##### Table of Contents



U.S. SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007.
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE TRANSITION PERIOD FROM  _________TO  _________.
 Commission File No. 1-32583
 FULL HOUSE RESORTS, INC.
  Delaware
    
    13-3391527(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 4670 S. Fort Apache RoadSuite 190Las Vegas, Nevada
    
    89147(Address of principal executive offices)
    
    (zip code)
 (Registrants telephone number)
 þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS
  o þ




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##### 



FULL HOUSE RESORTS, INC.
TABLE OF CONTENTS
 PagePART I. Financial InformationItem 1. Condensed Consolidated Financial StatementsBalance Sheets as of June 30, 2007, (unaudited) and
December 31, 2006
    
    
    3Unaudited Statements of Operations
for the three and six months ended June 30, 2007 and 2006
    
    
    4Unaudited Statements of Cash Flows
for the six months ended June 30, 2007 and 2006
    
    
    5Notes to Unaudited Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis or Plan of Operation
    
    
    12Item 3. Controls and Procedures
    
    
    24PART II.Item 1. Legal Proceedings
    
    
    24Signatures
    
    
    27Exhibit Index
    
    
    28EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30, 2007(unaudited)
    
    
    December 31, 2006ASSETSCurrent assetsCash
    
    $
    9,808,564
    
    
    $
    22,117,482Accounts receivable, net of allowance of $20,000 in 2007
    
    
    160,339
    
    
    
    Prepaid expenses
    
    
    555,399
    
    
    
    76,204Other
    
    
    166,778
    
    
    
    115,00010,691,080
    
    
    
    22,308,686Property and equipment, net of accumulated depreciation
of $6,894,351 and $107,774
    
    
    16,327,872
    
    
    
    7,401Long-term assets related to tribal casino projectsNotes receivable
    
    
    12,125,882
    
    
    
    10,995,782Contract rights, net of accumulated amortization of $642,199
and $608,899
    
    
    5,660,709
    
    
    
    5,160,185Land held for development
    
    
    130,000
    
    
    
    130,00017,916,591
    
    
    
    16,285,967Other long-term assetsGoodwill
    
    
    12,041,668
    
    
    
    Investment in unconsolidated joint venture
    
    
    281,574
    
    
    
    Deferred income tax assets
    
    
    
    
    
    
    159,054Deposits and other
    
    
    909,632
    
    
    
    1,395,01213,232,874
    
    
    
    1,554,066$
    58,168,417
    
    
    $
    40,156,120LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    2,582,770
    
    
    $
    2,381,260Accounts payable
    
    
    249,289
    
    
    
    153,330Accrued interest
    
    
    617,425
    
    
    
    428,051Other accrued expenses
    
    
    904,303
    
    
    
    486,841Dividend payable
    
    
    
    
    
    
    3,042,084Income tax payable
    
    
    
    
    
    
    237,623Other
    
    
    272,137
    
    
    
    272,1374,625,924
    
    
    
    7,001,326Long-term debt, net of current portion
    
    
    15,891,477
    
    
    
    Deferred income tax liability
    
    
    2,505,419
    
    
    
    18,396,896
    
    
    
    Non-controlling interest in consolidated joint venture
    
    
    2,396,632
    
    
    
    2,035,041Stockholders equityCumulative preferred stock, $.0001par value, 5,000,000 shares
Shares authorized; 700,000 shares issued and outstanding in 2006;
    
    
    
    
    
    
    70Common stock, $.0001 par value, 25,000,000 shares authorized;
19,342,276 and 18,408,380 shares issued and outstanding
    
    
    1,934
    
    
    
    1,841Additional paid-in capital
    
    
    42,838,032
    
    
    
    42,195,263Deferred compensation
    
    
    (1,586,765
    )
    
    
    (2,245,981
    )Deficit
    
    
    (8,504,236
    )
    
    
    (8,831,440
    )32,748,965
    
    
    
    31,119,753$
    58,168,417
    
    
    $
    40,156,120
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FULL
HOUSE RESORTS, INC. AND SUBSIDIARIES  UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006RevenuesCasino
    
    $
    2,005,397
    
    
    $
    
    
    
    $
    3,354,187
    
    
    $
    Food and beverage
    
    
    544,980
    
    
    
    
    
    
    
    865,782
    
    
    
    Hotel
    
    
    556,338
    
    
    
    
    
    
    
    861,382
    
    
    
    Other operating income
    
    
    303,809
    
    
    
    
    
    
    
    318,885
    
    
    
    3,410,524
    
    
    
    
    
    
    
    5,400,236
    
    
    
    Operating costs and expensesCasino
    
    
    689,792
    
    
    
    
    
    
    
    1,079,835
    
    
    
    Food and beverage
    
    
    558,666
    
    
    
    
    
    
    
    872,832
    
    
    
    Hotel
    
    
    341,641
    
    
    
    
    
    
    
