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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from                      to
 Commission File No. 1-32583
 FULL HOUSE RESORTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    13-3391527(I.R.S. Employer
Identification No.)4670 S. Fort Apache, Ste. 190
Las Vegas, Nevada(Address of principal executive offices)
    
    89147(Zip Code)
 (702) 221-7800  (Registrants telephone number, including area code)
 þ o
 o o
  Large Accelerated Filer o
Accelerated Filer o
Non-Accelerated Filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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FULL HOUSE RESORTS, INC.
INDEX
 PagePART I. Financial InformationItem 1. Consolidated Financial StatementsConsolidated Balance Sheets as of September 30, 2010 (Unaudited),
and December 31, 2009
    
    
    3Unaudited Consolidated Statements of Operations
for the three and nine months ended September 30, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Stockholders Equity for the nine months ended September 30, 2010 and 2009
    
    
    5Unaudited Consolidated Statements of Cash Flows
for the nine months ended September 30, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 4. Controls and Procedures
    
    
    23PART II. Other InformationItem 6. Exhibits
    
    
    24Signatures
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
  
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 September 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assetsCash and equivalents
    
    $
    17,485,006
    
    
    $
    9,198,399Notes receivable related to tribal casino project
    
    
    
    
    
    
    4,682,420Accounts receivable, net of allowance for doubtful accounts of $0 and $1,072
    
    
    3,018,642
    
    
    
    1,802,100Prepaid expenses
    
    
    491,408
    
    
    
    372,735Deferred tax asset
    
    
    123,476
    
    
    
    136,126Deposits and other
    
    
    105,723
    
    
    
    90,68521,224,255
    
    
    
    16,282,465Property and equipment, net of accumulated depreciation of $6,668,976 and $5,940,540
    
    
    7,619,711
    
    
    
    7,961,734Long-term assets related to tribal casino projectsNotes receivable, net of allowance of $618,875
    
    
    399,349
    
    
    
    430,467Contract rights, net of accumulated amortization of $3,527,723 and $1,748,570
    
    
    13,837,862
    
    
    
    15,617,01614,237,211
    
    
    
    16,047,483Other long-term assetsGoodwill
    
    
    10,308,520
    
    
    
    10,308,520Deposits and other
    
    
    1,380,595
    
    
    
    985,38411,689,115
    
    
    
    11,293,904$
    54,770,292
    
    
    $
    51,585,586LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesDebt to joint venture affiliate
    
    $
    
    
    
    $
    1,450,087Accounts payable
    
    
    183,398
    
    
    
    136,485Income tax payable
    
    
    268,104
    
    
    
    2,273,777Accrued payroll and related
    
    
    812,015
    
    
    
    723,783Other accrued expenses
    
    
    332,687
    
    
    
    288,4431,596,204
    
    
    
    4,872,575Deferred tax liability
    
    
    1,797,287
    
    
    
    1,756,0853,393,491
    
    
    
    6,628,660Stockholders equityCommon stock, $.0001 par value, 25,000,000 shares authorized; 19,364,276 and
19,358,276 shares issued
    
    
    1,936
    
    
    
    1,936Additional paid-in capital
    
    
    42,699,533
    
    
    
    42,665,390Treasury stock, 1,356,595 common shares
    
    
    (1,654,075
    )
    
    
    (1,654,075
    )Retained earnings (deficit)
    
    
    4,212,374
    
    
    
    (1,504,320
    )45,259,768
    
    
    
    39,508,931Non-controlling interest in consolidated joint venture
    
    
    6,117,033
    
    
    
    5,447,99551,376,801
    
    
    
    44,956,926$
    54,770,292
    
    
    $
    51,585,586
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months
    
    
    Nine monthsended September 30,
    
    
    ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesCasino
    
    $
    1,576,780
    
    
    $
    1,703,289
    
    
    $
    4,863,779
    
    
    $
    5,458,520Food and beverage
    
    
    437,568
    
    
    
    442,224
    
    
    
    1,300,013
    
    
    
    1,331,848Management fees
    
    
    6,518,898
    
    
    
    5,753,167
    
    
    
    18,699,602
    
    
    
    5,753,167Other
    
    
    103,014
    
    
    
    18,803
    
    
    
    142,563
    
    
    
    58,6888,636,260
    
    
    
    7,917,483
    
    
    
    25,005,957
    
    
    
    12,602,223Operating costs and expensesCasino
    
    
    537,719
    
    
    
    558,702
    
    
    
