##### Table of Contents



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 June 30, 2008
 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
    
    13-3391527(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)4670 S. Fort Apache, Ste. 190
    
    89147Las Vegas, Nevada
    
    (Zip Code)(Address of principal executive offices)
 (702) 221-7800  (Registrants telephone number, including area code)
 þ o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non Accelerated Filer o
    
    Smaller reporting company þ
 Yes o No þ




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##### 



FULL HOUSE RESORTS, INC.
INDEX
 PagePART I. Financial InformationItem 1. Condensed Consolidated Financial StatementsBalance Sheets as of June 30, 2008 (unaudited), and
December 31, 2007
    
    
    3Unaudited Statements of Operations
for the three and six months ended June 30, 2008 and 2007
    
    
    4Unaudited Statements of Cash Flows
for the six months ended June 30, 2008 and 2007
    
    
    5Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4T. Controls and Procedures
    
    
    26PART II. Other InformationItem 1. Legal Proceedings
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 6. Exhibits
    
    
    28Signatures
    
    
    29Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assetsCash
    
    $
    6,030,688
    
    
    $
    7,975,860Accounts receivable, net
    
    
    265,326
    
    
    
    319,865Prepaid expenses
    
    
    387,543
    
    
    
    351,658Deposits and other current assets
    
    
    384,911
    
    
    
    172,120Assets held for sale
    
    
    45,000
    
    
    
    6,960,7627,113,468
    
    
    
    15,780,265Property and equipment, net of accumulated depreciation of $4,406,016 and $3,848,439
    
    
    8,975,353
    
    
    
    9,227,113Long-term assets related to tribal casino projectsNotes receivable
    
    
    4,833,034
    
    
    
    12,178,481Contract rights, net of accumulated amortization of $699,655 and $670,927
    
    
    16,817,487
    
    
    
    14,761,13321,650,521
    
    
    
    26,939,614Other long-term assetsGoodwill
    
    
    10,308,520
    
    
    
    10,308,520Deposits and other
    
    
    927,951
    
    
    
    868,26511,236,471
    
    
    
    11,176,785$
    48,975,813
    
    
    $
    63,123,777LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt
    
    $
    236,032
    
    
    $
    259,124Accounts payable
    
    
    379,224
    
    
    
    274,411Accrued expenses
    
    
    1,007,826
    
    
    
    1,364,2931,623,082
    
    
    
    1,897,828Long-term debt to joint venture affiliate
    
    
    2,515,590
    
    
    
    1,255,478Other long-term debt, net of current portion
    
    
    4,127,384
    
    
    
    21,693,314Deferred income tax liability
    
    
    667,716
    
    
    
    359,023Other long-term liabilities
    
    
    73,024
    
    
    
    17,2319,006,796
    
    
    
    25,222,874Noncontrolling interest in consolidated joint venture
    
    
    4,808,021
    
    
    
    4,232,775Stockholders equityCommon stock, $.0001 par value, 25,000,000 shares authorized; 19,342,276 shares
issued and outstanding
    
    
    1,934
    
    
    
    1,934Additional paid-in capital
    
    
    42,702,372
    
    
    
    42,702,372Deferred compensation
    
    
    (724,694
    )
    
    
    (1,145,329
    )Deficit
    
    
    (6,818,616
    )
    
    
    (7,890,849
    )35,160,996
    
    
    
    33,668,128$
    48,975,813
    
    
    $
    63,123,777
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesCasino
    
    $
    1,804,463
    
    
    $
    2,005,397
    
    
    $
    3,769,512
    
    
    $
    3,354,187Food and beverage
    
    
    551,828
    
    
    
    544,980
    
    
    
    1,135,813
    
    
    
    865,782Other operating income
    
    
    30,679
    
    
    
    303,809
    
    
    
    51,268
    
    
    
    318,8852,386,970
    
    
    
    2,854,186
    
    
    
    4,956,593
    
    
    
    4,538,854Operating costs and expensesCasino
    
    
    677,550
    
    
    
    689,792
    
    
    
    1,277,336
    
    
    
    1,079,835Food and beverage
    
    
    555,045
    
    
    
    558,666
    
    
    
    1,155,318
    
    
    
    872,832Project development costs
    
    
    35,840
    
    
    
    60,554
    
    
    
    70,632
    
    
    
    245,734Selling, general and administrative
    
    
    1,737,469
    
    
    
    2,055,021
    
    
    
    3,332,090
    
    
    
