10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended: December 31, 2006

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

For the transition period from              to             

Commission File Number: 1-9481

ARCHON CORPORATION

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive office and zip code)

(702) 732-9120

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer  ¨    Accelerated filer  ¨    Non-accelerated filer  x

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

6,235,931 as of February 13, 2007

ARCHON CORPORATION

INDEX

				Page
PART I FINANCIAL INFORMATION
	Item 1	Unaudited Condensed Consolidated Financial Statements:
			Condensed Consolidated Balance Sheets as of December 31, 2006 and September 30, 2006	1
			Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2006 and 2005	3
			Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended December 31, 2006	4
			Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2006 and 2005	5
			Notes to Condensed Consolidated Financial Statements	6
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
	Item 3	Quantitative and Qualitative Disclosures About Market Risk		22
	Item 4	Controls and Procedures		22
PART II OTHER INFORMATION
	Item 1	Legal Proceedings		24
	Item 2	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		24
	Item 3	Defaults Upon Senior Securities		24
	Item 4	Submission of Matters to a Vote of Security Holders		24
	Item 5	Other Information		24
	Item 6	Exhibits		25

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PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	December 31, 2006		September 30, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	8,706,525	$	6,187,533
Investment in marketable securities		7,826,039		6,011,225
Accounts receivable, net		130,256		1,096,333
Inventories		423,478		414,033
Prepaid expenses and other		1,088,736		1,045,654
Total current assets		18,175,034		14,754,778
Land held for sale		21,504,400		21,504,400
Property held for investment, net		126,571,653		127,364,625
Property and equipment, net		26,038,401		26,778,164
Other assets		7,696,154		7,648,201
Total assets	$	199,985,642	$	198,050,168

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Archon Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (continued)

	December 31, 2006		September 30, 2006
LIABILITIES and STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,255,642	$	2,770,938
Interest payable		377,050		1,310,796
Accrued and other liabilities		3,737,956		3,524,408
Nonrefundable option payment		6,922,500		5,750,000
Current portion of debt		11,343,770		11,427,277
Current portion of non-recourse debt		2,268,827		2,195,326
Total current liabilities		27,905,745		26,978,745
Debt – less current portion		114,252		223,306
Non-recourse debt – less current portion		76,222,582		76,818,600
Deferred income taxes		28,096,490		27,245,317
Other liabilities		44,309,205		45,051,567
Stockholders’ equity		23,337,368		21,732,633
Total liabilities and stockholders’ equity	$	199,985,642	$	198,050,168

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Archon Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

	Three Months Ended December 31,
	2006			2005
Revenues:
Casino	$	6,015,396		$	5,697,190
Hotel		634,629			558,382
Food and beverage		1,807,796			1,670,253
Investment properties		3,100,562			3,100,562
Other		1,086,144			828,309
Gross revenues		12,644,527			11,854,696
Less casino promotional allowances		(1,562,242	)		(1,415,203	)
Net operating revenues		11,082,285			10,439,493
Operating expenses:
Casino		3,559,824			3,323,463
Hotel		276,641			243,950
Food and beverage		946,640			932,671
Other		477,313			394,925
Selling, general and administrative		965,896			883,615
Corporate expenses		912,832			856,895
Utilities and property expenses		1,175,455			1,128,776
Depreciation and amortization		1,368,766			1,390,205
Gain on disposal of assets		(22,817	)		0
Total operating expenses		9,660,550			9,154,500
Operating income		1,421,735			1,284,993
Interest expense		(2,143,898	)		(2,229,611	)
Interest and other income		102,662			129,559
Loss before income tax expense benefit and discontinued operations		(619,501	)		(815,059	)
Federal income tax benefit		225,219			285,271
Loss before discontinued operations		(394,282	)		(529,788	)
Discontinued operations – gain on sale, net of tax provision of $510,596		948,250			0
Net income (loss)		553,968			(529,788	)
Dividends accrued on preferred shares		(377,819	)		(377,819	)
Net income (loss) applicable to common shares	$	176,149		$	(907,607	)
Average common shares outstanding		6,672,281			6,235,931
Average common and common equivalent shares outstanding		7,051,912			6,235,931
Loss from continuing operations per common share:
Basic	$	(0.12	)	$	(0.15	)
Diluted	$	(0.12	)	$	(0.15	)
Income (loss) per common share:
Basic	$	0.03		$	(0.15	)
Diluted	$	0.02		$	(0.15	)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Stockholders’ Equity

For the Three Months Ended December 31, 2006

	Common Stock		Preferred Stock		Additional Paid-In Capital		Accumulated Deficit			Accumulated Other Comprehensive Income		Treasury Stock			Total
Balances,
October 1, 2006	$	66,723	$	9,445,483	$	61,482,194	$	(51,098,102	)	$	1,924,109	$	(87,774	)	$	21,732,633
Net income								553,968								553,968
Unrealized gain on marketable securities											1,050,767					1,050,767
Balances,
December 31, 2006	$	66,723	$	9,445,483	$	61,482,194	$	(50,544,134	)	$	2,974,876	$	(87,774	)	$	23,337,368

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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Archon Corporation and Subsidiaries

