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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 March 31, 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.
  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
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 Yes o No þ




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##### 



FULL HOUSE RESORTS, INC.
INDEX
 PagePART I. Financial InformationItem 1. Consolidated Financial StatementsConsolidated Balance Sheets as of March 31, 2010 (Unaudited),
and December 31, 2009
    
    
    3Unaudited Consolidated Statements of Operations
for the three months ended March 31, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Stockholders Equity
for the three months ended March 31, 2010 and 2009
    
    
    5Unaudited Consolidated Statements of Cash Flows
for the three months ended March 31, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4(T). Controls and Procedures
    
    
    21PART II. Other InformationItem 1. Legal Proceedings
    
    
    22Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assetsCash and equivalents
    
    $
    12,318,773
    
    
    $
    9,198,399Notes receivable related to tribal casino project
    
    
    
    
    
    
    4,682,420Accounts receivable, net of allowance for doubtful accounts of $312 and $1,072
    
    
    3,318,050
    
    
    
    1,802,100Prepaid expenses
    
    
    410,848
    
    
    
    372,735Deferred tax asset
    
    
    86,393
    
    
    
    136,126Deposits and other
    
    
    190,911
    
    
    
    90,68516,324,975
    
    
    
    16,282,465Property and equipment, net of accumulated depreciation of $6,201,348 and $5,940,540
    
    
    8,030,053
    
    
    
    7,961,734Long-term assets related to tribal casino projectsNotes receivable, net of allowance of $672,082
    
    
    419,703
    
    
    
    430,467Contract rights, net of accumulated amortization of $2,341,621 and $1,748,570
    
    
    15,023,965
    
    
    
    15,617,01615,443,668
    
    
    
    16,047,483Other long-term assetsGoodwill
    
    
    10,308,520
    
    
    
    10,308,520Deposits and other
    
    
    863,120
    
    
    
    985,38411,171,640
    
    
    
    11,293,904$
    50,970,336
    
    
    $
    51,585,586LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesDebt to joint venture affiliate
    
    $
    
    
    
    $
    1,450,087Accounts payable
    
    
    386,553
    
    
    
    136,485Income tax payable
    
    
    1,360,648
    
    
    
    2,273,777Accrued payroll and related
    
    
    630,034
    
    
    
    723,783Other accrued expenses
    
    
    270,197
    
    
    
    288,4432,647,432
    
    
    
    4,872,575Deferred tax liability
    
    
    1,732,575
    
    
    
    1,756,0854,380,007
    
    
    
    6,628,660Stockholders equityCommon stock, $.0001 par value, 25,000,000 shares authorized; 19,358,276 shares issued
    
    
    1,936
    
    
    
    1,936Additional paid-in capital
    
    
    42,682,073
    
    
    
    42,665,390Treasury stock, 1,356,595 common shares
    
    
    (1,654,075
    )
    
    
    (1,654,075
    )Retained earnings (deficit)
    
    
    504,297
    
    
    
    (1,504,320
    )41,534,231
    
    
    
    39,508,931Non-controlling interest in consolidated joint venture
    
    
    5,056,098
    
    
    
    5,447,99546,590,329
    
    
    
    44,956,926$
    50,970,336
    
    
    $
    51,585,586
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three monthsended March 31,2010
    
    
    2009RevenuesCasino
    
    $
    1,712,012
    
    
    $
    1,868,942Food and beverage
    
    
    417,191
    
    
    
    430,734Management fees
    
    
    6,162,107
    
    
    
    Other
    
    
    19,921
    
    
    
    20,2608,311,231
    
    
    
    2,319,936Operating costs and expensesCasino
    
    
    535,907
    
    
    
    579,910Food and beverage
    
    
    487,025
    
    
    
    480,660Project development costs
    
    
    67,677
    
    
    
    15,695Selling, general and administrative
    
    
    1,765,733
    
    
    
    1,529,893Depreciation and amortization
    
    
    861,343
    
    
    
    290,5523,717,685
    
    
    
    2,896,710Operating gains (losses)Equity in net income of unconsolidated joint venture and related guaranteed payments
    
    
    1,442,116
    
    
    
    1,252,176Unrealized gains (losses) on notes receivable, tribal governments
    
    
    (10,764
    )
    