    1,621,101
    
    
    
    1,698,096Food and beverage
    
    
    518,432
    
    
    
    491,838
    
    
    
    1,501,336
    
    
    
    1,456,511Project development costs
    
    
    148,310
    
    
    
    108,124
    
    
    
    283,722
    
    
    
    139,138Selling, general and administrative
    
    
    1,547,855
    
    
    
    1,756,191
    
    
    
    4,829,910
    
    
    
    4,805,159Depreciation and amortization
    
    
    855,873
    
    
    
    662,210
    
    
    
    2,576,849
    
    
    
    1,233,7433,608,189
    
    
    
    3,577,065
    
    
    
    10,812,918
    
    
    
    9,332,647Operating gains (losses)Equity in net income of
unconsolidated joint
venture, and related
guaranteed payments
    
    
    1,531,900
    
    
    
    1,459,975
    
    
    
    3,623,450
    
    
    
    3,551,852Unrealized gains (loss) on
notes receivable, tribal
governments
    
    
    
    
    
    
    248,641
    
    
    
    (31,118
    )
    
    
    542,610Member agreement modification
    
    
    
    
    
    
    (2,147,327
    )
    
    
    
    
    
    
    (2,147,327
    )Impairment gain (loss)
    
    
    
    
    
    
    4,669
    
    
    
    
    
    
    
    (25,332
    )1,531,900
    
    
    
    (434,042
    )
    
    
    3,592,332
    
    
    
    1,921,803Operating income
    
    
    6,559,971
    
    
    
    3,906,376
    
    
    
    17,785,371
    
    
    
    5,191,379Other income (expense)Interest and other income
    
    
    3,776
    
    
    
    112,848
    
    
    
    118,061
    
    
    
    148,438Interest expense
    
    
    (3,655
    )
    
    
    (48,408
    )
    
    
    (10,966
    )
    
    
    (195,570
    )Income before income taxes
    
    
    6,560,092
    
    
    
    3,970,816
    
    
    
    17,892,466
    
    
    
    5,144,247Income taxes
    
    
    (1,599,610
    )
    
    
    (1,735,797
    )
    
    
    (4,368,021
    )
    
    
    (2,327,022
    )Net income
    
    
    4,960,482
    
    
    
    2,235,019
    
    
    
    13,524,445
    
    
    
    2,817,225(Income) loss attributable to noncontrolling interest in
consolidated joint venture
    
    
    (2,723,520
    )
    
    
    812,989
    
    
    
    (7,807,751
    )
    
    
    933,948Net income attributable to the Company
    
    $
    2,236,962
    
    
    $
    3,048,008
    
    
    $
    5,716,694
    
    
    $
    3,751,173Net income attributable to the Company per common share
    
    $
    0.12
    
    
    $
    0.17
    
    
    $
    0.32
    
    
    $
    0.21Weighted-average number of common shares outstanding
    
    
    18,007,681
    
    
    
    18,001,681
    
    
    
    18,004,615
    
    
    
    18,033,323
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalNine months ended
    
    Common stock
    
    
    Treasury stock
    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersSeptember 30, 2010
    
    Shares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    capital
    
    
    (deficit)
    
    
    Interest
    
    
    equityBeginning balances
    
    
    19,358,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,665,390
    
    
    $
    (1,504,320
    )
    
    $
    5,447,995
    
    
    $
    44,956,926Previously
deferred
share-based
compensation
recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,683
    
    
    
    
    
    
    
    
    
    
    
    16,683Issuance of
common stock
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,460
    
    
    
    
    
    
    
    
    
    
    
    17,460Distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,138,713
    )
    
    
    (7,138,713
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,716,694
    
    
    
    7,807,751
    
    
    
    13,524,445Ending balances
    
    
    19,364,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,699,533
    
    
    $
    4,212,374
    
    
    $
    6,117,033
    
    
    $
    51,376,801
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalNine months ended
    
    Common stock
    
    
    Treasury stock
    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersSeptember 30, 2009
    
    Shares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    capital
    
    
    (deficit)
    
    
    Interest
    
    
    equityBeginning balances
    
    
    19,350,276
    
    
    $
    1,935
    
    
    
    1,210,414
    
    
    $
    (1,502,182
    )
    
    $
    42,356,098
    
    
    $
    (6,272,559
    )
    
    $
    4,600,068
    
    
    $
    39,183,360Previously
deferred
share-based
compensation
recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255,493
    
    
    
    
    
    
    