Consolidated Condensed Statements of Cash Flows

	Three Months Ended December 31,
	2006			2005
Cash flows from operating activities:
Cash and cash equivalents provided by operations	$	526,032		$	955,175
Changes in assets and liabilities:
Accounts receivable, net		966,077			903,192
Inventories		(9,445	)		12,134
Prepaid expenses and other		(43,081	)		(165,438	)
Deferred income taxes		285,377			(285,271	)
Other assets		(132,914	)		14,971
Accounts payable		484,704			862,828
Interest payable		(933,746	)		(904,357	)
Accrued and other liabilities		213,548			(337,640	)
Nonrefundable option payment		1,172,500			0
Other liabilities		(742,362	)		(186,316	)
Net cash provided by operating activities		1,786,690			869,278
Cash flows from investing activities:
Proceeds from sale of property		1,832,500			0
Capital expenditures		(186,869	)		(31,170	)
Marketable securities purchased		(198,251	)		0
Marketable securities sold		0			890,000
Net cash provided by investing activities		1,447,380			858,830
Cash flows from financing activities:
Paid on debt and obligation under lease		(715,078	)		(1,367,781	)
Net cash used in financing activities		(715,078	)		(1,367,781	)
Increase in cash and cash equivalents		2,518,992			360,327
Cash and cash equivalents, beginning of period		6,187,533			2,116,708
Cash and cash equivalents, end of period	$	8,706,525		$	2,477,035

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

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ARCHON CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and General Information

Archon Corporation (the “Company” or “Archon”) is a Nevada corporation. The Company’s primary business operations are conducted through a wholly-owned subsidiary corporation, Pioneer Hotel Inc. (“PHI”), which operates the Pioneer Hotel & Gambling Hall (the “Pioneer”) in Laughlin, Nevada. In addition, the Company owns real estate on Las Vegas Boulevard South (the “Strip”) in Las Vegas, Nevada, and also owns investment properties in Dorchester, Massachusetts and Gaithersburg, Maryland. In June 2006, the Company announced that it had entered into an option agreement for the sale of the real estate it owns on the Strip for a total sale price of $450 million, subject to the terms of the agreement. See Notes 4 and 8

The condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three month period is not necessarily indicative of results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2006.

Summary of Significant Accounting Policies

Principles of Consolidation. The accompanying unaudited condensed 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 by the equity method. All material intercompany accounts and transactions have been eliminated in consolidation.

Earnings Per Share. The Company presents its per share results in accordance with Statement of Accounting Standards (“SFAS”) No. 128, “Earnings Per Share” (“SFAS 128”). SFAS 128 requires the presentation of basic net loss per share and diluted net loss per share. Basic per share amounts are computed by dividing net loss by average shares outstanding during the period, while diluted per share amounts reflect the impact of additional dilution for all potentially dilutive securities, such as stock options. Dilutive stock options of approximately 400,000 were included in diluted calculations during the quarter ended December 31, 2006. Dilutive stock options of approximately 800,000 were not included in diluted calculations during the quarter ended December 31, 2005, as the Company incurred a net loss during that period and the effect would be antidilutive.

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

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

There was no impact on net income for the first quarter of 2007 as no share-based payments were unvested as of October 1, 2005 and no share-based payments have been granted subsequent to October 1, 2005. The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to the exercise of vested options as a result of net operating loss carryforwards.

As of December 31, 2006, the Company has the following share-based compensation plans:

Key Employee Stock Option Plan: The Company’s Key Employee Stock Option Plan (the “Stock Option Plan”) provided for the grant of up to 1.2 million shares of its common stock to key employees. The Stock Option Plan provided for both incentive stock options and non-qualified stock options. Stock option grants had generally vested over a three-year period from the employee’s hire date. The Stock Option Plan ceased granting options as of September 30, 2003, when the plan had expired. In July 2005, the Stock Option Plan was reinstated for an additional 10-year period. During the quarter ended December 31, 2006, there were no stock options granted under the Stock Option Plan. As of December 31, 2006, there were approximately 804,860 options outstanding and exercisable under the Stock Option Plan. During the quarter ended December 31, 2006, no options were exercised.

1995 Non-Employee Director Stock Option Plan: In December 1995, the Company adopted the 1995 Non-Employee Director Stock Option Plan (the “Non-Employee Director Plan”) that provided for the grant of up to 100,000 shares of its common stock to the directors. Under the Non-Employee Director Plan, directors were automatically granted an option to purchase 12,500 shares of the common stock at an exercise price equal to the market value of such shares on the date of such election to the board. Stock option grants vested immediately. The Non-Employee Director Plan ceased granting options on March 21, 2002. As of December 31, 2006, there were 25,000 options outstanding and exercisable under this plan. During the quarter ended December 31, 2006, no options were exercised.

Subsidiary Stock Option Plans: SFHI, Sahara Las Vegas Corp (“SLVC”) and PHI (collectively, the “Subsidiaries”), have adopted subsidiary stock option plans (the “Subsidiary Plans”). The Subsidiary Plans provide for the grant of options by each of the Subsidiaries with respect to an aggregate of up to 10% of the outstanding shares of such Subsidiary’s Common Stock to employees, non-employee directors, consultants or affiliates of the Company or the Subsidiaries. The purpose of the Subsidiary Plans is to enable the Subsidiaries and the Company to attract, retain and motivate their employees, non-employee directors, consultants and affiliates by providing for or increasing the proprietary interest of such persons in the Subsidiaries. As of December 31, 2006, no options had been granted under any of the Subsidiary Plans.