    3,807,276Depreciation and amortization
    
    
    324,693
    
    
    
    322,114
    
    
    
    595,234
    
    
    
    519,6453,330,597
    
    
    
    3,686,147
    
    
    
    6,430,610
    
    
    
    6,525,322Operating gains (losses)Equity in net income of unconsolidated joint venture and management fee income
    
    
    1,032,046
    
    
    
    1,026,218
    
    
    
    2,194,783
    
    
    
    2,073,705Unrealized gains (loss) on notes receivable, tribal governments
    
    
    (61,840
    )
    
    
    523,768
    
    
    
    1,836,684
    
    
    
    928,301Impairment loss, assets held for sale
    
    
    (85,000
    )
    
    
    
    
    
    
    (85,000
    )
    
    
    885,206
    
    
    
    1,549,986
    
    
    
    3,946,467
    
    
    
    3,002,006Income (loss) from continuing operations before other income (expense)
    
    
    (58,421
    )
    
    
    718,025
    
    
    
    2,472,450
    
    
    
    1,015,538Other income (expense)Interest and other income
    
    
    36,929
    
    
    
    116,053
    
    
    
    95,677
    
    
    
    286,480Interest expense
    
    
    (118,491
    )
    
    
    (362,435
    )
    
    
    (298,385
    )
    
    
    (623,275
    )Income (loss) from continuing operations before noncontrolling interest in net
income (loss) of consolidated joint venture and income taxes
    
    
    (139,983
    )
    
    
    471,643
    
    
    
    2,269,742
    
    
    
    678,743Noncontrolling interest in net (income) loss of consolidated joint venture
    
    
    188,434
    
    
    
    (103,664
    )
    
    
    (575,246
    )
    
    
    (111,590
    )Income from continuing operations before income taxes
    
    
    48,451
    
    
    
    367,979
    
    
    
    1,694,496
    
    
    
    567,153Income taxes
    
    
    (15,108
    )
    
    
    (209,830
    )
    
    
    (660,404
    )
    
    
    (313,659
    )Income from continuing operations
    
    
    33,343
    
    
    
    158,149
    
    
    
    1,034,092
    
    
    
    253,494Income from discontinued operations, net of tax
    
    
    
    
    
    
    78,084
    
    
    
    38,141
    
    
    
    73,710Net income
    
    $
    33,343
    
    
    $
    236,233
    
    
    $
    1,072,233
    
    
    $
    327,204Income from continuing operations per common shareBasic and diluted
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.06
    
    
    $
    0.02Income from discontinued operations per common shareBasic and diluted
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00
    
    
    $
    0.00Net income per common shareBasic and diluted
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.06
    
    
    $
    0.02Weighted-average number of common shares outstandingBasic
    
    
    19,342,276
    
    
    
    19,322,828
    
    
    
    19,342,276
    
    
    
    19,265,597Diluted
    
    
    19,342,276
    
    
    
    19,322,996
    
    
    
    19,342,276
    
    
    
    19,265,597
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six monthsended June 30,2008
    
    
    2007Net cash provided by operating activities:
    
    $
    631,558
    
    
    $
    856,299Investing activities:Deposits and other cash costs of the Stockmans Casino
acquisition, net of cash acquired of $920,824 in 2007
    
    
    
    
    
    
    (8,317,493
    )Acquisition of contract rights and other assets
    
    
    (2,085,082
    )
    
    
    (304,464
    )Purchase of property and equipment
    
    
    (314,746
    )
    
    
    (112,624
    )Advances to tribal governments, net of $2,124 and $32,030 expensed
    
    
    (71,336
    )
    
    
    (235,623
    )Proceeds from sale of assets
    
    
    6,961,020
    
    
    
    900Proceeds from repayment of tribal advances
    
    
    9,253,467
    
    
    
    Other
    
    
    8,856
    
    
    
    Net cash provided by (used in) investing activities
    
    
    13,752,179
    
    
    
    (8,969,304
    )Financing activities:Dividends paid
    
    
    
    
    
    
    (3,042,084
    )Payments on long-term debt
    
    
    (17,589,021
    )
    
    
    (1,153,829
    )Proceeds from borrowings from joint venture affiliate
    
    
    1,260,112
    
    
    
    Net cash used in financing activities
    
    
    (16,328,909
    )
    
    
    (4,195,913
    )Net decrease in cash
    
    
    (1,945,172
    )
    
    
    (12,308,918
    )Cash, beginning of period
    
    
    7,975,860
    
    
    
    22,117,482Cash, end of period
    
    $
    6,030,688
    
    
    $
    9,808,564
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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. 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
annual 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 the Companys Annual Report on Form 10-KSB/A for the year ended December 31,
2007, from which the balance sheet information as of that date was derived. Certain minor
reclassifications to 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 period ended June 30, 2008, are not necessarily
indicative of the results to be expected for the year ending December 31, 2008.The condensed 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 guidance in Financial
Accounting Standards Board (FASB) Interpretation No. 46R, Consolidation of Variable
Interest Entities. 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.2.
    