    
    
    
    
    255,493Issuance of
common stock
    
    
    8,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    20,399
    
    
    
    
    
    
    
    
    
    
    
    20,400Purchase of
treasury stock
    
    
    
    
    
    
    
    
    
    
    146,181
    
    
    
    (151,893
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,893
    )Net income (loss).
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,751,173
    
    
    
    (933,948
    )
    
    
    2,817,225Ending balances
    
    
    19,358,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,631,990
    
    
    $
    (2,521,386
    )
    
    $
    3,666,120
    
    
    $
    42,124,585
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine monthsended September, 30,2010
    
    
    2009Net cash provided by operating activities
    
    $
    12,761,200
    
    
    $
    5,092,744Cash flows from investing activities:Purchase of property and equipment
    
    
    (358,738
    )
    
    
    (320,447
    )Proceeds from repayment of tribal advances
    
    
    5,000,000
    
    
    
    Proceeds from sale of assets
    
    
    1,200
    
    
    
    400Deposits and other capitalized acquisition costs
    
    
    (572,854
    )
    
    
    Other
    
    
    44,600
    
    
    
    854Net cash provided by (used in) investing activities
    
    
    4,114,208
    
    
    
    (319,193
    )Cash flows from financing activities:Payments on long-term debt to joint venture affiliate
    
    
    (1,450,088
    )
    
    
    (2,566,599
    )Proceeds from borrowings from joint venture affiliate
    
    
    
    
    
    
    395,000Purchase of treasury stock
    
    
    
    
    
    
    (151,893
    )Loan fees
    
    
    
    
    
    
    (4,250
    )Distributions to non-controlling interest in consolidated joint venture
    
    
    (7,138,713
    )
    
    
    Net cash used in financing activities
    
    
    (8,588,801
    )
    
    
    (2,327,742
    )Net increase in cash and equivalents
    
    
    8,286,607
    
    
    
    2,445,809Cash and equivalents, beginning of period
    
    
    9,198,399
    
    
    
    5,304,755Cash and equivalents, end of period
    
    $
    17,485,006
    
    
    $
    7,750,564SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for income taxes
    
    $
    6,414,760
    
    
    $
    626,485Non-cash investing and financing activities:Purchases of property and equipment financed with prior year deposit
    
    $
    94,185
    
    
    $
    
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF PRESENTATION
 The interim consolidated financial statements of Full House Resorts, Inc. and subsidiaries
(collectively, FHR or 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
annual financial statements prepared in accordance with generally accepted accounting
principles in the United States of America (GAAP) has been omitted pursuant to the interim
financial information rules and regulations of the United States Securities and Exchange
Commission.These unaudited interim consolidated financial statements should be read in conjunction with
the annual audited consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K filed March 24, 2010, for the year ended December 31,
2009, from which the balance sheet information as of that date was derived. Certain minor
reclassifications of amounts previously reported have been made to conform to the current
period presentation, none of which affected previously reported net income or earnings per
share. The results of operations for the periods ended September 30, 2010, are not
necessarily indicative of results to be expected for the year ending December 31, 2010.The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, including Stockmans Casino (Stockmans). Gaming Entertainment
(Michigan), LLC (GEM), a 50%-owned investee of the Company that is jointly owned by RAM
Entertainment, LLC (RAM), has been consolidated pursuant to the relevant portions of
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 810, Consolidation. The Company accounts for its investment in Gaming Entertainment
(Delaware), LLC (GED) (Note 3) using the equity method of accounting. All material
intercompany accounts and transactions have been eliminated. In addition, on January 1,
2009, the Company retroactively adopted the requirements of ASC Topic 810 for the
non-controlling or minority interest in a subsidiary. The adoption of Topic 810 did not have
any effect on the Companys consolidated net income or net income per share attributable to
the Company for the periods presented.
 2.
    
    SHARE-BASED COMPENSATION
 For the three months ended September 30, 2009, the Company recognized share-based
compensation expense of $33,346, related to the amortization of restricted stock grants
issued as board compensation in May 2009, which is included in selling, general and
administrative expenses. For the nine months ended September 30, 2010 and 2009, share-based
compensation expense recognized was $16,683 and $275,892, respectively. All stock grants
were fully vested as of March 31, 2010.
 3.
    