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The following table summarizes stock option activity during the first quarter of fiscal 2007 under all plans:

	Number of Shares (000’s)	Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000’s)
Options outstanding at September 30, 2006:	830	$	8.12	3.6 yrs	$	20,560
Granted	0		N/A	N/A		N/A
Exercised	0		N/A	N/A		N/A
Canceled	0		N/A	N/A		N/A
Options outstanding at December 31, 2006	830	$	8.12	3.6 yrs	$	24,792
Exercisable at December 31, 2006	830	$	8.12	3.6 yrs	$	24,792

As of December 31, 2006, there was no unrecognized compensation cost related to unvested stock options. There were no options exercised in the first quarter of fiscal 2007. The fair value of options vested in the first quarter of fiscal 2007 is not applicable as no options vested for the first time during this quarter. There were no unvested shares at December 31, 2006.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on both the implied volatility and historical volatility on the stock.

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

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

The Black-Scholes-Merton option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award and stock price volatility. The Company did not calculate the fair value of stock options granted during the three months ended December 31, 2006 and 2005 as no stock options were granted during these periods.

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 those related to customer incentives, bad debts, inventories, investments, estimated useful lives for depreciable and amortizable assets, valuation reserves and estimated cash flows in assessing the recoverability of long-lived assets, estimated liabilities for slot club bonus point programs, income taxes, contingencies and litigation. Actual results may differ from estimates.

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Recently Issued Accounting Standards.

EITF 04-5. In June 2005, the EITF reached a consensus on recently issued EITF No. 04- 5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights, which addresses when a general partner, or general partners as a group, control and should therefore, consolidate a limited partnership. Under EITF No. 04-5, a sole general partner is presumed to control a limited partnership when certain conditions are met. The Company has determined that it will not be required to consolidate the accounts of Santa Fe Mining Corp (“SFMC”).

2. Comprehensive Income (Loss)

Comprehensive income (loss) is the total of net income (loss) and all other non-stockholder changes in stockholders’ equity. Comprehensive income (loss) for the three months ended December 31, 2006 and 2005 is as follows (in thousands):

	Three Months Ended December 31,
	2006		2005
Net income (loss)	$	554	$	(530	)
Unrealized gain on marketable securities, net of income taxes		1,051		99
Comprehensive income (loss)	$	1,605	$	(431	)

3. Other Assets

Included in Other assets at December 31, 2006 and September 30, 2006 are unamortized loan issue costs, which were incurred during the acquisition of certain rental property and certain debt, and deferred rents of approximately $4.5 million and $4.6 million, respectively. The unamortized loan issue costs are being amortized on the straight-line basis over the loan period, which closely approximates the effective interest method, and the deferred rents are being amortized on the straight-line basis over the lease period.

Additionally, Other assets at December 31, 2006 and September 30, 2006 include $100,000 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.

Other assets also include amounts for the cash surrender value of life insurance of approximately $800,000 on December 31, 2006 and September 30, 2006 and investments in unconsolidated entities of approximately $1.9 million and $1.8 million on December 31, 2006 and September 30, 2006, respectively. One of the unconsolidated entities is a 50% owned LLC which has the following financial profile at and for the three months ended December 31, 2006: current and total assets of approximately $200,000 and $1.0 million, respectively; current and total liabilities of approximately $100,000 and $200,000, respectively; total equity of approximately $800,000; revenues of approximately $500,000 and pretax income of approximately $100,000. As of and for the three months ended December 31, 2005: current and total assets of approximately $300,000 and $1.2 million, respectively; current and total liabilities of approximately $100,000 and $400,000, respectively; total equity of approximately $800,000; revenues of approximately $500,000 and pretax income of approximately $100,000.

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4. Nonrefundable Option Payment

Included in Nonrefundable option payment at September 30, 2006, were a nonrefundable payment of $5.0 million and a nonrefundable extension fee of $750,000 received from a third party which has an option to acquire the Company’s Strip property. At December 31, 2006, the Company received an additional nonrefundable extension fee of approximately $1.2 million in December 2006 which is included in Nonrefundable option payment. See Note 8

5. Related Parties

The Company has entered into a Patent Rights and Royalty Agreement with David Lowden, brother of Paul W. Lowden, with respect to certain gaming technology for which David Lowden has been issued a patent. The Company has agreed to pay certain royalty payments with respect to the technology incorporated into gaming devices placed in operation, as well as costs related to maintain the patent. David Lowden has granted the Company an exclusive five-year license expiring in January 2007 in the United States with respect to the technology, which will be automatically renewed for additional two-year terms unless Archon terminates the agreement within thirty days prior to the renewal or the agreement is otherwise earlier terminated in accordance with its terms. The Company also has an understanding with David Lowden that it will pay for the costs of commercial development of the technology. Through December 31, 2006, the Company had expensed approximately $400,000 for commercial development of the technology. No costs have been expensed in the three months ended December 31, 2006.

See Note 3 for information regarding transactions between the Company and J & J Mortgage.

6. Debt

The Company has a loan payable to a bank which, under the original terms, had a balloon payment of $10.0 million due on December 15, 2006. In January 2007, the lender modified the loan to extend the maturity date to January 15, 2008, at which time a balloon payment of $9.5 million is due. Monthly principal and interest payments on the loan were reduced from $120,000 to $98,000. All other loan terms remained the same. The Company paid $76,000 in fees to modify the loan.