    SHARE-BASED COMPENSATIONFor the three months ended June 30, 2008 and 2007, the Company recognized share-based
compensation expense of $209,559 and $766,905, respectively, related to the amortization of
restricted stock grants granted in prior years, which is included in selling, general and
administrative expenses. For the six months ended June 30, 2008 and 2007, share-based
compensation expense recognized was $420,635 and $1,135,216, respectively. At June 30,
2008, the Company has recorded deferred share-based compensation of $724,694, which is
expected to be amortized through February 2010 using the straight-line method.3.
    
    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).
GED has a management agreement with Harrington Raceway and Casino (Harrington) (formerly
known as Midway Slots and Simulcast), which is located in Harrington, Delaware. GED has no
non-operating income or expenses, is treated as a partnership for income tax purposes and
consequently recognizes no federal or state income tax provision. As a result, 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 joint venture agreement with HRI to allow HRI
greater flexibility in GEDs management of the facility while providing the Company with
guaranteed growth in its share of GEDs management fee for the remaining term of the
management contract. Under the terms of the restructured management agreement, the Company
is to receive the greater of 50% of GEDs management fees as currently prescribed under the
management agreement, or an 8% increase in its 50% share of GEDs 2007 management fees. The
8% guaranteed growth factor applied to the 2007 management fees takes into account
the expansion at Harrington that was completed in February 2008, and resets to 5% in 2009
through the expiration of the GED management contract in August 2011. As a result of the
agreement, the Company has received or accrued additional management fee income of $135,175
and $207,624 for the three and six months ended June 30, 2008, respectively, which is
included with the equity in net income of GED in the accompanying consolidated financial
statements.
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Unaudited summary information for GEDs operations is as follows:
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Management fee revenues
    
    $
    1,897,000
    
    
    $
    2,160,479
    
    
    $
    4,181,483
    
    
    $
    4,383,610Net income
    
    
    1,793,741
    
    
    
    2,052,456
    
    
    
    3,974,272
    
    
    
    4,147,410
 4.
    
    FAIR VALUE MEASUREMENTSOn January 1, 2008, the Company adopted the methods of fair value accounting described in
Statement of Financial Accounting Standards No. 157, Fair Value Measurements(SFAS No.
157), to value its financial assets that were previously carried at estimated fair value.
The adoption of SFAS No. 157 in the first quarter of 2008 did not have any effect on net
income. To date, the Company has chosen not to elect the fair value option as offered by
Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  including an amendment of FAS 115,for its financial
assets and liabilities that had not been previously carried at fair value. Therefore,
material financial assets and liabilities not carried at fair value are still reported at
carrying values.The Companys financial assets that are measured at estimated fair value use inputs from
among the three levels of the fair value hierarchy set forth in SFAS No. 157 as follows:
 Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or
liabilities, which prices are available at the measurement date.Level 2 inputs: Include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets and liabilities in markets that
are not active, inputs other than quoted prices that are observable for the asset or
liability (i.e.interest rates, yield curves, etc.) and inputs that are derived
principally from or corroborated by observable market data by correlation or other means
(marked corroborated inputs).Level 3 inputs: Unobservable inputs that reflect managements estimates about the
assumptions that market participants would use in pricing the asset or liability.
Management develops these inputs based on the best information available, including
internally-developed data.
 Due to the absence of observable market quotes on the Companys notes receivable from tribal
governments, none of the Companys financial assets are able to be measured using level 1 or
2 inputs and the Company utilizes valuation models that rely exclusively on Level 3 inputs,
including those that are based on managements estimates of expected cash flow streams,
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 outside of Nevada, and discount rates produced by the
widely-accepted Capital Asset Pricing Model (CAPM). The following key assumptions are used
in the CAPM:
 
    
    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;
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
    
    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
 A tabular summary of the current period activity related to notes receivable from tribal
governments, the fair value of which is estimated utilizing Level 3 inputs, is presented in
Note 5.5.
    