    VARIABLE INTEREST ENTITIES
 GED. The Companys investment in unconsolidated joint venture is a 50% ownership interest
in GED, a joint venture between the Company and Harrington Raceway Inc. (HRI). GED has a
management agreement with Harrington Raceway and Casino (Harrington) (formerly known as
Midway Slots and Simulcast), which is located in Harrington, Delaware. The Company receives
the greater of 50% of GEDs net income as currently prescribed under the joint venture
agreement, or a 5% growth rate in its 50% share of GEDs prior year net income through the
expiration of the GED management contract in August 2011.GED is a variable interest entity, but the Company is not the primary beneficiary due to the
fact that the Company holds a 50% non-controlling interest in GED and will not absorb or
receive over 50% of GEDs profits and losses. This is due to the Management Reorganization
Agreement with HRI where the Company obtained a guaranteed growth rate in the cash flow from
GED in exchange for lack of involvement in GEDs operations. Due to this agreement, the
Company does not have the power to direct the activities of GED that
most significantly impact the economic performance. Therefore, the Company does not
consolidate but accounts for the investment using the equity method.
 
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The Company believes the maximum exposure to loss is the management fee receivable and the
Companys investment in GED. The Companys assets related to its investment in GED consisted
of a receivable of $0.7 million as of September 30, 2010 and $0.6 million as of December 31,
2009. The equity method carrying value of the Companys investment in GED was $0.2 million
and $0.1 million as of September 30, 2010, and December 31, 2009, respectively, included in
long-term deposits and other.GED has no non-operating income or expenses, is treated as a partnership for income tax
reporting purposes and consequently recognizes no federal or state income tax provision. As
a result, income from operations for GED is equal to its net income for each period
presented and there are no material differences between GEDs income for financial and tax
reporting purposes. An unaudited summary for GEDs financial position and operations are as
follows:
 GED CONDENSED BALANCE SHEET INFORMATION
 September 30,
    
    
    December 31,2010
    
    
    2009Total assets
    
    $
    622,257
    
    
    $
    420,907Total liabilities
    
    
    227,919
    
    
    
    205,838
 GED CONDENSED STATEMENT OF INCOME INFORMATION
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    8,473,977
    
    
    $
    6,202,099
    
    
    $
    21,351,040
    
    
    $
    18,379,191Net income
    
    
    1,639,915
    
    
    
    1,691,962
    
    
    
    4,974,987
    
    
    
    5,436,532
 GEM. Due to the Companys financing arrangement for the development and management of the
FireKeepers project through GEM, a 50%-owned joint venture, the Company was exposed to the
majority of risk of economic loss from the joint ventures activities. As of August 2010,
FHRs member payable was paid and therefore, the Company is no longer exposed to the
majority of risk of economic loss from the joint ventures activities. However, the Company
possesses the power to direct the activities of GEM, including the direct oversight of
FireKeepers Casino, that significantly impact GEMs economic performance and therefore,
considers the Company to be the primary beneficiary. As such, the joint venture continues
to be a variable interest entity that requires consolidation in the Companys financial
statements.Management believes the maximum exposure to loss is $6.1 million, which is composed of the
Companys equity investment (which is eliminated in consolidation). Currently, GEM has no
debt. In addition, as part of the GEM member agreement modification, the GEM members agreed
that distributions to the members were to be made on a 50/50 basis to both members until
such time RAMs member payable had been fully repaid and thereafter 70% to the Company and
30% to RAM until such time as the remaining payable to the Company had been repaid. As of
March 31, 2010, RAMs member payable was paid and as of August 2010, FHRs member payable
was also paid. Accordingly, the distributions to the members reverted to a 50/50 split in
September 2010.GEMs current assets include the FireKeepers management fee receivable for both dates
presented, and December 31, 2009 current assets also includes the $5.0 million note
receivable plus interest from Firekeepers Development Authority (the Authority).
Long-term assets include $10.1 million and $11.4 million in contract rights, net of
amortization as of September 30, 2010 and December 31, 2009, respectively. Amounts due to
the members related to GEM member agreement are zero and $11.8 million, including $5.6
million
reported as equity, for September 30, 2010 and December 31, 2009, respectively. GEM has no
long-term liabilities.
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An unaudited summary of GEMs financial position and operations are as follows:
 GEM CONDENSED BALANCE SHEET INFORMATION
 September 30,
    
    
    December 31,2010
    
    
    2009Current assets
    
    $
    2,267,655
    
    
    $
    6,006,779Long-term assets
    
    
    10,057,627
    
    
    
    11,351,133Current liabilities
    
    
    91,215
    
    
    
    6,461,922
 GEM CONDENSED STATEMENT OF INCOME INFORMATION
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Revenues
    
    $
    6,518,898
    
    
    $
    5,733,167
    
    
    $
    18,699,602
    
    
    $
    5,753,167Net income
    
    
    5,447,039
    
    
    
    (1,625,977
    )
    
    
    15,615,503
    
    
    
    (1,867,897
    )
 4.
    