Under this loan, the Company has a financial covenant that requires the Company to maintain a minimum ratio of earnings before interest, taxes, depreciation and amortization, net of investment properties, compared to current portions of long-term debt, excluding investment properties. At December 31, 2006, the Company was not in compliance with this covenant and, as such, was technically in default under the debt agreement. Management believes it is not the intention of the lender to declare a default relative to this covenant. Management believes the Company has sufficient assets to meet any unforeseen demands on current operations or significant debt obligations.

7. Federal Income Tax

The Company recorded federal income tax expense of approximately $300,000 and federal income tax benefit of approximately $300,000, based on statutory rates, for the quarters ended December 31, 2006 and 2005, respectively.

The Company has recorded deferred tax assets related to net operating assets, as the Company is able to offset its assets with its deferred tax liabilities. Realization of the net deferred tax assets is dependent on the Company’s ability to generate profits from operations or from the sale of long-lived assets, which would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will generate profits from operations or sell those assets or will generate profits from sales if they were to occur in the

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future. In the event the Company does generate profits from sales of long-lived assets in the future, the valuation allowance would need to be recorded and would impact the Company’s future results of operations.

8. Sale of Option for Strip Land

On June 24, 2006, SLVC, a Nevada corporation and subsidiary of Archon Corporation entered into an Option Agreement (the “Agreement”) between SLVC and LVTI LLC, a Delaware limited liability company (“LVTI”). Pursuant to the Agreement, SLVC granted to LVTI an option (the “Option”) to purchase an approximately 27 acre parcel of real property located on Las Vegas Boulevard South (the “Property”) or, alternatively, SLVC’s membership interest in a limited liability company (“LVT LLC”) that may be formed and into which the Property would be contributed. The purchase price to be paid by LVTI for purchase of the Property or the membership interest in LVT LLC is $450 million. LVTI paid an initial deposit of $5.0 million on June 27, 2006. The Agreement also provided for a second deposit of $40.0 million due on or before September 22, 2006, and additional monthly payments of approximately $2.2 million in each month commencing on the 13th calendar month following the date the second deposit is paid until the closing of the exercise of the Option. The 30-day due diligence period ended and LVTI did not terminate the Agreement. Upon exercise of the Option, the initial deposit and the second deposit will be credited against the total purchase price. The Agreement provides for certain adjustments to the purchase price if certain easements are entered into with respect to the Property prior to the closing. The Option may be exercised by LVTI at any time between the last day of the 12^th calendar month and the last day of the 18^th calendar month following the date on which the second deposit is paid; provided that the option term may be extended by up to 30 days if SLVC does not give written notice to LVTI of the option term expiration as required by the Agreement. The first and second deposits and any additional monthly payments paid to SLVC prior to termination of the Agreement will be retained by SLVC upon a termination of the Agreement without exercise of the option, except under certain circumstances specified in the Agreement.

Pursuant to the First Amendment of the Agreement, LVTI elected to pay to the Company $750,000 to extend the date on which the second deposit of $40.0 million was due from September 22, 2006 to December 31, 2006. Pursuant to the Second Amendment, LVTI elected to pay to the Company $1,172,500 to extend the date on which the second deposit of $40.0 million was due from December 31, 2006 to March 31, 2007 (the “Second Extension Payment”). The Second Extension Payment, is non-refundable and will not be applied against the purchase price under the Agreement. See Note 4

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

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

The holders of more than 75% of the Company’s outstanding shares of common stock, including Paul W. Lowden, President and Chief Executive Officer of the Company and holder of more than 74% of the outstanding common stock, have approved the Agreement and the transactions contemplated thereby. No other stockholder approval is required in connection with the transaction.

9. Preferred Stock

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

“The holders of record of shares of Exchangeable Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore,

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

In October 2003, the dividend rate increased to 16.0%. As of December 31,2006, the aggregate liquidation preference of the preferred stock was approximately $21.7 million, or $4.93 per share.

Pursuant to the Certificate of Designation, 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. As such, two of the Company’s six directors have been elected by the preferred shareholders.

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

The holder of the preferred stock filed a complaint in November 2006. The Complaint alleges, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 13 years ago. The Complaint further alleges that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company plans to vigorously defend this Complaint and has both procedural and substantive defenses and may have rights against other persons or parties related to the purported claim.

In this suit, two holders of the Company’s Exchangeable Refundable Preferred Stock (the “Preferred Stock”) have alleged that the Company, beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the Liquidation Preference for the Preferred Stock. The complaint seeks damages for violations of Section 10(b) of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticut’s Unfair Trade Practices Act. The complaint seeks unspecified compensatory damages and the equitable relief of an accounting.

The Company filed a motion to dismiss the complaint in its entirety on December 19, 2006. On February 7, 2007, the plaintiffs filed a motion for leave to amend the complaint. The Court granted the motion to amend.

10. Discontinued Operations

In October 2006, the Company sold real estate with a net book value of $400,000 for $1.8 million. A gain of $900,000, net of taxes of $500,000, on the sale was recorded as discontinued operations. The operating results from this property are insignificant and are not recorded as discontinued operations.

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11. Supplemental Statement of Cash Flows Information

Supplemental statement of cash flows information for the three months ended December 31, 2006 and 2005 is presented below:

	2006		2005
	(amounts in thousands)
Operating activities:
Cash paid during the period for interest	$	2,996	$	3,012
Cash paid during the period for income taxes	$	0	$	0
Investing and financing activities:
Unrealized gain on marketable securities	$	1,051	$	99

12. 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. “Other and Eliminations” below includes financial information for the Company’s corporate operations, adjusted to reflect eliminations upon consolidation.