    556,934
    
    
    
    Project development costs
    
    
    60,554
    
    
    
    133,386
    
    
    
    245,734
    
    
    $
    432,024Selling, general and administrative
    
    
    2,055,021
    
    
    
    1,288,677
    
    
    
    3,807,276
    
    
    
    1,696,183Depreciation and amortization
    
    
    418,501
    
    
    
    19,321
    
    
    
    712,411
    
    
    
    37,5394,124,175
    
    
    
    1,441,384
    
    
    
    7,275,022
    
    
    
    2,165,746Other operating gainsEquity in net income of unconsolidated joint venture
    
    
    1,026,218
    
    
    
    1,017,027
    
    
    
    2,073,705
    
    
    
    1,994,591Unrealized gains on notes receivable, tribal governments
    
    
    523,768
    
    
    
    490,557
    
    
    
    928,301
    
    
    
    717,7491,549,986
    
    
    
    1,507,584
    
    
    
    3,002,006
    
    
    
    2,712,340Income from operations
    
    
    836,335
    
    
    
    66,200
    
    
    
    1,127,220
    
    
    
    546,594Other income (expense)Interest and other income
    
    
    116,053
    
    
    
    18,077
    
    
    
    286,480
    
    
    
    46,332Interest expense
    
    
    (362,435
    )
    
    
    (45,750
    )
    
    
    (623,275
    )
    
    
    (90,504
    )(246,382
    )
    
    
    (27,673
    )
    
    
    (336,795
    )
    
    
    (44,172
    )Income before non-controlling interest in net loss of
consolidated joint venture and income tax (expense)
benefit
    
    
    589,953
    
    
    
    38,527
    
    
    
    790,425
    
    
    
    502,422Non-controlling interest in net (income) loss of
consolidated joint venture
    
    
    (103,664
    )
    
    
    (23,296
    )
    
    
    (111,590
    )
    
    
    18,049Income before income tax (expense) benefit
    
    
    486,289
    
    
    
    15,231
    
    
    
    678,835
    
    
    
    520,471Income tax (expense) benefit
    
    
    (250,056
    )
    
    
    134,382
    
    
    
    (351,631
    )
    
    
    (83,466
    )Net income
    
    
    236,233
    
    
    
    149,613
    
    
    
    327,204
    
    
    
    437,005Less undeclared dividends on cumulative preferred
stock
    
    
    
    
    
    
    (52,500
    )
    
    
    
    
    
    
    (105,000
    )Net income available to common stockholders
    
    $
    236,233
    
    
    $
    97,113
    
    
    $
    327,204
    
    
    $
    332,005Net income per common shareBasic and diluted
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.02
    
    
    $
    0.03Weighted-average number of common shares outstandingBasic
    
    
    19,322,828
    
    
    
    10,563,047
    
    
    
    19,265,597
    
    
    
    10,451,098Diluted
    
    
    19,322,996
    
    
    
    11,287,551
    
    
    
    19,265,597
    
    
    
    11,179,336
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six monthsended June 30,2007
    
    
    2006Net cash
provided by (used in) operating activities:
    
    $
    856,299
    
    
    $
    (647,790
    )Investing activities:Deposits and other cash costs of the Stockmans
Casino acquisition, net of cash acquired of
$920,824 in 2007
    
    
    (8,317,493
    )
    
    
    (863,972
    )Acquisition of contract rights and other assets
    
    
    (304,464
    )
    
    
    (110,893
    )Acquisition of property and equipment
    
    
    (112,624
    )
    
    
    Advances to tribal governments, net of $32,030 and
$106,589 expensed
    
    
    (235,623
    )
    
    
    (818,882
    )Proceeds from sale of equipment
    
    
    900
    
    
    
    Repayments by co-venturer
    
    
    
    
    
    
    37,215Net cash used in investing activities
    
    
    (8,969,304
    )
    
    
    (1,756,532
    )Financing activities:Dividends paid
    
    
    (3,042,084
    )
    
    
    Payments on long-term debt
    
    
    (1,153,829
    )
    
    
    Offering costs
    
    
    
    
    
    
    (50,203
    )Cash used in financing activities
    
    
    (4,195,913
    )
    
    
    (50,203
    )Net decrease in cash and cash equivalents
    
    
    (12,308,918
    )
    
    
    (2,454,525
    )Cash and cash equivalents, beginning of period
    
    
    22,117,482
    
    
    