    
    253,7491,431,352
    
    
    
    1,505,925Operating income
    
    
    6,024,898
    
    
    
    929,151Other income (expense)Interest and other income
    
    
    112,841
    
    
    
    22,655Interest expense, including amortization of debt costs of $3,655 and $8,395
    
    
    (3,655
    )
    
    
    (88,809
    )Income before income taxes
    
    
    6,134,084
    
    
    
    862,997Income taxes
    
    
    (1,538,649
    )
    
    
    (385,972
    )Net income
    
    
    4,595,435
    
    
    
    477,025(Income) loss attributable to non-controlling interest in consolidated joint venture
    
    
    (2,586,818
    )
    
    
    59,180Net income attributable to the Company
    
    $
    2,008,617
    
    
    $
    536,205Net income attributable to the Company per common shareBasic and diluted
    
    $
    0.11
    
    
    $
    0.03Weighted-average number of common shares outstandingBasic and diluted
    
    
    18,001,681
    
    
    
    18,103,688
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalThree months ended
    
    Common stock

    
    
    Treasury stock

    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersMarch 31, 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
    
    
    
    
    
    
    
    
    
    
    
    16,683Distribution to
non-controlling
interest in
consolidated joint
venture
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,978,715
    )
    
    
    (2,978,715
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,008,617
    
    
    
    2,586,818
    
    
    
    4,595,435Ending balances
    
    
    19,358,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,682,073
    
    
    $
    504,297
    
    
    $
    5,056,098
    
    
    $
    46,590,329
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalThree months ended
    
    Common stock

    
    
    Treasury stock

    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersMarch 31, 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,615
    
    
    
    
    
    
    
    
    
    
    
    126,615Purchase of
treasury stock
    
    
    
    
    
    
    
    
    
    
    146,181
    
    
    
    (151,893
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,893
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    536,205
    
    
    
    (59,180
    )
    
    
    477,025Ending balances
    
    
    19,350,276
    
    
    $
    1,935
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,482,713
    
    
    $
    (5,736,354
    )
    
    $
    4,540,888
    
    
    $
    39,635,107
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three monthsended March, 31,2010
    
    
    2009Net cash provided by operating activities
    
    $
    2,623,917
    
    
    $
    1,114,790Cash flows from investing activities:Purchase of property and equipment
    
    
    (74,742
    )
    
    
    (137,211
    )Proceeds from repayment of tribal advances
    
    
    5,000,000
    
    
    
    Net cash provided by (used in) investing activities
    
    
    4,925,258
    
    
    
    (137,211
    )Cash flows from financing activities:Payments on long-term debt to joint venture affiliate
    
    
    (1,450,086
    )
    
    
    (2,309,914
    )Proceeds from borrowings from joint venture affiliate
    
    
    
    
    
    
    125,000Purchase of treasury stock
    
    
    
    
    
    
    (151,893
    )Distributions to non-controlling interest in consolidated joint venture
    
    
    (2,978,715
    )
    
    
    Net cash used in financing activities
    
    
    (4,428,801
    )
    
    
    (2,336,807
    )Net increase (decrease) in cash and equivalents
    
    
    3,120,374
    
    
    
    (1,359,228
    )Cash and equivalents, beginning of period
    
    
    9,198,399
    
    
    
    5,304,755Cash and equivalents, end of period
    
    $
    12,318,773
    
    
    $
    3,945,527
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF PRESENTATIONThe 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 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 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 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 March 31, 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
(Codification) 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 Financial Accounting
Standards Board Accounting Standards Codification(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 March 31, 2010 and 2009, the Company recognized share-based
compensation expense of $16,683 and $126,615, respectively, related to the amortization of
restricted stock grants in prior years, which is included in selling, general and
administrative expenses. All stock grants are 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. We receive 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 we hold a 50%
non-controlling interest in GED and will not absorb or receive over 50% of the companys
profits and losses. This is due to the Management Reorganization Agreement with HRI where we
obtained a guaranteed growth rate in our cash flow from GED in exchange for lack of
involvement in the entitys operations. Due to this agreement, we do not have the
power to direct the activities of GED that most significantly impact the economic
performance. Therefore, we do not consolidate, but account for our investment using the
equity method.
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The Company believes the maximum exposure to loss is the account receivable and investment
in GED as GED carries no loans. The Companys assets and liabilities related to its
investment in GED consisted of an amount due from HRI included in accounts receivable of
$0.7 million as of March 31, 2010, and $0.6 million as of December 31, 2009. The equity
method carrying value of the Companys investment in GED was $0.3 million and $0.1 million
as of March 31, 2010, and December 31, 2009, respectively, included in deposits and other.
In addition to FHRs share of GEDs net income, FHR also
received $0.7 million and $0.3
million as part of the Management Reorganization Agreements guaranteed payments for the
periods ending March 31, 2010 and 2009, respectively.
 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 operations follows:
 GED CONDENSED BALANCE SHEET INFORMATION
 March 31,
    