Set forth below is the unaudited financial information for the segments in which the Company operates for the three months ended December 31, 2006 and 2005.

	Three Months Ended December 31,
	2006			2005
	(dollars in thousands)
Pioneer Hotel:
Net operating revenues	$	7,431		$	6,937
Operating income	$	(543	)	$	(542	)
Depreciation and amortization	$	549		$	562
Interest expense	$	335		$	356
Interest and other income	$	2		$	3
Loss before income taxes	$	(876	)	$	(895	)
Capital expenditures / transfers	$	23		$	31
Identifiable assets (1)	$	29,489		$	30,921
Investment Properties:
Net operating revenues	$	3,101		$	3,101
Operating income	$	2,308		$	2,308
Depreciation and amortization	$	793		$	793
Interest expense	$	1,855		$	1,890
Interest and other income	$	1		$	1
Income before income taxes	$	453		$	419
Capital expenditures / transfers	$	0		$	0
Identifiable assets (1)	$	131,154		$	134,388
Other and Eliminations:

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	Three Months Ended December 31,
	2006			2005
	(dollars in thousands)
Net operating revenues	$	550		$	401
Operating income	$	1,116		$	(481	)
Depreciation and amortization	$	27		$	35
Interest expense	$	(46	)	$	(16	)
Interest and other income	$	100		$	126
Income (loss) before income taxes	$	1,262		$	(339	)
Capital expenditures / transfers	$	164		$	0
Identifiable assets (1)	$	39,343		$	31,732
Total:
Net operating revenues	$	11,082		$	10,439
Operating income	$	2,881		$	1,285
Depreciation and amortization	$	1,369		$	1,390
Interest expense	$	2,144		$	2,230
Interest and other income	$	103		$	130
Income (loss) before income taxes	$	839		$	(815	)
Capital expenditures / transfers	$	187		$	31
Identifiable assets (1)	$	199,986		$	197,041

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

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ARCHON CORPORATION

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion is intended to further the reader’s understanding of the consolidated financial condition and results of operations of Archon Corporation (the “Company” or “Archon”). It should be read in conjunction with the financial statements included in this quarterly report on Form 10-Q and the Company’s annual report on Form 10-K for the year ended September 30, 2006. These historical financial statements may not be indicative of the Company’s future performance.

General

Overview of Business Operations and Trends

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

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

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

Management believes the recent revenue and expense trends the Pioneer may not change significantly over the next few years.

Investment Properties:

During fiscal year 2001, the Company acquired certain investment properties as part of a Section 1031 exchange. The investment properties are located in Gaithersburg, MD and Dorchester, MA. The Company acquired the properties and nonrecourse debt associated with the properties which are subject to long-term leases. Tenants remit payments to banks according to the terms of the leases and notes. The payments are used to liquidate the nonrecourse debt obligations. Rental income is recorded by the Company on a straight-line basis and totals approximately $12.4 million annually and will remain at this level until approximately 2020. The buildings are also being depreciated on a straight-line basis and the depreciation expense is approximately $3.2 million annually and will remain at this level until approximately 2020 or until the assets are sold, otherwise disposed of or become impaired. Interest expense is also recorded based on the outstanding nonrecourse debt remaining to be paid based on unamortized loan issue costs and remaining debt amortization timetables. At any time during the life of the leases and debt amortization, the fair market values of the properties may be different than its book values. Interest

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is presently being expensed at approximately $7.4 million annually and will decrease in relation to debt principal reductions through 2020.

Critical Accounting Policies and Estimates

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

Management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements:

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

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

Income Taxes. The Company has recorded deferred tax assets related to net operating assets as the Company is able to offset its assets with its deferred tax liabilities. Realization of the net deferred tax assets is dependent on the Company’s ability to generate profits from operations or from the sale of long-lived assets that would reverse the temporary differences that established the deferred tax liabilities. There can be no assurance that the Company will generate profits from operations or sell those assets or will generate profits from sales if they were to occur in the future. In the event the Company does generate profits from sales of long-lived assets in the future a valuation allowance would need to be recorded and would impact the Company’s future results of operations.

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Results of Operations – Three Months Ended December 31, 2006 and 2005

General

During the quarter ended December 31, 2006, the Company’s net operating revenues increased approximately $600,000 and operating expenses increased approximately $500,000, resulting in an increase in operating income of approximately $100,000 from the quarter ended December 31, 2005. The improvement in operating results was primarily due to $200,000 received as reimbursement of amounts previously expended on behalf of an affiliated company. The operating results at the Pioneer and the investment properties were unchanged.

Consolidated

Net Operating Revenues. Consolidated net operating revenues for the quarter ended December 31, 2006 were $11.1 million, approximately a $600,000, or 6%, increase from $10.4 million for the quarter ended December 31, 2005. Income from the investment properties was $3.1 million in each of the quarters ended December 31, 2006 and 2005. Revenues at the Pioneer of $7.4 million for the quarter ended December 31, 2006 increased $500,000 or 7%, from $6.9 million for the quarter ended December 31, 2005.

Operating Expenses. Total operating expenses increased $500,000, or 6%, to $9.7 million for the quarter ended December 31, 2006 from $9.2 million for the quarter ended December 31, 2005. Total operating expenses as a percentage of net revenue decreased to 87% for the 2006 quarter from 88% for the 2005 quarter. Operating expenses at the Pioneer of $8.0 million for the quarter ended December 31, 2006 increased $500,000 or 7%, from $7.5 million for the quarter ended December 31, 2005.