    NOTES RECEIVABLE, TRIBAL GOVERNMENTSThe Company has notes receivable related to advances to tribes to fund tribal operations and
development expenses related to potential casino projects. 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, 2008 and December 31, 2007, notes receivable from tribal governments as
follows:
 June 30,
    
    
    December 31,2008
    
    
    2007 *Contractual (stated)
amount (including interest)FireKeepers
DevelopmentAuthority
    
    $
    5,000,000
    
    
    $
    14,250,815Other
    
    
    1,258,904
    
    
    
    1,308,859$
    6,258,904
    
    
    $
    15,559,674Estimated fair value of notes
receivable related to tribal
casino projects:FireKeepers
DevelopmentAuthority
    
    $
    3,781,399
    
    
    $
    11,189,359Other
    
    
    1,051,635
    
    
    
    989,122$
    4,833,034
    
    
    $
    12,178,481
 
 *
    
    Contractual amounts as of December 31, 2007, have been revised to conform to the current
year presentation, and now include accrued interest of $1,475,574. However, the inclusion
of interest for comparability did not change previously reported net income, since the
related receivables are presented at their estimated fair values. On May 6, 2008, the FireKeepers Development Authority (the Authority) closed on the sale
of $340 million of Senior Secured Notes and a $35 million equipment financing facility to
fund the development and construction of the Authoritys FireKeepers Casino in Michigan. On
the same date, GEM received a payment of $9.3 million on its notes receivable from the
Authority which resulted in an increase in the estimated fair value of the notes receivable
of approximately $1.8 million, which was recorded as an unrealized gain in the first quarter
of 2008. The remaining $5.0 million is to be paid 180 days following the opening of the
casino, subject to there being adequate funds remaining in the construction disbursement
account. If there are insufficient funds to repay the remaining balance, the Authority will
be obligated to repay the balance in 60 monthly installments beginning 180 days following
the opening of the casino, with interest at prime plus 1%.During the current quarter, the estimated opening date for the FireKeepers Casino in
Michigan was extended from the second quarter to the third quarter of 2009, based on the
current contractual estimate of the construction period. The effect of the change in the
estimated opening date reduced the estimated fair value of the note receivable by $152,070
to $3,781,399 as of June 30, 2008.
  8




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The Company also extended its estimated opening date for the Montana casino from the third
quarter of 2009 to the fourth quarter of 2009. This revision is due to delays in regulatory
approvals and the related effect waiting to begin construction during the favorable
construction season of warmer months. Also during the current quarter, the discount rate
used to estimate the fair value of the notes receivable related to the Montana casino
project was increased from 22% to 24%, based on increased project specific risks. The
combined effect of the changes in the estimated opening date and the discount rate reduced
the estimated fair value of the note receivable related to the Montana project by $43,633 to
$559,062 as of June 30, 2008.In March 2008, the Company formally decided to no longer pursue the Nambé Pueblo project.
However, the Pueblo has affirmed its responsibility to repay reimbursable development
advances of approximately $662,000 out of any future gaming revenues. Management of the
Company currently believes that the Nambé Pueblo intend to develop a slot machine parlor
with approximately 200 devices, which would be attached to a travel center currently under
development, which would provide the Nambé Pueblo the financial wherewithal to repay the
amounts owed to the Company. Management has estimated the fair value of the note receivable
from the Nambé Pueblo at $492,573 as of June 30, 2008.The following table summarizes the changes in fair market value of notes receivable from
tribal governments, determined using Level 3 fair value inputs, from January 1, 2008 to June
30, 2008:
 FireKeepersDevelopmentTotal
    
    
    Authority
    
    
    Other tribesBalances, January 1, 2008
    
    $
    12,178,481
    
    
    $
    11,189,359
    
    
    $
    989,122Total advances
    
    
    85,604
    
    
    
    
    
    
    
    85,604Advances allocated to contract rights
    
    
    (16,392
    )
    
    
    
    
    
    
    (16,392
    )Advances expensed as period costs
    
    
    2,124
    
    
    
    2,124
    
    
    
    Repayment of notes receivable
    
    
    (9,253,467
    )
    
    
    (9,253,467
    )
    
    
    Unrealized gains included in earnings
    
    
    1,836,684
    
    
    
    1,843,383
    
    
    
    (6,699
    )Balances, June 30, 2008
    
    $
    4,833,034
    
    
    $
    3,781,399
    
    
    $
    1,051,635
 6.
    