    3,275,270Cash and cash equivalents, end of period
    
    $
    9,808,564
    
    
    $
    820,745
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF PRESENTATIONThe interim condensed consolidated financial statements of Full House Resorts, Inc. (Full
House, we, our, ours, us) and its subsidiaries (collectively, the Company) included herein
reflect all adjustments that are, in the opinion of management, necessary to present fairly
the financial position and results of operations for the interim periods presented. Certain
information normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America has been omitted pursuant to
the interim financial information rules and regulations of the United States Securities and
Exchange Commission.These unaudited interim condensed consolidated financial statements should be read in
conjunction with the annual audited consolidated financial statements and notes thereto
included in Full Houses Annual Report on Form 10-KSB for the year ended December 31, 2006
(2006 Annual Report), from which the balance sheet information as of December 31, 2006, was
derived. Certain minor reclassifications to amounts previously reported have been made to
conform to the current period presentation. The results of operations for the period ended
June 30, 2007, are not necessarily indicative of the results to be expected for the year
ending December 31, 2007.The condensed consolidated financial statements include the accounts of the Company,
including Stockmans Casino and Holiday Inn Express (Stockmans) since its acquisition on
January 31, 2007 (Note 2). Gaming Entertainment (Michigan) LLC (GEM), a consolidated
50%-owned subsidiary of the Company, which is jointly owned with RAM Entertainment, LLC
(RAM), a privately held company, has been determined to be a variable interest entity, as
defined in Financial Accounting Standards Board (FASB) Interpretation No. 46R, Consolidation
of Variable Interest Entitiesand also is consolidated. The Company accounts for its
investment in Gaming Entertainment (Delaware) LLC (GED) (Note 4), using the equity method of
accounting. All material intercompany accounts and transactions have been eliminated.2.
    
    ACQUISITION OF STOCKMANS CASINOOn January 31, 2007, the Company acquired Stockmans in Fallon, Nevada. The purchase price
was approximately $27.4 million (including acquisition costs of $659,846), which was
financed through an equity offering effected during 2006, a $16 million reducing revolving
loan from a bank, and a promissory note to the seller in the approximate amount of $1.25
million (Note 6).The purchase price was allocated in the first quarter of 2007 as follows:
 Current assets
    
    $
    1,437,662Other assets
    
    
    151,531Property and equipment
    
    
    16,885,000Current liabilities
    
    
    (440,514
    )Goodwill
    
    
    9,372,983$
    27,406,662
 Total acquisition costs exceeded the estimate disclosed in the 2006 Annual Report by
$34,745. While the evaluation of fair market value of the assets has been completed, the
Company is currently evaluating the tax treatment and contemplates having further discussion
with seller. The resulting accounting is expected to be
completed within one year of the purchase. In the first quarter of 2007, goodwill was
adjusted upward from the original estimate disclosed in the 2006 Annual Report by
approximately $2.5 million, primarily as a result of the
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recognition of a deferred tax
liability related to the Companys carry-over tax basis in Stockmans property assets.
  Six months ended June 30,2007
    
    2006Net revenues
    
    $
    8,526,197
    
    
    $
    7,517,394Net income
    
    
    469,851
    
    
    
    1,806,665Earnings per share, basic
    
    
    0.02
    
    
    
    0.17Earnings per share, diluted
    
    
    0.02
    
    
    
    0.16
 3.
    
    SHARE-BASED COMPENSATIONFor the six months ended June 30, 2007 and 2006, general and administrative expense for
share-based compensation was $1,135,216 and $528,887, respectively, as a result of
amortization of restricted stock grants. The current quarter expense includes $335,156 as a
result of the vesting of 137,500 shares of restricted stock held by a former employee.On June 25, 2007, the Company issued 20,000 shares of unrestricted stock in conjunction with
director compensation, which was valued at $75,600 based on the closing price of the
Companys stock ($3.78), with no discount. Since the shares were fully vested at the date of
grant, the Company recognized share-based compensation expense of $75,600 related to this
grant during the second quarter of 2007.4.
    
    INVESTMENT IN UNCONSOLIDATED JOINT VENTUREThe Companys investment in unconsolidated joint venture is comprised of a 50% ownership
interest in GED, a joint venture between the Company and Harrington Raceway Inc. (HRI).
Since GED has no non-operating income or expenses, and is treated as a partnership for
income tax purposes and consequently recognizes no federal or state income tax provision,
income from operations for GED is equal to net income for each period presented, and there
are no material differences between its income for financial and tax reporting purposes.On June 18, 2007, the Company restructured its management contract relating to Midway Slots
and Simulcast (Midway) in Harrington, Delaware. The Company has agreed with HRI, the owner
of Midway and an equal co-venturer in GED, to allow HRI greater flexibility in the
management of the facility while providing the Company with guaranteed growth in its share
of the management fee for the remaining term of the management contract, which expires in
August, 2011.The Company will continue to receive management fees as currently prescribed under the
management agreement, with a minimum guaranteed growth factor of 5% per year over the
previous year, beginning with 2007. However, the minimum guaranteed growth factor is to be
increased to 8% in 2008 to account for the scheduled opening of the expansion currently
underway at Midway.
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Unaudited summary information for GEDs operations is as follows:
 Three months
    
    Six monthsended June 30,
    
    ended June 30,2007
    
    2006
    
    2007
    
    2006Management fee
revenues
    
    $
    2,160,479
    
    
    $
    2,142,493
    
    
    $
    4,383,610
    
    
    $
    4,222,433Net income
    
    
    2,052,456
    
    
    
    2,034,051
    
    
    
    4,147,410
    
    
    
    3,989,181
 5.
    