Operating Income. Consolidated operating income for the quarter ended December 31, 2006 was $1.4 million, an increase of $100,000, or 11%, from $1.3 million for the quarter ended December 31, 2005. This increase was due to the aforementioned changes in net operating revenues and operating expenses. Operating income of $2.3 million for each of the three-month periods ended December 31, 2006 and 2005 is attributable to the investment properties. Operating income was unchanged at the Pioneer.

Interest Expense. Consolidated interest expense for the quarter ended December 31, 2006 was $2.1 million, a $100,000 or 4%, decrease compared to $2.2 million for the quarter ended December 31, 2005.

Interest and Other Income. Consolidated interest and other income was $100,000 for each of the quarters ended December 31, 2006 and 2005.

Loss Before Income Tax and Discontinued Operations. Consolidated loss before income tax and discontinued operations for the quarter ended December 31, 2006 was $600,000, a $200,000 improvement compared to $800,000 for the quarter ended December 31, 2005.

Discontinued Operations. In October 2006, the Company sold real estate with a net book value of $400,000 for $1.8 million. A gain of $900,000, net of taxes of $500,000, on the sale was recorded as discontinued operations.

Federal Income Tax. The Company recorded a federal income tax provision of $300,000 for the quarter ended December 31, 2006 comprised of a $200,000 benefit on continuing operations and a $500,000 provision on discontinued operations. The Company recorded a federal income tax benefit of $300,000 for the quarter ended December 31, 2005, based on federal statutory rates.

Preferred Share Dividends. Undeclared preferred share dividends are not recorded in the stockholders’ equity section of the balance sheet as the Company may elect at its sole discretion whether to redeem its preferred stock. However, dividends of approximately $400,000 for each of the three-month periods ended December 31,

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2006 and 2005 accrued on the preferred stock for purposes of calculating net income (loss) applicable to common shares.

Net Income (Loss). Consolidated net income attributable to common shares was $200,000, or $0.03 per common share, for the quarter ended December 31, 2006 compared to consolidated net loss of $900,000, or $0.15 per common share, for the quarter ended December 31, 2005.

Pioneer

Net Operating Revenues. Net operating revenues at the Pioneer were $7.4 million for the quarter ended December 31, 2006, an increase of $500,000, or 7%, compared to $6.9 million in the quarter ended December 31, 2005. The improvement was due to increased customer volume.

Casino revenues for the three months ended December 31, 2006 were $6.0 million, an increase of $300,000, or 6%, compared to $5.7 million in the three months ended December 31, 2005. Slot and video poker revenues were approximately $5.5 million, an increase of $200,000, or 4%, compared to approximately $5.2 million. Other gaming revenues, including table games, increased $100,000 or 22%, to $600,000 from $500,000. Casino promotional allowances were approximately $1.6 million compared to $1.4 million, an increase of approximately $100,000 or 10%.

Hotel revenues were relatively unchanged at approximately $600,000 for the three months ended December 31, 2006 and 2005. An increase in hotel occupancy was partially offset by a decrease in the average room rate. Competitive pressures in the Laughlin market in the 2006 period caused the decline in average room rate. Food and beverage revenues increased $100,000, or 8%, to $1.8 million from $1.7 million. Other revenues increased $100,000, or 26%, to $500,000 from $400,000.

Operating Expenses. Operating expenses were $8.0 million for the quarter ended December 31, 2006, an increase of $500,000, or 7%, from $7.5 million in the quarter ended December 31, 2005. Operating expenses as a percentage of net revenue decreased to 107% in the current quarter from 108% in the prior year quarter.

Casino expenses were $3.6 million, an increase of approximately $200,000, or 7%, from $3.3 million, primarily due to increased casino promotional allowances. Casino expenses as a percentage of casino revenues increased to 59% from 58%.

Hotel expenses were relatively unchanged at $300,000 in the 2006 quarter compared to $200,000 in the 2005 quarter. Food and beverage expenses were unchanged at $900,000, due to a slight decrease in the cost of sales. Food and beverage expenses as a percentage of food and beverage revenues decreased to 52% from 56%. Other expenses were $500,000, an increase of $100,000 or 21%, from $400,000, due to the increase in other income. Other expenses as a percentage of other revenues decreased to 88% from 91%.

Selling, general and administrative expenses were $1.2 million, an increase of $100,000, or 6%, compared to $1.1 million. Selling, general and administrative expenses as a percentage of revenues were 16% in both quarters. Utilities and property expenses were $1.0 million, an increase of $100,000, or 9%, from $900,000, due to increased rent expense. Pioneer’s selling, general and administrative expenses are greater than the consolidated total due to the elimination of intercompany transactions in consolidation. Utilities and property expenses as a percentage of revenues were 13% in both quarters. Depreciation and amortization expenses were relatively unchanged at $500,000 in the 2006 quarter compared to $600,000 in the 2005 quarter.

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

Contractual Obligations and Commitments: The following table summarizes the Company’s fiscal year contractual obligations and commitments as of December 31, 2006 (for the nine-month period ending September 30, 2007 and for the fiscal years ending September 30, 2008, 2009, 2010, 2011, 2012, 2013 and thereafter.)