    
    December 31,2010
    
    
    2009Total assets
    
    $
    676,347
    
    
    $
    420,907Total liabilities
    
    
    147,225
    
    
    
    205,838
 GED CONDENSED STATEMENT OF INCOME INFORMATION
 March 31,
    
    
    March 31,2010
    
    
    2009Revenues
    
    $
    5,832,688
    
    
    $
    6,062,614Net income
    
    
    1,610,105
    
    
    
    1,849,271
 GEM. Due to our financing arrangement for the development and management of the FireKeepers
project through a 50%-owned joint venture, GEM, we believe we are exposed to the majority of
risk of economic loss from the joint ventures activities. Therefore, we consider the joint
venture to be a variable interest entity that requires consolidation in our financial
statements. The Company is the primary beneficiary due to the fact that we have the majority
of the invested capital and will receive the majority of its income or absorb the majority
of its losses until GEM has fully repaid FHR, which is currently anticipated to be in the
third quarter of 2010, and that we primarily direct the activities of GEM including the
direct oversight of FireKeepers Casino.
 Management believes the maximum exposure to loss is $8.2 million, which is composed of our
equity investment and our current receivable (which are eliminated in consolidation).
Currently, GEM has no debt, other than the $3.1 million payable to FHR. In addition, as
part of the GEM member agreement modification, the GEM members agreed that distributions to
the members will be made on a 50/50 basis to both members until such time RAMs member
payable has been fully repaid and thereafter 70% to the Company and 30% to RAM until such
time as the remaining payable to the Company has been repaid. As of March 31, 2010, RAMs
member payable has been paid; therefore our rights now allow us to receive a 70/30 split on
distributions.
 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. Long-term assets include
$10.9 million and $11.4 million in contract rights as of March 31, 2010 and December 31,
2009, respectively. Current liabilities include amounts due to the members of $0.3 million
and $6.3 million for March 31, 2010 and December 31, 2009, respectively. GEM has no
long-term liabilities.
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An unaudited summary of GEMs operations follows:
 GEM CONDENSED BALANCE SHEET INFORMATION
 March 31,
    
    
    December 31,2010
    
    
    2009Current assets
    
    $
    2,807,273
    
    
    $
    6,006,779Long-term assets
    
    
    10,919,964
    
    
    
    11,351,133Current liabilities
    
    
    825,627
    
    
    
    9,251,338
 GEM CONDENSED STATEMENT OF INCOME INFORMATION
 March 31,
    
    
    March 31,2010
    
    
    2009Revenues
    
    $
    6,162,107
    
    
    $
    Net income
    
    
    5,173,633
    
    
    
    (118,359
    )
 4.
    
    FAIR VALUE MEASUREMENTS
 The carrying value of the Companys cash and cash equivalents and accounts payable
approximate 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 values of the Companys debt
approximate their recorded values as of the balance sheet dates presented, based on level 2
inputs 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 Accounting Standards Update (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 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 March 31, 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 as defined in ASC
Topic 820. 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:
 
    
    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.
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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 March 31, 2010, and December 31, 2009, notes receivable from tribal governments were
as follows:
 March 31,
    
    
    December 31,2010
    
    
    2009Contractual (stated) amountFireKeepers Development Authority
    
    $
    
    
    
    $
    5,000,000Northern Cheyenne
    
    
    672,082
    
    
    
    672,082Nambe Pueblo
    
    
    661,600
    
    
    