    CONTRACT RIGHTSContract rights consist of the following as of:
 AccumulatedJune 30, 2008
    
    Cost
    
    
    Amortization
    
    
    NetFireKeepers project, initial cost
    
    $
    4,155,213
    
    
    $
    
    
    
    $
    4,155,213FireKeepers project, additional
    
    
    13,210,373
    
    
    
    (699,655
    )
    
    
    12,510,718Other projects
    
    
    151,556
    
    
    
    
    
    
    
    151,556$
    17,517,142
    
    
    $
    (699,655
    )
    
    $
    16,817,487
 AccumulatedDecember 31, 2007
    
    Cost
    
    
    Amortization
    
    
    NetFireKeepers project, initial cost
    
    $
    4,155,213
    
    
    $
    
    
    
    $
    4,155,213FireKeepers project, additional
    
    
    11,141,683
    
    
    
    (670,927
    )
    
    
    10,470,756Other projects
    
    
    135,164
    
    
    
    
    
    
    
    135,164$
    15,432,060
    
    
    $
    (670,927
    )
    
    $
    14,761,133
  9




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##### Table of Contents



In connection with the Authoritys financing of the FireKeepers Casino development, GEM
funded $2,068,690 of financing costs on behalf of the Authority, as required by the
management agreement, which was recorded as additional contract rights related to the
FireKeepers project in the second quarter of 2008.In the fourth quarter of 2007, the Company recorded impairment losses related to the Navajo
Nation (Manuelito) and Nambé Pueblo contract rights of $200,000 and $207,534,
respectively, based on information indicating that these projects would not be developed.
During the second quarter of 2008, the Company formally approved and began executing a plan
to sell land purchased for the Manuelito project. As a result, the land has been
reclassified to current assets held for sale and adjusted to its estimated net realizable
value of $45,000, which resulted in an additional impairment loss of $85,000.7.
    
    LONG-TERM DEBTAt June 30, 2008 and December 31, 2007, long-term debt consists of the following:
 June 30,
    
    
    December 31,2008
    
    
    2007Long-term debt, joint venture affiliate:Promissory note, maturing in 2011,
interest at 1% above the prime rate
(6.00% at June 30, 2008 and 8.25% at
December 31, 2007)
    
    $
    2,515,590
    
    
    $
    1,255,478Long-term debt, other: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 (7.41% at June
30, 2008 and December 31, 2007)
    
    $
    3,405,274
    
    
    $
    11,401,000Long-term obligation related to the
acquisition of additional contract
rights related to the Michigan project,
payable in full within 30 days after
Michigan project financing is obtained
    
    
    
    
    
    
    9,500,000Promissory note, $1.25 million on
January 31, 2007, due February 1, 2012,
interest at a fixed annual rate of
7.44%
    
    
    958,142
    
    
    
    1,051,4384,363,416
    
    
    
    21,952,438Less current portion
    
    
    (236,032
    )
    
    
    (259,124
    )$
    4,127,384
    
    
    $
    21,693,314
 Reducing Revolving Loan (the Revolver).The maximum amount permitted to be outstanding
under the Revolver decreases $312,000 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. Management is not aware of any
covenant violations through the date of this filing.During the first quarter of 2008, proceeds from the sale of the Holiday Inn Express in
Fallon, Nevada were applied against outstanding balances payable on the Revolver. The
outstanding balance was reduced from $10.9 million to $3.9 million and the Companys
availability under the Revolver increased to approximately $5.3 million. In addition,
periodic payment requirements were reduced on a pro-rata basis. As of June 30, 2008, there
are no additional required principal payments due on the Revolver until January 2017.
  10




---



##### Table of Contents



Peters Family Trust Promissory Note.The promissory note in the amount of $1.25 million,
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.Green Acres.Effective May 15, 2007, GEM entered into an agreement with Green Acres Casino
Management, Inc. (Green Acres) whereby GEM acquired all of Green Acres interests in the
Nottawaseppi
Huron Band of Potawatomi casino project in Michigan for $10 million. GEMs members equally
funded an initial deposit of $500,000. The remaining obligation of $9.5 million, although
unsecured, was recorded as a long-term liability once the management agreement between GEM and the
Authority was approved in December 2007. On May 6, 2008, in conjunction with the financing of the
FireKeepers Casino, the Company applied the proceeds of the $9.3 million tribal receivable
reimbursement to pay off the remaining balance of the $9.5 million Green Acres liability.Scheduled maturities of long-term debt (including obligations to joint venture affiliate)
are as follows:
 Annual periods ending June 30,2009
    