    NOTES RECEIVABLE, TRIBAL GOVERNMENTSThe Company has advanced funds directly to tribes to fund tribal operations and for
development expenses related to potential projects. The repayment of these notes is
contingent upon the development of the projects, and ultimately, the successful operation of
the facilities. The Companys agreements with the tribes provide for the reimbursement of
these advances plus applicable interest either from the proceeds of any outside financing of
the development, the actual operation itself or in the event that the Company does not
complete the development, from the revenues of the tribal gaming operation following
completion of development activities undertaken by others.As of June 30, 2007 and December 31, 2006, the Company has made advances to tribal
governments totaling $13,910,302 and $13,652,328 as follows:
 June 30,
    
    
    December 31,2007
    
    
    2006Contractual (stated) amount (not including interest):Huron (Michigan) tribe
    
    $
    12,839,080
    
    
    $
    12,728,428Other
    
    
    1,071,222
    
    
    
    923,900$
    13,910,302
    
    
    $
    13,652,328Estimated fair value of notes
receivable related to Tribal
casino projects:Huron (Michigan) tribe
    
    $
    11,239,687
    
    
    $
    10,258,202Other
    
    
    886,195
    
    
    
    737,580$
    12,125,882
    
    
    $
    10,995,782
 In June 2007, the estimated opening date for the Montana casino was extended from the third
quarter to the fourth quarter of 2008. This change in estimate results from slower than
expected progress on compact negotiations. However, the change in estimate did not have a
material impact on either the estimated fair value of the related notes receivable or the
unrealized gains for the current quarter.
 The following table summarizes the changes in notes receivable, tribal government between
December 31, 2006 and June 30, 2007:
 Total
    
    
    Michigan tribe
    
    
    Other tribesBalances, January 1, 2007
    
    $
    10,995,782
    
    
    $
    10,258,202
    
    
    $
    737,580Total advances
    
    
    267,653
    
    
    
    120,332
    
    
    
    147,321Advances allocated to contract rights
    
    
    (33,824
    )
    
    
    
    
    
    
    (33,824
    )Advances expensed as period costs
    
    
    (32,030
    )
    
    
    (32,030
    )
    
    
    Unrealized gains
    
    
    928,301
    
    
    
    893,182
    
    
    
    35,119Balances, June 30, 2007
    
    $
    12,125,882
    
    
    $
    11,239,686
    
    
    $
    886,196
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6.
    
    LONG-TERM DEBTLong-term debt arose in the first quarter of 2007 as a result of the Stockmans acquisition.
Accordingly, at June 30, 2007, long-term debt consists of the following:
 Reducing revolving loan agreement,
$16.0 million limit on January 31, 2007,
due January 31, 2022, interest at 2.1%
above the five year LIBOR/Swap rate,
adjusted annually (7.39%) at June 30,
2007)
    
    $
    14,933,334Promissory note, $1.25 million on
January 31, 2007, due February 1, 2012,
interest at a fixed annual rate of 7.44%
    
    
    1,159,653Promissory note, $2.38 million on
February 15, 2002, originally due March
15, 2003, and was extended to December
2007, interest based on Bank of America
New York prime rate (8.25% at June 30,
2007)
    
    
    2,381,26018,474,247Less current portion of long-term debt
    
    
    (2,582,770
    )$
    15,891,477
 The maximum amount permitted to be outstanding under the reducing revolving loan decreases
$533,000 semiannually on January 1 and July 1 of each year and any outstanding amounts above
such reduced maximum must be repaid on each such date. The reducing revolving loan is
payable over 15 years at a variable interest rate based on the five year LIBOR/Swap rate
plus 2.1%. This rate adjusts annually based on the funded debt to EBITDA ratio of
Stockmans with adjustments based on the five year LIBOR/Swap rates. Stockmans assets are
pledged as collateral for the loan. The loan agreement also contains certain customary
financial representations and warranties and requires that Stockmans maintain specified
financial covenants, including a fixed charge coverage ratio, a funded debt to EBITDA ratio
and a minimum tangible net worth. In addition, the loan agreement provides restrictions on
certain distributions and capital expenditures by Stockmans, and also provides for
customary events of default including payment defaults and covenant defaults.On April 30, 2007, the Company elected to pay and paid $1.1 million of its long-term debt
prior to the scheduled due dates of July 1, 2007 and January 1, 2008 and as a result the
Company has approximately $1.1 million of availability under its revolving credit line at
June 30, 2007.The promissory note payable to the seller of Stockmans is payable in 60 monthly
installments of principal and interest and is secured by a second interest in the real
estate of Stockmans.
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Scheduled maturities of long-term debt are as follows:
 Annual periods ending June 30,2008
    
    $
    2,582,7702009
    
    
    1,302,0322010
    
    
    1,320,2052011
    
    
    1,339,7762012
    
    
    1,260,130Thereafter
    
    
    10,669,334Total
    
    $
    18,474,247
 7.
    