	Payments Due By Periods (1)
	2007		2008		2009		2010		2011		2012		2013 and thereafter		Total
	(dollars in thousands)
Non-recourse debt:
Gaithersburg	$	1,673	$	2,490	$	2,828	$	3,186	$	3,573	$	3,987	$	29,555	$	47,292
Sovereign		0		0		0		0		0		0		31,199		31,199
Debt:
Equipment		1,198		182		52		0		0		0		0		1,432
Mortgage obligation		388		9,638		0		0		0		0		0		10,026
Operating leases:
Ground lease		271		364		364		364		364		364		24,096		26,187
Corporate offices		11		0		0		0		0		0		0		11
Total	$	3,541	$	12,674	$	3,244	$	3,550	$	3,937	$	4,351	$	84,850	$	116,147

⁽¹⁾ The Company is required to make the following cash interest payments related to the above debt obligations: (i) Non-recourse debt – $4.4 million (2007), $7.0 million (2008), $6.8 million (2009), $6.6 million (2010), $6.3 million (2011), $6.1 million (2012) and $33.8 million (2013 and thereafter)), and (ii) Long-term debt—$0.8 million (2007), $0.3 million (2008), $0 (2009), $0 (2010), $0 (2011), $0 (2012) and $0 (2013 and thereafter).

The Company has no significant purchase commitments or obligations other than those included in the above schedule.

The Company’s ability to service its contractual obligations and commitments, other than the non-recourse debt, 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 the Company’s control. In addition, the Company 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.

Under an existing debt agreement with a bank, the Company is obligated to make a balloon payment of approximately $9.5 million in January 2008. At December 31, 2006, under the original loan terms, the loan balance of $10.0 million was due as of December 15, 2006. In January 2007, the loan was modified to extend the maturity date until January 15, 2008. The Company will either have to sell certain assets or will have to refinance this debt as current cash balances and projected cash flow from operations is not expected to equal this debt obligation. Although the Company believes one of these alternatives will occur, the Company can give no assurance that assets can be sold or that the debt can be refinanced at terms acceptable to the Company. The debt is guaranteed by the Company’s primary shareholder, who is also the CEO and Chairman of the Board.

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Liquidity. As of December 31, 2006, the Company held cash and cash equivalents of approximately $8.7 million compared to $6.2 million at September 30, 2006. The Company had $7.8 million in investment in marketable securities at December 31, 2006 compared to $6.0 million at September 30, 2006. The investment properties are structured such that future tenants’ payments cover future required mortgage payments including any balloon payments. Management believes that the Company will have sufficient available cash and cash resources to meet its cash requirements for a reasonable period of time.

The Company has a balloon payment due in January 2008 of approximately $9.5 million related to debt owed to a bank. The Company plans to either refinance the debt or sell certain assets of the Company to pay the obligation. The debt obligation is secured by 27 acres of land owned on the Las Vegas Strip and is personally guaranteed by Paul W. Lowden, the Company’s CEO, Chairman of the Board and primary stockholder.

Cash Flows from Operating Activities. The Company’s cash provided by operating activities was $1.8 million for the three months ended December 31, 2006 as compared to $900,000 for the three months ended December 31, 2005. The increase of $900,000 was primarily due to the receipt of a nonrefundable option payment of $1.2 million.

Cash Flows from Investing Activities. Cash provided by investing activities was $1.4 million for the three months ended December 31, 2006, as compared to $900,000 for the three months ended December 31, 2005. In the current year period, the Company received $1.8 million form the sale of fixed assets, which was partially offset by $200,000 in capital expenditures and $200,000 from the purchase of marketable securities. In the prior year period, the company received $900,000 from the sale of marketable securities.

Cash Used in Financing Activities. Cash used in financing activities was $700,000 for the three months ended December 31, 2006 as compared to $1.4 million for the three months ended December 31, 2005, all of which was used to make debt payments.

The Company’s primary source of operating cash is from the Pioneer operations, from interest income on available cash and cash equivalents and investments in marketable securities and, to a lesser extent, from net cash generated from the leasing of certain land owned on the Las Vegas strip. Rental income from the Company’s two investment properties is contractually committed to reducing the non-recourse indebtedness issued or assumed in connection with the acquisition of the investment properties. Under the two leases, the tenants are responsible for substantially all obligations related to the property. Sahara Las Vegas Corp. (“SLVC”), an indirect wholly-owned subsidiary of the Company, owns an approximately 27-acre parcel of real property on Las Vegas Boulevard South which is subject to a lease with a condominium developer. SLVC generates minimal cash from the lease agreement after payment of property costs, most notably property taxes.

Pioneer

Pioneer’s principal uses of cash are for payments of slot machine debt obligations, ground lease rent and capital expenditures to maintain the facility. The Company has implemented changes in personnel and promotional programs and installed new slot equipment to address the decreases in revenues and operating income. One of management’s main focuses is to recapture market share in the Laughlin market. Management, however, can give no assurance that market share will be recaptured in its Laughlin market as its competition in the market typically has greater capital resources than does the Pioneer.

Payments of rent were approximately $100,000 and $0 for the three months ended December 31, 2006 and 2005, respectively. Capital expenditures to maintain the facility in fiscal 2007 are expected to be less than $1 million.