    $
    236,0322010
    
    
    254,2052011
    
    
    2,789,3662012
    
    
    194,1292013
    
    
    Thereafter
    
    
    3,405,274$
    6,879,006
 In 2013, there is no scheduled long-term debt maturing since the Peters promissory note
matures in 2012 and there are no required principal payments due on the Revolver until
January 2017.8.
    
    INCOME TAXESFASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes(FIN 48), was adopted
by the Company in the first quarter of 2007. Based on managements assessment of its tax
positions in accordance with FIN 48, there was no effect on its opening retained earnings or
the current periods results of operations as a result of the adoption of FIN 48.For the periods ended June 30, 2008 and 2007, the difference between the Companys estimated
effective and the federal statutory tax rate was primarily due to a state tax provision
applicable to GED, net of the federal benefit, as well as the treatment of share-based
compensation.9.
    
    SEGMENT REPORTINGSince the acquisition of Stockmans in January 2007, the Company is comprised of three
primary business segments. The operations segment includes Stockmans Casino operation in
Fallon, Nevada and until February 2008, included the operation of the Holiday Inn Express,
which was sold. Accordingly, the operating results of the hotel are included in discontinued
operations in all periods presented, and are therefore not included in the table below. The
development/management segment includes costs associated with tribal casino projects and the
Delaware joint venture. The Corporate segment includes general and administrative expenses
of the Company.
  11




---



##### Table of Contents



The following tables reflect selected segment information for the three and six months ended
June 30, 2008 and 2007.
  Development/2008
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedRevenues
    
    $
    2,386,935
    
    
    $
    
    
    
    $
    35
    
    
    $
    2,386,970Selling, general and administrative
    
    
    517,503
    
    
    
    159,287
    
    
    
    1,060,679
    
    
    
    1,737,469Depreciation and amortization
    
    
    295,406
    
    
    
    9,576
    
    
    
    19,711
    
    
    
    324,693Operating gains
    
    
    
    
    
    
    885,206
    
    
    
    
    
    
    
    885,206Income(loss) from continuing
operations before other
income(expense)
    
    
    341,431
    
    
    
    681,030
    
    
    
    (1,080,882
    )
    
    
    (58,421
    )Income(loss) from continuing operations
    
    
    342,648
    
    
    
    608,455
    
    
    
    (917,760
    )
    
    
    33,343
 Development/2007
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedRevenues
    
    $
    2,570,632
    
    
    $
    
    
    
    $
    283,554
    
    
    $
    2,854,186Selling, general and administrative
    
    
    400,051
    
    
    
    55,047
    
    
    
    1,599,923
    
    
    
    2,055,021Depreciation and amortization
    
    
    303,660
    
    
    
    16,650
    
    
    
    1,804
    
    
    
    322,114Operating gains
    
    
    
    
    
    
    1,549,986
    
    
    
    
    
    
    
    1,549,986Income(loss) from continuing operations
before other income(expense)
    
    
    618,463
    
    
    
    1,411,253
    
    
    
    (1,311,691
    )
    
    
    718,025Income(loss) from continuing operations
    
    
    667,304
    
    
    
    1,224,384
    
    
    
    (1,733,539
    )
    
    
    158,149
  Development/2008
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedRevenues
    
    $
    4,956,535
    
    
    $
    
    
    
    $
    58
    
    
    $
    4,956,593Selling, general and administrative
    
    
    905,516
    
    
    
    181,781
    
    
    
    2,244,793
    
    
    
    3,332,090Depreciation and amortization
    
    
    539,282
    
    
    
    28,728
    
    
    
    27,224
    
    
    
    595,234Operating gains
    
    
    
    
    
    
    3,946,467
    
    
    
    
    
    
    
    3,946,467Income(loss) from continuing
operations before other
income(expense)
    
    
    1,079,082
    
    
    
    3,666,645
    
    
    
    (2,273,277
    )
    
    
    2,472,450Income(loss) from continuing operations
    
    
    1,130,123
    
    
    
    3,480,187
    
    
    
    (3,576,218
    )
    
    
    1,034,092
 Development/2007
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedRevenues
    