    INCOME TAXESFinancial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in
Income Taxes(FIN 48), became effective and was adopted by the Company beginning in 2007.
Based on managements assessment of its tax positions in accordance with FIN 48, there was no
impact on its opening retained earnings or the current periods results of operations as a
result of the change in accounting principle to adopt FIN 48.For the periods ended June 30, 2007 and 2006, the difference between the Companys estimated
effective and statutory tax rates was primarily due to the state tax provision, net of the
federal benefit, as well as the treatment of stock based compensation.8.
    
    SEGMENT REPORTINGFollowing the acquisition of Stockmans in January 2007, our business is comprised of three
primary business segments. The operations segment includes Stockmans casino and hotel
operation in Fallon, Nevada. The development / management segment includes costs associated
with our tribal casino projects and our Delaware joint venture. The Corporate segment
reflects the management and administrative expenses of the Company and one-time revenues of
$283,554 in connection with the termination of our consulting agreement from the Hard Rock
casino in Biloxi, Mississippi. The following tables reflect selected
segment information for the three and six months ended
June 30, 2007 and 2006.Selected unaudited Statements of Operations data for the three months ended June 30,
 Casino/Hotel
    
    Development/2007
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    3,126,970
    
    
    $
    
    
    
    $
    283,554
    
    
    $
    3,410,524Selling, general and administrative
    
    
    400,051
    
    
    
    55,047
    
    
    
    1,599,923
    
    
    
    2,055,021Depreciation and amortization
    
    
    400,048
    
    
    
    16,650
    
    
    
    1,803
    
    
    
    418,501Other operating gains
    
    
    
    
    
    
    1,549,986
    
    
    
    
    
    
    
    1,549,986Income (loss) from operations
    
    
    736,772
    
    
    
    1,411,254
    
    
    
    (1,311,691
    )
    
    
    836,335Net income (loss)
    
    
    745,388
    
    
    
    1,224,384
    
    
    
    (1,733,539
    )
    
    
    236,233
 Casino/Hotel
    
    Development/2006
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Selling, general and administrative
    
    
    
    
    
    
    49,900
    
    
    
    1,238,777
    
    
    
    1,288,677Depreciation and amortization
    
    
    
    
    
    
    16,650
    
    
    
    2,671
    
    
    
    19,321Other operating gains
    
    
    
    
    
    
    1,507,584
    
    
    
    
    
    
    
    1,507,584Income (loss) from operations
    
    
    
    
    
    
    1,395,172
    
    
    
    (1,328,972
    )
    
    
    66,200Net income (loss)
    
    
    
    
    
    
    1,305,876
    
    
    
    (1,156,263
    )
    
    
    149,613
 10




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##### Table of Contents



Selected unaudited Statements of Operations data for the six months ended June 30,
 Casino/Hotel
    
    Development/2007
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    5,116,682
    
    
    $
    
    
    
    $
    283,554
    
    
    $
    5,400,236Selling, general and administrative
    
    
    673,904
    
    
    
    115,548
    
    
    
    3,017,824
    
    
    
    3,807,276Depreciation and amortization
    
    
    674,922
    
    
    
    33,300
    
    
    
    4,189
    
    
    
    712,411Other operating gains
    
    
    
    
    
    
    3,002,006
    
    
    
    
    
    
    
    3,002,006Income (loss) from operations
    
    
    1,258,253
    
    
    
    2,609,935
    
    
    
    (2,740,968
    )
    
    
    1,127,220Net income (loss)
    
    
    1,273,239
    
    
    
    2,353,301
    
    
    
    (3,299,336
    )
    
    
    327,204Casino/Hotel
    
    Development/2006
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedRevenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Selling, general and administrative
    
    
    
    
    
    
    29,127
    
    
    
    1,667,056
    
    
    
    1,696,183Depreciation and amortization
    
    
    
    
    
    
    33,300
    
    
    
    4,239
    
    
    
    37,539Other operating gains
    
    
    
    
    
    
    2,712,340
    
    
    
    
    
    
    
    2,712,340Income (loss) from operations
    
    
    
    
    
    
    2,432,162
    
    
    
    (1,885,568
    )
    
    
    546,594Net income (loss)
    
    
    
    
    
    
    2,318,161
    
    
    
    (1,986,156
    )
    
    
    332,005Selected unaudited Balance Sheet data as of June 30,Casino/Hotel
    
    Development/2007
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedAssets
    
    $
    18,289,737
    
    
    $
    17,967,300
    
    
    $
    21,939,509
    
    
    $
    58,168,417Plant, property and equipment, net
    
    
    16,304,894
    
    
    