    FAIR VALUE MEASUREMENTS
 The carrying value of the Companys cash and equivalents and accounts payable approximates
fair value because of the short maturity of those instruments. Substantially all of the
Companys notes receivable are carried at estimated fair value determined based on level 3
inputs, as discussed in Note 5. The estimated fair value of the Companys debt approximates
their recorded values as of the balance sheet dates presented, based on level 2 inputs, as
defined in ASC Topic 820, consisting of interest rates offered to the Company for loans of
the same or similar remaining maturities and bearing similar risks.In January 2010, the FASB issued ASU 2010-6, Improving Disclosures About Fair Value
Measurements, which requires reporting entities to make new disclosures about recurring or
nonrecurring fair-value measurements including significant transfers into and out of level 1
and level 2 fair value measurements, also, as defined in ASC Topic 820, and information on
purchases, sales, issuances, and settlements on a gross basis in the reconciliation of level
3 fair value measurements. ASU 2010-6 was effective for 2010, except for level 3
reconciliation disclosures, which will become effective for 2011. The adoption of ASU 2010-6
did not have a material effect on the Companys financial statements or disclosures for the
three months ended September 30, 2010, and it is not expected that the adoption of level 3
reconciliation disclosures will have a material effect in 2011.Due to the absence of observable market quotes on the Companys notes receivable from tribal
governments (Note 5), tribal notes receivable are recorded and subsequently re-measured and
adjusted periodically to estimated fair value based only on level 3 inputs. These level 3
inputs are based primarily on managements estimates of expected cash flow streams, based on
factors such as future interest rates, casino opening dates and discount rates.The estimated casino opening dates used in the valuations take into account project-specific
circumstances such as ongoing litigation, the status of required regulatory approvals,
construction periods and other factors. Factors considered in the determination of an
appropriate discount rate include discount rates typically used by gaming industry investors
and appraisers to value individual casino properties in the appropriate regions, and
discount rates produced by the widely-accepted Capital Asset Pricing Model (CAPM). The
following key assumptions are used in the CAPM:
 
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
    
    S&P 500, average benchmark investment returns (medium-term horizon risk
premiums);
    
    Risk free investment return equal to the trailing 10-year average for 90-day
treasury bills;
    
    Investment beta factor equal to the average of a peer group of similar entities
in the hotel and gaming industry;
    
    Project-specific adjustments based on the status of the project (i.e.,
litigation, regulatory approvals, tribal politics, etc.), and typical size premiums
for micro-cap and low-cap companies.
 5.
    
    NOTES RECEIVABLE, TRIBAL GOVERNMENTS
 The Company has notes receivable related to advances made to, or on behalf of, tribes to
fund tribal operations and development expenses related to potential casino projects.
Repayment of these notes is conditioned upon the development of the projects, and
ultimately, the successful operation of the facilities. Subject to such condition, the
Companys agreements with the tribes provide for the reimbursement of these advances plus
applicable interest, if any, 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 any tribal gaming operation following completion of
development activities undertaken by others.As of September 30, 2010, and December 31, 2009, notes receivable from tribal governments
were as follows:
 September 30,
    
    
    December 31,2010
    
    
    2009Contractual (stated) amountFireKeepers Development Authority
    
    $
    
    
    
    $
    5,000,000Northern Cheyenne
    
    
    618,875
    
    
    
    618,875Nambe Pueblo
    
    
    661,600
    
    
    
    661,600$
    1,280,475
    
    
    $
    6,280,475Estimated fair value of notes receivable
related to tribal casino projects:FireKeepers Development Authority
    
    $
    
    
    
    $
    4,682,420Northern Cheyenne
    
    
    
    
    
    
    Nambe Pueblo
    
    
    399,349
    
    
    