    $
    4,255,300
    
    
    $
    
    
    
    $
    283,554
    
    
    $
    4,538,854Selling, general and administrative
    
    
    673,904
    
    
    
    115,548
    
    
    
    3,017,824
    
    
    
    3,807,276Depreciation and amortization
    
    
    482,156
    
    
    
    33,300
    
    
    
    4,189
    
    
    
    519,645Operating gains
    
    
    
    
    
    
    3,002,006
    
    
    
    
    
    
    
    3,002,006Income(loss) from continuing operations
before other income(expense)
    
    
    1,146,571
    
    
    
    2,609,935
    
    
    
    (2,740,968
    )
    
    
    1,015,538Income(loss) from continuing operations
    
    
    1,199,529
    
    
    
    2,353,301
    
    
    
    (3,299,336
    )
    
    
    253,494
  12




---



##### Table of Contents



Development/2008
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedAssets
    
    $
    20,843,467
    
    
    $
    22,057,472
    
    
    $
    6,074,874
    
    
    $
    48,975,813Property and equipment, net
    
    
    8,748,209
    
    
    
    1,732
    
    
    
    225,412
    
    
    
    8,975,353Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    682,404
    
    
    
    4,898,342
    
    
    
    3,426,050
    
    
    
    9,006,796
 Development/2007
    
    Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    ConsolidatedAssets
    
    $
    23,302,942
    
    
    $
    17,998,425
    
    
    $
    9,861,195
    
    
    $
    51,162,562Property and equipment, net
    
    
    9,077,445
    
    
    
    
    
    
    
    22,978
    
    
    
    9,100,423Goodwill
    
    
    12,240,654
    
    
    
    
    
    
    
    
    
    
    
    12,240,654Liabilities
    
    
    533,454
    
    
    
    2,537,680
    
    
    
    19,951,687
    
    
    
    23,022,821
 10.
    
    CONTINGENCIESUninsured cash deposits.The Company has cash on deposit with Nevada State Bank
substantially in excess of federally-insured limits, and the risk of losses related to such
concentrations may be increasing as a result of economic developments.Miscellaneous legal matters.The Company is involved in various inquiries, administrative
proceedings, and litigation relating to contracts and other matters arising in the normal
course of business. While any proceeding or litigation has an element of uncertainty,
management is unable to estimate losses, if any, to be incurred in connection with these
matters, and currently believes that the likelihood of an unfavorable outcome is remote.
Accordingly, no provision for loss has been recorded in connection therewith.
  13




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##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operation.
 Overview
        14




---



##### Table of Contents



Critical accounting estimates and policies
   Assets related to tribal casino projects
 Recognition of Interest
Income and Balance Sheet Classification of Structured Notes
    15




---



##### 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
 Fair Value Measurements
   16




---



##### Table of Contents



June 30, 2008
    
    
    December 31, 2007*Aggregate face amount of the notes receivable (including interest)
    
    $
    6,258,904
    
    
    $
    15,559,674Estimated years until opening of casino:FireKeepers
    
    
    1.25
    
    
    
    1.50Montana
    
    
    1.50
    
    
    
    1.75Discount rate:FireKeepers
    
    
    17.0
    %
    
    
    17.5
    %Montana
    
    
    24.0
    %
    
    
    22.5
    %Estimated probability rate of casino opening:FireKeepers
    
    
    97
    %
    
    
    96
    %Montana
    
    
    71
    %
    
    
    80
    %
 
 *
    
    Contractual amounts as of December 31, 2007, have been revised to conform to the current
year presentation, and now include accrued interest of $1,475,574. However, the inclusion
of interest for comparability did not result in any change in previously recorded net income
since the related notes receivable are presented at their estimated fair values.   
    
    S&P 500, 10 and 15-year 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 unlevered 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, and the status of outstanding required
regulatory approvals and/or litigation, if any.
   Accounting by Creditors for Impairment of a
Loan
  17




---



##### Table of Contents



Contract rights
  Summary of assets related to tribal casino projects
  June 30,
    
    
    December 31,2008
    
    
    2007Michigan project:Notes receivable, tribal governments
    
    $
    3,781,399
    
    
    $
    11,189,359Contract rights, net
    
    
    16,665,931
    
    
    
    14,625,96920,447,330
    
    
    
    25,815,328Other projects:Notes receivable, tribal governments
    
    
    1,051,635
    
    
    
    989,122Contract rights, net
    
    
    151,556
    
    
    