    8,832
    
    
    
    11,146
    
    
    
    16,327,872Goodwill
    
    
    
    
    
    
    
    
    
    
    12,041,668
    
    
    
    12,041,668Liabilities
    
    
    533,454
    
    
    
    2,537,680
    
    
    
    19,951,686
    
    
    
    23,022,820Casino/Hotel
    
    Development/2006
    
    Operations
    
    Management
    
    Corporate
    
    ConsolidatedAssets
    
    $
    
    
    
    $
    13,473,021
    
    
    $
    3,903,395
    
    
    $
    17,376,416Plant, property and equipment, net
    
    
    
    
    
    
    
    
    
    
    3,988,832
    
    
    
    3,988,832Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Liabilities
    
    
    
    
    
    
    390,373
    
    
    
    2,905,130
    
    
    
    3,295,503
 9.
    
    COMMITMENTEffective May 15, 2007, GEM entered into an agreement with Green Acres Casino Management,
Inc. (Green Acres). Pursuant to the agreement, GEM will acquire all of Green Acres
interests in the Nottawaseppi Huron Band of Potawatomi casino project in Michigan for $10
million. Prior to the execution of the agreement, Green Acres had a right to a royalty
payment based on various operating metrics but which would approximate 15% of the total
management fee received by GEM from the operation of the planned casino in Michigan. GEMs
members equally funded an initial deposit of $500,000 and the remainder becomes due once
financing is obtained as part of the project funding for the casino and the NIGC approves a
seven-year management agreement between GEM and the Michigan tribe. GEM has been in discussion with
lenders to arrange an add-on financing security as part of the overall project financing
transaction to fund the balance of the Green Acres purchase price. The add-on debt security
will be an obligation of GEM and will not be part of the overall casino development cost.
 11




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##### Table of Contents



10.
    
    SUBSEQUENT EVENTOn July 23, 2007, the Nottawaseppi Huron Band of Potawatomi Indians (the Michigan tribe) and
Perez APC (Perez), the architect engaged to provide services for the Michigan project,
entered into an amendment to the original agreement between Perez and GEM for Perez to
provide architectural services. The amendment revised the parties responsibilities, removed any
financial liability from GEM and made Firekeepers Development Authority (the Authority), an
agency of the Michigan tribe, responsible for the architectural costs associated with the
Michigan project and designated GEM as the Authoritys agent with no financial liability for
the services rendered to date, or to be rendered by Perez as the project moves forward. As
a result, the current liability of $272,137 in the accompanying condensed consolidated
financial statements will be reversed in the third quarter of 2007.
 
 Item 2. Managements Discussion and Analysis or Plan of Operation.
 Overview
    12




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##### Table of Contents



Critical accounting estimates and policies
   Long-term assets related to Tribal casino projects
 Recognition of Interest
Income and Balance Sheet Classification of Structured Notes
  13




---



##### Table of Contents




    
    the Federal Bureau of Indian Affairs (BIA) recognizes the tribe,
    
    the tribe has the right to acquire land to be used as a casino site,
    
    the Department of the Interior has put the land into trust as a casino site,
    
    the tribe has a gaming compact with the state government,
    
    the NIGC has approved a proposed management agreement, and
    
    other legal or political obstacles exist or are likely to occur.
  
    
    a certain minimum monthly priority payment to the tribe,
    
    repayment of various senior debt associated with construction and equipping of the
casino with interest accrued thereon,
    
    repayment of various debt with interest accrued thereon due to us,
    
    management fee to us,
    
    other obligations, and
    
    the remaining funds distributed to the tribe.
 Notes receivable
  14




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##### Table of Contents



Accounting by Creditors for Impairment of a
Loan
 Contract rights
  Summary of long-term assets related to Tribal casino projects
  June 30,
    
    December 31,2007
    
    2006Michigan project:Notes receivable, tribal governments
    
    $
    11,239,687
    
    
    $
    10,258,202Contract rights, net
    
    
    5,154,697
    
    
    
    4,687,99716,394,384
    
    
    
    14,946,199Other projects:Notes receivable, tribal governments
    
    
    886,195
    
    
    
    737,580Contract rights, net
    
    
    506,012
    
    
    
    472,188Land held for development
    
    
    130,000
    
    
    
    130,0001,522,207
    
    
    
    1,339,768$
    17,916,591
    
    
    $
    16,285,967
  15




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##### Table of Contents




    
    The tribe is federally recognized;
    
    adequate land for the proposed casino resort has been placed in trust;
    
    the tribe has a valid gaming compact with the State of Michigan;
    
    the NIGC has not yet approved the management agreement;
    
    the BIA issued a record of decision approving the final environmental impact
statement in September 2006; and
    
    proposals for approximately $157 million of construction financing have been
obtained and the completion of financing documentation is expected in
the third quarter of
2007.
    June 30, 2007
    