    1,280,475$
    1,333,682
    
    
    $
    6,952,557Estimated fair value of notes receivable
related to tribal casino projects:FireKeepers Development Authority
    
    $
    
    
    
    $
    4,682,420Northern Cheyenne
    
    
    
    
    
    
    Nambe Pueblo
    
    
    419,703
    
    
    
    430,467$
    419,703
    
    
    $
    5,112,887
 The $5.0 million due from the FireKeepers Development Authority (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 financial 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 second quarter of 2010 with the expected facility opening during the
first quarter of 2011, which represents a six 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 March 31, 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, determined using level 3 estimated fair value inputs, from January 1,
2010, to March 31, 2010:
 FireKeepersDevelopment
    
    
    Nambe PuebloTotal
    
    
    Authority
    
    
    ProjectBalances, January 1, 2010
    
    $
    5,112,887
    
    
    $
    4,682,420
    
    
    $
    430,467Unrealized gains included in earnings
    
    
    306,816
    
    
    
    317,580
    
    
    
    (10,764
    )Collection
    
    
    (5,000,000
    )
    
    
    (5,000,000
    )
    
    
    Balances, March 31, 2010
    
    $
    419,703
    
    
    $
    
    
    
    $
    419,703
 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 performs a
quarterly review of goodwill and whenever there might be an impairment triggering event as
described in ASC Topic 360.
 The Company compares Stockmans carrying amount to its fair value which includes analyzing
Stockmans projected earnings and cash flow and applying multiples of earnings and similar
industry performance measures and valuation methods. Key assumptions include varying levels
of revenue growth or potential decline. Based on current analysis, goodwill is not
impaired. However, our analysis also indicates that a decline in projected earnings could
result in an impairment of our goodwill asset.
 7.
    
    DEBT
 At March 31, 2010, there was no long-term debt outstanding, and at December 31, 2009,
long-term debt consisted of $1.5 million due to joint venture affiliate (RAM), all of which
was included in debt to joint venture affiliate.
 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 this member agreement modification, 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 million reported as
equity, resulting in the recognition of a net pre-tax gain of $1.4 million in September
2009. The GEM members agreed that distributions to the members will be made on a 50/50 basis
to both members until such time RAMs member payable has been fully repaid and thereafter
70% to the Company and 30% to RAM until such time as the remaining payable to the Company
has been repaid. Thereafter, distributions to members will be made on a 50/50 basis. Also,
no further interest accruals will be made on any members payables. As of March 31, 2010,
RAMs member payable was fully repaid and the Company had begun collecting its
disproportionate distributions.
 Reducing Revolving Loan (the Revolver).Effective January 1, 2010, based upon the
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
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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. As of March 31, 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 $8.2 million of availability under its revolving
credit line as of March 31, 2010.
 8.
    
    SEGMENT REPORTING
 The Company is composed of three primary business segments. The following tables reflect
selected segment information for the three months ended March 31, 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 and the Michigan and Delaware joint ventures. The Corporate segment includes
general and administrative expenses of the Company.
 Selected statement of operations data for the three months ended March 31:
 Development/Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    2,149,124
    
    
    $
    6,162,107
    
    
    $
    
    
    
    $
    8,311,231Selling, general and administrative
expense
    
    
    446,277
    
    
    
    245,410
    
    
    
    1,074,046
    
    
    
    1,765,733Depreciation and amortization
    
    
    245,083
    
    
    
    593,195
    
    
    
    23,065
    
    
    
    861,343Operating gains
    
    
    
    
    
    
    1,431,352
    
    
    
    
    
    
    
    1,431,352Operating income (loss)
    
    
    434,833
    
    
    
    6,754,456
    
    
    
    (1,164,391
    )
    
    
    6,024,898Net income (loss) attributable to
Company
    
    
    287,114
    
    
    
    2,486,120
    
    
    
    (764,617
    )
    
    
    2,008,6172009Revenues
    
    $
    2,319,936
    
    
    $
    
    
    
    $
    
    
    
    $
    2,319,936Selling, general and administrative
expense
    
    
    446,666
    
    
    
    123,921
    
    
    
    959,306
    
    
    
    1,529,893Depreciation and amortization
    
    
    256,885
    
    
    
    13,449
    
    
    