    135,1641,203,191
    
    
    
    1,124,286$
    21,650,521
    
    
    $
    26,939,614
   18




---



##### 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 approved the management agreement;
 
    
    the BIA issued a record of decision approving the final environmental impact statement in
September 2006;
 
    
    project financing was obtained in May 2008; and
 
    
    construction commenced, with an anticipated construction period of approximately 15
months.
   June 30, 2008
    
    
    December 31, 2007 Discount rate increases 2.5%
    
    $
    (131,085
    )
    
    $
    (347,790
    ) Discount rate decreases 2.5%
    
    
    139,020
    
    
    
    366,793 Forecasted opening date delayed one quarter
    
    
    (144,467
    )
    
    
    (442,085
    ) Forecasted opening date accelerated one quarter
    
    
    149,128
    
    
    
    460,273
    19




---



##### Table of Contents



June 30, 2008
    
    FireKeepers
    
    
    New Mexico
    
    
    Montana
    
    
    TotalNotes receivable
    
    $
    3,781,399
    
    
    $
    492,573
    
    
    $
    559,062
    
    
    $
    4,833,034Contract rights
    
    
    16,665,931
    
    
    
    
    
    
    
    151,556
    
    
    
    16,817,487Total
    
    $
    20,447,330
    
    
    $
    492,573
    
    
    $
    710,618
    
    
    $
    21,650,521
  Consolidation of Variable Interest Entities
 Recently issued accounting pronouncements
 Fair Value Measurements The Fair
Value Option for Financial Assets and Financial Liabilities  including an amendment of FAS 115
(SFAS No. 159).
 Non-controlling Interests in Consolidated
Financial Statements-an amendment of ARB No. 51 (SFAS No. 160),
 Business Combinations
(SFAS No. 141R)
  20




---



##### Table of Contents



Results of continuing operations
 Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007
 Operating revenues.
 Project development costs.
 Selling, general and administrative expense.
 Operating costs and expenses from continuing operations.
 Operating gains.
 Other income (expense).
 Income taxes.
 Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007
 Operating revenues.
  21




---



##### Table of Contents



Project development costs.
 Selling, general and administrative expense.
 Operating costs and expenses from continuing operations.
 Operating gains.
 Other income (expense).
 Income taxes.
 Liquidity and capital resources
     22




---



##### Table of Contents



FireKeepers project
     23




---



##### Table of Contents



Other projects
        24




---



##### Table of Contents



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;
 
    
    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.
  Seasonality
  Regulation and taxes
   25




---



##### Table of Contents



Off-balance sheet arrangements
  
 Item 3. Quantitative and qualitative disclosures about market risk
    
 Item 4(T). Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
  26




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
   In Favor
    
    
    WithheldElection of Kenneth R. Adams
    
    
    13,234,392
    
    
    
    68,390Election of Carl G. Braunlich
    
    
    13,239,492
    
    
    
    63,290Election of Kathleen M. Caracciolo
    
    
    13,240,692
    
    
    
    62,090Election of Andre M. Hilliou
    
    
    13,094,992
    
    
    
    207,790Election of Lee A. Iacocca
    
    
    12,825,841
    
    
    
    476,941Election of Mark J. Miller
    
    
    13,090,192
    
    
    
    212,590Election of J. Michael Paulson
    
    
    13,243,492
    
    
    
    59,290
 In Favor
    
    
    Against
    
    
    AbstainRatification of PBTK as
independent auditors
    
    
    13,244,604
    
    
    
    46,433
    
    
    
    11,745
 In Favor
    
    
    Against
    
    
    Abstain
    
    
    Broker Non-votesAmendment of the 2006 Incentive
Compensation Plan
    
    
    8,783,759
    
    
    
    742,702
    
    
    
    11,880
    
    
    
    3,764,441
  27




---



##### Table of Contents



Item 6. Exhibits
 3.1
    
    
    Amended and Restated Bylaws of the Company incorporated by reference
to the Companys Form 8-K filed June 4, 2008, Exhibit 3.1.31.1
    
    
    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  28




---



##### Table of Contents



SIGNATURES
  FULL HOUSE RESORTS, INC.Date: August 13, 2008By:
    /s/ MARK MILLERMark MillerChief Financial Officer
(on behalf of the Registrant and
as principal financial officer)  29




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    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 200231.2
    
    
    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 200232.1
    
    
    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 200232.2
    
    
    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
  30