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Preferred Stock

The Company’s preferred stock provides that dividends accrue on a semi-annual basis, to the extent not declared. Prior to fiscal 1997, the Company satisfied the semiannual dividend payments on its preferred stock through the issuance of paid-in-kind dividends. The Company has not declared the semiannual preferred stock dividends since October 1, 1996. The dividend rate per annum was equal to 8% of $2.14 for each share of preferred stock until September 30, 1998, at which date the dividend rate increased to 11%; the dividend rate continued to increase by an additional 50 basis points on each succeeding semiannual dividend payment date up to a maximum of 16% per annum. In October 2003, the dividend rate increased to 16.0%. As of December 31, 2006, the aggregate liquidation preference of the preferred stock was approximately $21.7 million, or $4.93 per share.

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

The Board of Directors of the Company authorized an increase in the amount of cash that may be used to purchase preferred stock to $2.5 million. As of February 13, 2007, the Company had purchased 709,305 shares of preferred stock for $1.4 million under this program. Previously, the Company had purchased 276,627 shares for $500,000. During the three months ended December 31, 2006, the Company did not purchase any of its outstanding preferred shares.

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

The holder of the preferred stock filed a complaint in November 2006. The Complaint alleges, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 13 years ago. The Complaint further alleges that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company plans to vigorously defend this Complaint and has both procedural and substantive defenses and may have rights against other persons or parties related to the purported claim.

In this suit, two holders of the Company’s Exchangeable Refundable Preferred Stock (the “Preferred Stock”) have alleged that the Company, beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the Liquidation Preference for the Preferred Stock. The complaint seeks damages for violations of Section 10(b) of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticut’s Unfair Trade Practices Act. The complaint seeks unspecified compensatory damages and the equitable relief of an accounting.

The Company filed a motion to dismiss the complaint in its entirety on December 19, 2006. On February 7, 2007, the plaintiffs filed a motion for leave to amend the complaint. The Court granted the motion to amend.

Recently Issued Accounting Standards

The Company keeps abreast of new generally accepted principles and disclosure reporting requirements issued by the SEC and other standard setting agencies. Recently issued accounting standards which may affect the financial results are noted in Note 1 of the Notes to Unaudited Condensed Consolidated Financial Statements.

Effects of Inflation

The Company has been generally successful in recovering costs associated with inflation through price adjustments in its hotel. Any such future increases in costs associated with casino operations and maintenance of properties may not be completely recovered by the Company.

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Private Securities Litigation Reform Act

Certain statements in this Quarterly Report on Form 10-Q 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 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss arising from changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity process. Excluding its non-recourse debt, the Company has total interest-bearing debt at December 31, 2006 of approximately $11.5 million, of which approximately $10.0 million bears interest at a variable rate (approximately 9.25% at December 31, 2006). Therefore, the Company maintains certain market rate risk related to this debt. A change in the interest rates of 1% would cause an approximate $100,000 change in the amount of interest the Company would incur based on the amount of variable-interest rate debt outstanding for any current or future year in which this debt is outstanding. Future borrowings related to this debt will be exposed to this same market rate risk.

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

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures:

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

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

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

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ARCHON CORPORATION

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

The holder of the preferred stock filed a complaint in November 2006. The Complaint alleges, amongst other things, that the Company has failed to properly apply the cumulative cash dividend and liquidation preferences related to certain exchangeable preferred stock issued by the Company approximately 13 years ago. The Complaint further alleges that previous disclosure by the Company with regard to the same exchangeable preferred stock is not in accord with the manner of computation the plaintiffs believe is proper and required. The Company plans to vigorously defend this Complaint and has both procedural and substantive defenses and may have rights against other persons or parties related to the purported claim.

In this suit, two holders of the Company’s Exchangeable Refundable Preferred Stock (the “Preferred Stock”) have alleged that the Company, beginning in February 2006, had made false and misleading statements concerning the calculation of accrued but unpaid dividends and the Liquidation Preference for the Preferred Stock. The complaint seeks damages for violations of Section 10(b) of the Securities Exchange Act of 1934, common-law fraudulent misrepresentation, breach of contract and Connecticut’s Unfair Trade Practices Act. The complaint seeks unspecified compensatory damages and the equitable relief of an accounting.

The Company filed a motion to dismiss the complaint in its entirety on December 19, 2006. On February 7, 2007, the plaintiffs filed a motion for leave to amend the complaint. The Court granted the motion to amend.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

None

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5. Other Information

None

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Item 6. Exhibits

a. Exhibits.

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements 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,
Registrant
By:	/s/ Paul W. Lowden
	Paul W. Lowden
	Chairman of the Board, President and Chief Executive Officer

Date: February 13, 2007

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13a – 14(a) OF THE EXCHANGE ACT

As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Paul W. Lowden, certify that:

1. I have reviewed this report on Form 10-Q of Archon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 13, 2007
/s/ Paul W. Lowden
Paul W. Lowden
Chairman of the Board and President
(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13a – 14(a) OF THE EXCHANGE ACT

As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Armando Toral, certify that:

1. I have reviewed this report on Form 10-Q of Archon Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 13, 2007
/s/ Armando Toral
Armando Toral
Principal Accounting Officer
(Principal Accounting and Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Archon Corporation (the “Company”) on Form 10-Q for the period ended December 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Paul W. Lowden, Chief Executive Officer of the Company, and Armando Toral, Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2003, that to our knowledge:

(i) the Report fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	February 13, 2007
/s/ Paul W. Lowden
Paul W. Lowden
Chairman of the Board and President
(Principal Executive Officer)
/s/ Armando Toral
Armando Toral
Principal Accounting Officer
(Principal Accounting and Financial Officer)

This certification accompanies the above-described Report on Form 10-Q pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by

such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.