    20,218
    
    
    
    290,552Operating gains
    
    
    
    
    
    
    1,505,925
    
    
    
    
    
    
    
    1,505,925Operating income (loss)
    
    
    555,816
    
    
    
    1,353,560
    
    
    
    (980,225
    )
    
    
    929,151Net income (loss) attributable to
Company
    
    
    365,923
    
    
    
    838,754
    
    
    
    (668,472
    )
    
    
    536,205
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Selected balance sheet data as of March 31, 2010 and December 31, 2009:
 Development/Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Total Assets
    
    $
    20,045,318
    
    
    $
    19,254,684
    
    
    $
    11,670,334
    
    
    $
    50,970,336Property and equipment, net
    
    
    7,881,919
    
    
    
    674
    
    
    
    147,460
    
    
    
    8,030,053Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    1,332,152
    
    
    
    1,529,750
    
    
    
    1,518,105
    
    
    
    4,380,0072009Total 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 is experiencing a
significant recession accompanied by, among other things, weakness in consumer spending
including gaming, 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.
 HRI arbitration. On June 19, 2009, HRI filed a demand for arbitration with the American
Arbitration Association disputing the formula used for computing the minimum annual
increase in the Companys share of the management fee. HRI had disputed the computation of
the annual minimum percentage increase in the management fee payable to the Company
pursuant to the Management Reorganization Agreement entered into on June 18, 2007. Pursuant
to that agreement, the Company is entitled to the greater of the share of management fee
actually due from the operations or the amount actually paid in the prior year plus a
percentage increase, currently 5%. On April 26, 2010, the arbitrator denied HRIs position
and issued a binding decision in the matter in favor of the Company. The ruling includes
that HRI is not entitled to any credit and the payments are to continue as they have been
computed. Further, on April 29, 2010, we filed with the American Arbitration Association a
request for an award of fees and costs in the amount of $95,366. The Management
Reorganization Agreement provides the arbitrator with discretion to award none, all, or
some of the amount claimed, which would then be collected from HRI, if awarded. The
arbitration fees have not been recorded as a receivable due to the uncertainty of
collection.
 
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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;
 
    
    risks, uncertainties and other factors described from time to time in this and
our other SEC filings and reports.
  Overview
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Critical accounting estimates and policies
     Assets related to tribal casino projects
 Accounting Standards Codification
  15




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Notes receivable
    , ,
 Contract rights
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Results of continuing operations
  Three Months Ended March 31, 2010, Compared to Three Months Ended March 31, 2009
 Operating revenues.
 Operating costs and expenses.
 Project development costs.
 Selling, general and administrative expense.
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Operating gains
 Other income (expense).
 Income taxes.
 Non-controlling interest.
 Liquidity and capital resources
 Economic conditions and related risks and uncertainties
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FireKeepers project
  (GEM Financial Resolution)
 
    
    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.
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Other projects
     Seasonality
   20




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Regulation and taxes
   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
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PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
 On April 26, 2010 the American Arbitration Association arbitrator issued a binding decision
in the previously disclosed matter brought by Harrington Raceway, Inc. on June 19, 2009 in
favor of the Company and denying the claim of HRI. HRI had disputed the computation of the
annual minimum percentage increase in the management fee payable to the Company pursuant to
the Management Reorganization Agreement entered into on June 18, 2007. Pursuant to that
agreement, the Company is entitled to the greater of the share of management fee actually
due from the operations or the amount actually paid in the prior year plus a percentage
increase, currently 5%. The ruling includes that HRI is not entitled to any credit and the
payments are to continue as they have been computed. On April 29, 2010, we filed with the
American Arbitration Association a request for an award of fees and costs in the amount of
$95,366. The Management Reorganization Agreement provides the arbitrator with discretion to
award none, all, or some of the amount claimed, which would then be collected from HRI, if
awarded. The arbitration fees have not been recorded as a receivable due to the
uncertainty of collection.
 
 Item 6.
    
    Exhibits
 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  22




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SIGNATURES
  FULL HOUSE RESORTS, INC.Date:  May 10, 2010By:
    /s/ MARK MILLERMark MillerChief Financial Officer and Chief Operating Officer
(on behalf of the Registrant and

as
principal financial officer)  23