    430,467$
    399,349
    
    
    $
    5,112,887
 The $5.0 million due from the Authority at December 31, 2009, including interest at prime
plus 1% accrued from August 5, 2009, was paid in February 2010.In 2008, management announced that the Company was no longer pursuing the Nambé Pueblo
project. The Nambé Pueblo tribe has acknowledged its obligation to repay reimbursable
development advances of approximately $0.7 million plus interest at prime plus 2%, from
future gaming revenues, if any. Management has been advised and therefore, currently
believes that the Nambé Pueblo expects to develop a slot machine operation with
approximately 200 devices, which when constructed, to be adjacent to its travel center and
provide the Nambé Pueblo tribe with the financial wherewithal to repay the amounts owed to
the Company. The Company has been advised that the Nambé Pueblo continues to work with
potential financing sources to fund the gaming development. Based on information available
about the current status of the financing effort, the Companys management believes funding
may be completed in the first quarter of 2011 with the expected facility opening during the
fourth quarter of 2011, which represents a three month delay from prior estimates. With due
consideration to the foregoing factors, management has estimated the fair value of the note
receivable
from the Nambé Pueblo at $0.4 million as of September 30, 2010, and adjusted its carrying
value accordingly. There can be no assurance that the facility will be opened or that the
receivable will be paid.
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The following table summarizes changes in the estimated fair value of notes receivable from
tribal governments, which consisted of the Nambé Pueblo project, determined using level 3
estimated fair value inputs, from January 1, 2010, to September 30, 2010:
 Nambe PuebloProjectBalances, January 1, 2010
    
    $
    430,467Unrealized loss included in earnings
    
    
    (31,118
    )Balances, September 30, 2010
    
    $
    399,349
 6.
    
    GOODWILL
 Goodwill represents the excess of the purchase price over fair market value of net assets
acquired in connection with the Stockmans casino operation. The Companys review of
goodwill as of September 30, 2010 resulted in a 6.2% excess of estimated fair value over the
carrying amount of Stockmans goodwill and related assets using an income approach
considering an earnings multiple of 6.5 times. The calculation contemplates changes for both
current year and future year estimates in earnings and the impact of these changes to the
fair value of Stockmans, although there is some uncertainty in key assumptions including
projected future earnings growth. Management believes Stockmans could sustain a further
10% decline in current year projected earnings or a future year 1% decline in projected
earnings growth without impairment.
 7.
    
    DEBT
 At September 30, 2010, there was no long-term debt outstanding. At December 31, 2009,
current portion of long-term debt consisted of $1.5 million debt due to joint venture
affiliate (RAM).Debt to joint venture affiliate.On October 9, 2009, effective September 30, 2009, an
agreement was reached between the Company and RAM (GEM Financial Resolution) clarifying
the treatment of the following items:
 
    
    Reimbursable and non-reimbursable advances funded by the members, before RAM
acquired its interest in GEM.
    
    Repayments of disproportionate advances by the Company as prior agreements were
unclear as to the treatment.
 As a result of the GEM Financial Resolution, payables due from GEM to each member were
adjusted to reflect a total payable due to RAM of $8.5 million, including $2.7 reported as
equity, and a total payable due to FHR of $11.9 million, including $2.7 reported as equity,
resulting in the recognition of a net pre-tax gain of $1.4 million, which was recorded in
September 2009. The net pre-tax gain is distributed gross on the statements of operations
for the periods ended September 30, 2009, as a $2.1 million charge characterized as a member
agreement modification offset by a $3.5 million credit attributable to the non-controlling
interest.Reducing Revolving Loan (the Revolver).Effective January 1, 2010, based upon an amendment
to the Revolver, the maximum amount permitted to be outstanding decreases $329,000
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. Draws on the Revolver are 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 Revolver 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 Revolver 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. As of September 30, 2010 and
December 31, 2009, there were no amounts drawn on the Revolver, and the Company was in full
compliance with the debt covenants. The Company had $7.9 million of availability under its
revolving credit line as of September 30, 2010.
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8.
    
    SEGMENT REPORTING
 The Company is composed of three primary business segments. The following tables reflect
selected segment information for the three and nine months ended September 30, 2010 and
2009. The operations segment includes the Stockmans Casino operation in Fallon, Nevada. The
development/management segment includes costs associated with tribal casino development
projects, the Michigan and Delaware joint ventures and other minor projects. The Corporate
segment includes general and administrative expenses of the Company.Selected statement of operations data for the three months ended September 30:
 Casino
    
    
    Development/Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    2,032,056
    
    
    $
    6,604,204
    
    
    $
    
    
    
    $
    8,636,260Selling, general and administrative expense
    
    
    428,937
    
    
    
    191,985
    
    
    
    926,933
    
    
    
    1,547,855Depreciation and amortization
    
    
    237,302
    
    
    
