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino.                                                                                                                                                                                          
|10.34 |  | Option Agreement dated October 8, 2002 between Endeavor North LLC and Archon Corp.                                                                                                                                                                                
|21    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                      
|23.1  |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                 
|99.1  |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                   

---

FOOTNOTES TO EXHIBIT INDEX

52

---

53

---



SIGNATURES

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

|                  |  | ARCHON CORPORATION
|----------------- |  | ------------------
|December 20, 2002 |  | By:               

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

|Signature                                                                              |  | Title                                                                             |  | Date             
|-------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------- |  | -----------------
|/s/PAUL W. LOWDENPaul W. Lowden (Principal Executive Officer)                          |  | Chairman of the Board and President (Principal Executive Officer)                 |  | December 20, 2002
|/s/SUZANNE LOWDENSuzanne Lowden                                                        |  | Director                                                                          |  | December 20, 2002
|/s/HOWARD E. FOSTERHoward E. Foster                                                    |  | Special Director                                                                  |  | December 20, 2002
|/s/JOHN DELANEYJohn Delaney                                                            |  | Director                                                                          |  | December 20, 2002
|/s/WILLIAM J. RAGGIOWilliam J. Raggio                                                  |  | Director                                                                          |  | December 20, 2002
|/s/CHARLES W. SANDEFURCharles W. Sandefur (Principal Financial and Accounting Officer) |  | Director and Chief Financial Officer (Principal Accounting and Financial Officer) |  | December 20, 2002

54

---

SECTION 302 CERTIFICATION

I,
Paul W. Lowden, certify that:





|Dated: December 20, 2002                                                                           | 
|-------------------------------------------------------------------------------------------------- | 
|/s/ Paul W. LowdenPaul W. Lowden
Chairman of the Board and President
(Principal Executive Officer) | 

---

SECTION 302 CERTIFICATION

I,
Charles W. Sandefur, certify that:





|Dated: December 20, 2002                                                                                                    | 
|--------------------------------------------------------------------------------------------------------------------------- | 
|/s/CHARLES W. SANDEFURCharles W. Sandefur
Director and Chief Financial Officer
(Principal Accounting and Financial Officer) | 

---

INDEX TO EXHIBITS

|Exhibit Number |  | Description of Exhibit                                                                                                                                                                                                                                            
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1            |  | Articles of Incorporation and Bylaws of the Company (Previously filed with the Securities and Exchange Commission as an exhibit to the Company's S-4 (No. 33-67864) Registration Statement on Form 10-K dated
June 15, 1982 and incorporated herein by reference.)
|3.2            |  | Certificate of Designation for Exchangeable Redeemable Preferred Stock. (Previously filed with the Securities and Exchange Commission as an exhibit to the Company's Registration Statement on Form S-4
(No. 33-67864) and incorporated herein by reference.)     
|3.3            |  | Amended and Restated Bylaws of Santa Fe Gaming Corporation.(5)                                                                                                                                                                                                    
|10.1           |  | Notes secured by liens on office building in Las Vegas, Nevada in the original principal amounts of $301,598.05, $23,337.96 and $649,063.99 bearing interest at 10%, 11% and 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           |  | Employment Agreement by and among Santa Fe Gaming Corporation and Thomas K. Land dated October 1, 1999.(4)                                                                                                                                                        
|10.5           |  | First amendment to the Employment Agreement, dated October 1, 1998 by and among Santa Fe Gaming Corporation and Thomas K. Land.(4)                                                                                                                                
|10.6           |  | Management Agreement by and between Pioneer Hotel and Santa Fe Gaming Corporation dated as of December 30, 1998.(5)                                                                                                                                               
|10.7           |  | Right of First Refusal dated November 15, 1999 by and among Station Casinos, Inc., SFGC and SFHI.(6)                                                                                                                                                              
|10.8           |  | Non-Competition Agreement dated November 15, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                                                    
|10.9           |  | First Amendment to Non-Competition Agreement dated November 16, 1999 by and among Station Casinos, Inc., SFHI, SLVC, and SFGC.(6)                                                                                                                                 
|10.10          |  | Shareholders Agreement dated as of June 12, 2000 among Station Casino, Inc., Paul W. Lowden, David G. Lowden and Christopher W. Lowden.(7)                                                                                                                        
|10.11          |  | Asset Purchase Agreement dated June 12, 2000 by and among Santa Fe Hotel Inc., Santa Fe Gaming Corporation and Station Casinos, Inc.(8)                                                                                                                           
|10.12          |  | Credit Agreement dated as of June 12, 2000 by and between Pioneer Hotel Inc. and Station Casinos, Inc.(8)                                                                                                                                                         
|10.13          |  | Lease Agreement between HAHF Pioneer, LLC as landlord and Pioneer Hotel Inc., as tenant dated December 29, 2000.(9)                                                                                                                                               
|10.14          |  | Guaranty by Santa Fe Gaming Corporation, guarantor; Pioneer Hotel Inc., tenant and guarantor and Santa Fe Hotel Inc., guarantor dated December 29, 2000.(9)                                                                                                       
|10.15          |  | Exchange Agreement among Pioneer LLC, as transferor; Pioneer Hotel Inc., as tenant; HAHF Pioneer LLC as transferee and Heller Affordable House of Florida, Inc., dated December 29, 2000.(9)                                                                      
|10.16          |  | Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                                                            
|10.17          |  | Lease Schedule No. 1 to Master Lease Agreement by and between PDS Gaming Corporation-Nevada and Pioneer Hotel Inc. dated December 29, 2000.(9)                                                                                                                    
|10.18          |  | Guaranty by and between PDS Gaming Corporation-Nevada and Santa Fe Gaming Corporation dated December 29, 2000.(9)                                                                                                                                                 
|10.19          |  | Purchase Contract by and between David Bralove, as trustee of the Gaithersburg Realty Trust and Santa Fe Hotel, Inc. dated February 28, 2001.(10)                                                                                                                 
|10.20          |  | Promissory Note dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.(10)                                                                                         