    December 31, 2006
    
    
    Discount rate increases 2.5%
    
    $
    (295,398
    )
    
    $
    (363,556
    )
    
    
    Discount rate decreases 2.5%
    
    
    309,846
    
    
    
    384,996
    
    
    Forecasted opening date delayed one quarter
    
    
    (500,809
    )
    
    
    (457,077
    )
    
    
    Forecasted opening date accelerated one quarter
    
    
    524,164
    
    
    
    478,393
 16




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##### Table of Contents



June 30, 2007
    
    December 31, 2006Aggregate face amount of the notes
receivable
    
    $
    13,910,302
    
    
    $
    13,652,328Estimated years until opening of
casino:Michigan
    
    
    1.25
    
    
    
    1.75New Mexico
    
    
    1.50
    
    
    
    1.75Montana
    
    
    1.50
    
    
    
    1.75Discount rate
    
    
    20.0
    %
    
    
    20.0
    %Estimated probability rate of casino
opening:Michigan
    
    
    90
    %
    
    
    90
    %New Mexico
    
    
    90
    %
    
    
    90
    %Montana
    
    
    90
    %
    
    
    90
    %
   
    
    S&P 500, 10 and 15-year average benchmark investment returns (medium-term horizon risk premiums);
    
    Risk-free investment return equal to the 10-year average for 90-day Treasury Bills;
    
    Investment beta factor equal to the unleveraged five-year average for the hotel / gaming industry; and
    
    Project specific adjustments based on typical size premiums for micro-cap and
low-cap companies using 10 and 15-year averages.
   June 30, 2007
    
    Michigan
    
    New Mexico
    
    Montana
    
    Other
    
    TotalNotes receivable
    
    $
    11,239,687
    
    
    $
    461,410
    
    
    $
    424,785
    
    
    $
    
    
    
    $
    12,125,882Contract rights
    
    
    5,154,697
    
    
    
    192,878
    
    
    
    113,134
    
    
    
    200,000
    
    
    
    5,660,709Land held for development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,000
    
    
    
    130,000Total
    
    $
    16,394,384
    
    
    $
    654,288
    
    
    $
    537,919
    
    
    $
    330,000
    
    
    $
    17,916,591
 17




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##### Table of Contents



December 31, 2006
    
    Michigan
    
    New Mexico
    
    Montana
    
    Other
    
    TotalNotes receivable
    
    $
    10,258,202
    
    
    $
    379,665
    
    
    $
    357,915
    
    
    $
    
    
    
    $
    10,995,782Contract rights
    
    
    4,687,997
    
    
    
    169,780
    
    
    
    102,408
    
    
    
    200,000
    
    
    
    5,160,185Land held for development
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,000
    
    
    
    130,000Total
    
    $
    14,946,199
    
    
    $
    549,445
    
    
    $
    460,323
    
    
    $
    330,000
    
    
    $
    16,285,967
  Consolidation of Variable Interest Entities
 Income taxes. Accounting for Uncertainty in Income Taxes, an Interpretation of FASB
Statement 109
 Recently issued accounting pronouncements
 The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of
SFAS No. 115,
 Results of operations
 Six months ended June 30, 2007, compared to six months ended June 30, 2006
 Net Income.
 18




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##### Table of Contents



Operating Revenues.
 
    
    Casino revenues increased by $239,010 or 7% compared to the same five-month period
in prior year, primarily due to an overall increase in the table games hold percentage
compared to prior year and new marketing programs, including direct mailings to
players club members and $10 cash coupons.
    
    Food and beverage revenues increased by $48,815 or 5% compared to the same
five-month period in the prior year, primarily due to expanded hours at the coffee
shop, in addition to special events in the dining room and the increased occupancy at
the hotel
    
    Hotel revenues increased $99,438 or 13% compared to the same five-month period in
the prior year, primarily due to an increase in the occupancy rate and an increase in
the average daily rate, reflecting stronger demand during the current quarter.
Activity at the Naval Air Station in Fallon and related companies were higher in 2007
than in 2006 which drove the stronger hotel demand. Revenues from other corporate
accounts and special functions also contributed to the increase from prior year.
 Other Operating Income.
 Other Operating Gains.
 Operating Expenses.
 
    
    Casino expenses increased approximately $194,700 or 22% compared to the same
five-month period in the prior year due to an increase of $38,864 in casino cage labor,
an increase of $14,881 in participation slot payments, an increase of $31,260 in slot
conversion charges, an increase of $12,744 in repairs and maintenance and an increase
of $12,931 in taxes/licenses expense; offset by a decrease of $58,434 in slot supplies.
    