    593,197
    
    
    
    25,374
    
    
    
    855,873Operating gains
    
    
    
    
    
    
    1,531,900
    
    
    
    
    
    
    
    1,531,900Operating income (loss)
    
    
    309,666
    
    
    
    7,350,922
    
    
    
    (1,100,617
    )
    
    
    6,559,971Net income (loss) attributable to Company
    
    
    206,600
    
    
    
    2,758,909
    
    
    
    (728,547
    )
    
    
    2,236,9622009Revenues
    
    $
    2,164,316
    
    
    $
    5,753,167
    
    
    $
    
    
    
    $
    7,917,483Selling, general and administrative expense
    
    
    436,448
    
    
    
    138,400
    
    
    
    1,181,343
    
    
    
    1,756,191Depreciation and amortization
    
    
    240,039
    
    
    
    399,886
    
    
    
    22,285
    
    
    
    662,210Operating loss
    
    
    
    
    
    
    (434,042
    )
    
    
    
    
    
    
    (434,042
    )Operating income (loss)
    
    
    437,289
    
    
    
    4,758,586
    
    
    
    (1,289,499
    )
    
    
    3,906,376Net income (loss) attributable to Company
    
    
    288,860
    
    
    
    3,616,670
    
    
    
    (857,522
    )
    
    
    3,048,008
 Selected statement of operations data for the nine months ended September 30:
 Casino
    
    
    Development/Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    6,221,049
    
    
    $
    18,784,908
    
    
    $
    
    
    
    $
    25,005,957Selling, general and administrative expense
    
    
    1,289,763
    
    
    
    593,200
    
    
    
    2,946,947
    
    
    
    4,829,910Depreciation and amortization
    
    
    723,375
    
    
    
    1,779,586
    
    
    
    73,888
    
    
    
    2,576,849Operating gains
    
    
    
    
    
    
    3,592,332
    
    
    
    
    
    
    
    3,592,332Operating income (loss)
    
    
    1,085,475
    
    
    
    20,003,113
    
    
    
    (3,303,217
    )
    
    
    17,785,371Net income (loss) attributable to Company
    
    
    719,436
    
    
    
    7,177,779
    
    
    
    (2,180,521
    )
    
    
    5,716,6942009Revenues
    
    $
    6,849,056
    
    
    $
    5,753,167
    
    
    $
    
    
    
    $
    12,602,223Selling, general and administrative expense
    
    
    1,285,006
    
    
    
    394,873
    
    
    
    3,125,280
    
    
    
    4,805,159Depreciation and amortization
    
    
    743,701
    
    
    
    426,836
    
    
    
    63,206
    
    
    
    1,233,743Operating gains
    
    
    
    
    
    
    1,921,803
    
    
    
    
    
    
    
    1,921,803Operating income (loss)
    
    
    1,665,741
    
    
    
    6,802,654
    
    
    
    (3,277,016
    )
    
    
    5,191,379Net income (loss) attributable to Company
    
    
    1,099,268
    
    
    
    4,850,661
    
    
    
    (2,198,756
    )
    
    
    3,751,173
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Selected balance sheet data as of September 30, 2010 and December 31, 2009:
 Casino
    
    
    Development/Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Total assets
    
    $
    19,535,617
    
    
    $
    17,603,658
    
    
    $
    17,631,017
    
    
    $
    54,770,292Property and equipment, net
    
    
    7,520,089
    
    
    
    385
    
    
    
    99,237
    
    
    
    7,619,711Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    1,300,120
    
    
    
    1,122,607
    
    
    
    970,764
    
    
    
    3,393,4912009Total assets
    
    $
    19,800,305
    
    
    $
    22,790,171
    
    
    $
    8,995,110
    
    
    $
    51,585,586Property and equipment, net
    
    
    7,834,951
    
    
    
    818
    
    
    
    125,965
    
    
    
    7,961,734Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    1,125,099
    
    
    
    2,871,553
    
    
    
    2,632,008
    
    
    
    6,628,660
 9.
    