---

|10.21 |  | Deed of Trust and Security Agreement dated February 28, 2001 by and between SFHI, LLC and Lehman Brothers Holdings Inc., d/b/a Lehman Capital, a division of Lehman Brothers Holdings Inc.(10)                                                                    
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22 |  | 75 Lease Agreement by and between REII-Gaithersburg, Maryland, L.L.C. and GE Information Services, Inc. dated January 29, 1999.(10)                                                                                                                               
|10.23 |  | Assignment of Lease and Rents dated February 28, 2001 by and between Gaithersburg Realty Trust and SFHI, LLC.(10)                                                                                                                                                 
|10.24 |  | Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                                                                
|10.25 |  | First Amendment dated December 26, 2000 to Contract dated December 8, 2000 by and between S-BNK#2 Investors, L.P. and Santa Fe Hotel Inc.(10)                                                                                                                     
|10.26 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 10.20% A-1 Note due June 30, 2005.(10)                                                                                                                                                                         
|10.27 |  | Non-Recourse Note S-BNK Dorchester Operations, LLC 12.18% A-2 Note due June 30, 2020.(10)                                                                                                                                                                         
|10.28 |  | Mortgage, Open-End Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing financing Statement dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank,
National Association as Indenture Trustee.(10)
|10.29 |  | Lease Agreement dated June 30, 2000 by and between S-BNK Dorchester Operations, LLC and Sovereign Bank. (10)                                                                                                                                                      
|10.30 |  | Indenture dated as of June 30, 2000 between S-BNK Dorchester Operations, LLC. and First Security Bank, National Association as Indenture Trustee.(10)                                                                                                             
|10.31 |  | Patent Rights Royalty Agreement dated as of January 2, 2002 between Archon Corporation and David G. Lowden.(11)                                                                                                                                                   
|10.32 |  | Subordinated Loan Agreement dated October 8, 2002 between Archon Corporation and Duke's-Sparks, LLC.                                                                                                                                                              
|10.33 |  | Lease dated October 4, 2002 between Archon Corporation and Dukes Casino.                                                                                                                                                                                          
|10.34 |  | Option Agreement dated October 8, 2002 between Endeavor North LLC and Archon Corp.                                                                                                                                                                                
|21    |  | Subsidiaries of the Company.                                                                                                                                                                                                                                      
|23.1  |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                 
|99.1  |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                   

---

FOOTNOTES TO EXHIBIT INDEX

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