    Food and beverage expenses are approximately $54,100 or 6.69% higher compared to the
same five-month period in the prior year primarily due to an increase in food
purchases. Labor costs reflected an increase during the current quarter at the coffee
shop due to the extended hours of operation and an increase in the use of contract
labor. In addition, an increase in supplies and linens expense in the current year is
due to the increase in business in the dining room.
 19




---



##### Table of Contents




    
    Hotel expenses reflect an increase of approximately $27,940 or 5% compared to the
same five-month period in the prior year primarily due to increased occupancy and the
resulting increases in housekeeping labor and other operating costs.
 Project development costs.
 Selling, general and administrative expense. .
 Depreciation and amortization expense.
 Unrealized gains on notes receivable from Tribal governments.
 Other expense.
 Liquidity and capital resources
   20




---



##### Table of Contents



Tribal casino projects
     21




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##### Table of Contents



22




---



##### Table of Contents



Other
   Quantitative and qualitative disclosures about market risk
   Safe harbor provision
   
    
    our growth strategies;
    
    our development and potential acquisition of new facilities;
    
    risks related to development and construction activities;
    
    anticipated trends in the gaming industries;
    
    patron demographics;
    
    general market and economic conditions;
    
    access to capital, including our ability to finance future business requirements;
 23




---



##### Table of Contents




    
    the availability of adequate levels of insurance;
    
    changes in federal, state, and local laws and regulations, including
environmental and gaming license legislation and regulations;
    
    regulatory approvals;
    
    competitive environment;
    
    risks, uncertainties and other factors described from time to time in this and
our other SEC filings and reports.
  
 Item 3. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.
 
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
    24




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##### Table of Contents



Item 4. Submission of Matters to a Vote Of Security Holders
   In Favor
    
    WithheldElection of Kenneth R. Adams
    
    
    16,700,254
    
    
    
    35,080Election of Carl G. Braunlich
    
    
    16,700,254
    
    
    
    35,080Election of Kathleen M. Caracciolo
    
    
    16,704,054
    
    
    
    31,280Election of Andre M. Hilliou
    
    
    16,581,961
    
    
    
    153,373Election of Lee A. Iacocca
    
    
    14,954,037
    
    
    
    1,781,297Election of Mark J. Miller
    
    
    16,221,861
    
    
    
    513,473Election of J. Michael Paulson
    
    
    16,702,204
    
    
    
    33,136
 In Favor
    
    Against
    
    Abstain
    
    Broker Non-voteRatification of PBTK as
independent auditors
    
    
    16,684,394
    
    
    
    26,531
    
    
    
    24,409
    
    
    
    0
 25




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##### Table of Contents



Item 6. Exhibits
 10.1
    
    Purchase and Sale Agreement between Green Acres Casino Management,
Inc. and Gaming Entertainment (Michigan) LLC is incorporated herein
by reference to the Companys Current Report on Form 8-K dated June
5, 2007.10.2
    
    Termination of Consulting Agreement is incorporated herein by
reference to the Companys Current Report on Form 8-K dated June 5,
2007.10.3
    
    Gaming Entertainment (Delaware) LLC Management Reorganization
Agreement is incorporated herein by reference to the Companys
Current Report on Form 8-K dated June 21, 2007.10.4
    
    Employment Agreement between the Company and Andre Hilliou is
incorporated herein by reference to the Companys Current Report on
Form 8-K dated July 20, 2007.10.5
    
    Employment Agreement between the Company and Mark Miller is
incorporated herein by reference to the Companys Current Report on
Form 8-K dated July 20, 2007.31.1
    
    Certification of principal executive officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*31.2
    
    Certification of principal financial officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002*32.1
    
    Certification of principal executive and financial officers pursuant
to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith 26




---



##### Table of Contents



SIGNATURES
  Date: August 10, 2007
    FULL HOUSE RESORTS, INC.By:
    /s/ MARK MILLERMark MillerChief Financial Officer
(on behalf of the Registrant and
as principal financial officer) 27




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##### Table of Contents



Exhibit
Index
 ExhibitNumber
    
    Description10.1
    
    Purchase and Sale Agreement between Green Acres Casino Management, Inc. and Gaming Entertainment (Michigan) LLC is incorporated herein by reference to the Companys Current Report on Form 8-K dated June 5, 2007.10.2
    
    Termination of Consulting Agreement is incorporated herein by reference to the Companys Current Report on Form 8-K dated June 5, 2007.10.3
    
    Gaming Entertainment (Delaware) LLC Management Reorganization Agreement is incorporated herein by reference to the Companys Current Report on Form 8-K dated June 21, 2007.10.4
    
    Employment Agreement between the Company and Andre Hilliou is incorporated herein by reference to the Companys Current Report on Form 8-K dated July 20, 2007.10.5
    
    Employment Agreement between the Company and Mark Miller is incorporated herein by reference to the Companys Current Report on Form 8-K dated July 20, 2007.31.1
    
    Certification of principal executive officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    Certification of principal financial officer pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    Certification of principal executive and financial officers pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith 28