    CONTINGENCIES
 Economic conditions and related risks and uncertainties.The United States has experienced a
severe and widespread recession accompanied by, among other things, weakness in consumer
spending including gaming activity and reduced credit and capital financing availability,
and is also engaged in war, all of which are likely to continue to have far-reaching effects
on economic conditions in the country for an indeterminate period. The Companys operations
are currently concentrated in northern Nevada, Delaware and Michigan. Accordingly, future
operations could be affected by adverse economic conditions particularly in those areas and
their key feeder markets in neighboring states. The effects and duration of these conditions
and related risks and uncertainties on the Companys future operations and cash flows,
including its access to capital or credit financing, cannot be estimated at this time, but
may likely be significant.Acquisition.On September 13, 2010, the Company announced that it had entered into
definitive agreements with Grand Victoria Casino & Resort, LP to acquire all of the
operating assets of the Grand Victoria Casino & Resort, located in Rising Sun, Indiana on
the Ohio River. The purchase price is $43.0 million, exclusive of estimated cash and net
working capital balances of $8.0 million and fees and expenses as of the closing date. The
Company entered into a credit agreement with Wells Fargo National Association, as administrative agent for the lenders named in the credit agreement, on October 29, 2010
and regulatory approvals are expected to be obtained to accommodate a closing in the first
quarter of 2011. The credit agreement provides for a term loan in an amount up to $31.3
million and a revolving loan to the Company in an amount up to $4.7 million. The Company
anticipates applying approximately $19.0 million of cash on hand to the purchase price. The
term loans interest rate is expected to be LIBOR plus 550 basis points and it will fully
amortize over the five-year term of the facility. The credit agreement will be secured by
substantially all of the Companys assets.Through September 30, 2010, the Company incurred $84,072 in acquisition related expenses
which are included in project development expense. On September 10, 2010 the Company
deposited the $0.5 million initial deposit toward the $43.0 million purchase price with an
escrow agent and an additional $4.5 million was deposited on October 29, 2010. In
conjunction with closing on the financing commitment, the Company paid $1.8 million in
financing related fees.
 IRS examination.Effective May 1, 2010, the Company is under examination by the Internal
Revenue Service (IRS) for the year ended December 31, 2008. As of the date of this
filing, no issues have been presented which would necessitate an adjustment to prior
periods.
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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 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 and credit, including our ability to finance future business
requirements;
    
    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;
    
    availability of financing, required gaming approvals and all other conditions
required for closing will occur and that the Grand Victoria Casino and Resort will
be acquired;
    
    Firekeepers Casino will continue to generate the levels of business and sustain
the financial performance it has to date;
    
    Stockmans Casino will continue to generate the levels of business and sustain
the financial performance it has to date;
    
    risks, uncertainties and other factors described from time to time in this and
our other SEC filings and reports.
  Overview
   14




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Critical accounting estimates and policies
     15




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##### Table of Contents



ssets related to tribal casino projects
 Accounting Standards Codification "
 Notes receivable
    16




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,
" ,
 Contract rights
   Results of operations
  Three Months Ended September 30, 2010, Compared to Three Months Ended September 30, 2009
 Operating revenues. rd
  17




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##### Table of Contents



Operating costs and expenses.
 Project development costs.
 Selling, general and administrative expense.
 Operating gains (losses).
 Other income (expense).
 Income taxes.
 Non-controlling interest.
 Nine Months Ended September 30, 2010, Compared to Nine Months Ended September 30, 2009
 Operating revenues.
 Operating costs and expenses.
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##### Table of Contents



Project development costs.
 Selling, general and administrative expense.
 Operating gains (losses).
 Other income (expense).
 Income taxes.
 Non-controlling interest.
 Liquidity and capital resources
 Economic conditions and related risks and uncertainties
    19




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FireKeepers project
   20




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
    
    Reimbursable and non-reimbursable advances funded by the members, before RAM
acquired its interest in GEM.
    
    Repayments of disproportionate advances by us as prior agreements were unclear
as to the treatment.
   Other projects
    21




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Seasonality
  Regulation and taxes
    22




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Off-balance sheet arrangements
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
  23




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PART II  OTHER INFORMATION
 
 Item 6. Exhibits
 2.1
    
    Asset Purchase Agreement by and between Grand Victoria Casino &
Resort, L.P. and Full House Resorts, Inc., dated as of September 10,
2010 (Incorporated by reference to Exhibit 2.1 to Full Houses
Current Report on Form 8-K filed with the Securities and Exchange
Commission on September 13, 2010. )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 officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*32.2
    
    Certification of principal financial officer pursuant to 18 U.S.C.
section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
 
 *
    
    Filed herewith  24




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SIGNATURES
  FULL HOUSE RESORTS, INC.Date:  November 8, 2010
    By:
    /s/ MARK MILLERMark MillerChief Financial Officer and Chief Operating Officer
(on behalf of the Registrant and
as principal financial officer)  25