**U.S.SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-QSB**

** **

| **ý** |   | **QUARTERLY REPORT UNDER SECTION 13  OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                       |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       |   |                                                                                                                                                                         |
|       |   | **FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003.**                                                                                                                           |
|       |   |                                                                                                                                                                         |
|       |   | **OR**                                                                                                                                                                       |
|       |   |                                                                                                                                                                         |
| **o**      |   | **TRANSITION REPORT UNDER SECTION  13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                      |
|       |   |                                                                                                                                                                         |
|       |   | **FOR THE TRANSITION PERIOD FROM             TO             ** |

** **

**Commission FileNo.  0-20630**

** **

**FULL HOUSERESORTS, INC.**

(Exact name ofsmall business issuer as specified in its charter)

 

| **Delaware**                                                     |   | **13-3391527**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |   |                                  |
| **4670  S. Fort Apache Road  Suite 190  Las Vegas, Nevada**      |   | **89147**                             |
| (Address of  principal executive offices)                        |   | (zip code)                            |
|                                                             |   |                                  |
| **(702)  221-7800**                                              |
| (Registrant’s  telephone number)                            |

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

As of May 10, 2003,Registrant had 10,340,380 shares of its $.0001 par value common stockoutstanding.

 

 

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**FULL HOUSE RESORTS, INC**

**TABLE OF CONTENTS**

 
| PART I.  | Financial Information |
|----------|-----------------------|
|     |
|     | Item 1.               | Condensed Consolidated  Financial Statements |
|     |                  |   |
|     |                  | Unaudited Condensed Consolidated Balance  Sheets  as of March 31, 2003 and December 31, 2002 |
|     |                  |   |
|     |                  | Unaudited  Condensed Consolidated Statements of Operations  for the three months ended March 31, 2003 and 2002 |
|     |                  |   |
|     |                  | Unaudited  Condensed Consolidated Statements of Cash Flows   for the three months ended March 31, 2003 and 2002 |
|     |                  |   |
|     |                  | Notes  to Unaudited Condensed Consolidated Financial Statements |
|     |                  |   |
|     | Item 2.               | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |
|     |                  |   |
|     | Item 3.               | Controls and Procedures |
|     |                  |   |
| PART II. | Item 1.               | Legal Proceedings |
|     |                  |   |
|     | Item 3.               | Defaults Upon Senior  Securities |
|     |                  |   |
|     | Item 6.               | Exhibits and Reports on Form 8 - K |
|     |                  |   |
|     | Signatures            |
|     |                  |   |
|     | Certifications        |

 

2

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**FULL HOUSE RESORTS, INC. AND SUBSIDIARIES**

## **UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS**

 
|                                                                                                                                                                                |   | **MARCH 31,  2003** |       | **DECEMBER  31,  2002** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|-------------------------|--------|
| **ASSETS**                                                                                                                                                                          |   |                |       |                    |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| CURRENT  ASSETS:                                                                                                                                                                    |   |                |       |                    |   |
| Cash  and cash equivalents                                                                                                                                                          |   | $                   | 1,169,747  |                    | $      | 1,164,053 |   |
| Receivables                                                                                                                                                                         |   | 125,000             |       | 186,969                 |   |
| Prepaid  expenses                                                                                                                                                                   |   | 131,521             |       | 106,656                 |   |
| Total  current assets                                                                                                                                                               |   | 1,426,268           |       | 1,457,678               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| NON-OPERATING  LAND                                                                                                                                                                 |   | 2,472,000           |       | 2,472,000               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| FIXTURES  AND EQUIPMENT - net                                                                                                                                                       |   | 20,449              |       | 23,612                  |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| INVESTMENTS  IN JOINT VENTURES                                                                                                                                                      |   | 145,217             |       | 27,876                  |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| RECEIVABLES                                                                                                                                                                         |   | 1,317,291           |       | 1,257,291               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| GAMING  AND CONTRACT RIGHTS - net                                                                                                                                                   |   | 5,148,558           |       | 5,189,947               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| DEFERRED  INCOME TAX ASSET                                                                                                                                                          |   | 660,118             |       | 712,418                 |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| DEPOSITS  AND OTHER ASSETS                                                                                                                                                          |   | 6,382               |       | 6,382                   |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| TOTAL                                                                                                                                                                               |   | $                   | 11,196,283 |                    | $      | 11,147,204 |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                      |   |                |       |                    |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| CURRENT  LIABILITIES:                                                                                                                                                               |   |                |       |                    |   |
| Accounts  payable                                                                                                                                                                   |   | $                   | 20,556     |                    | $      | 13,426 |   |
| Payable  to joint ventures                                                                                                                                                          |   | 48,030              |       | —                  |   |
| Current  portion of long-term debt                                                                                                                                                  |   | 2,381,260           |       | 2,381,260               |   |
| Accrued  expenses                                                                                                                                                                   |   | 107,423             |       | 172,654                 |   |
| Total  current liabilities                                                                                                                                                          |   | 2,557,269           |       | 2,567,340               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| **COMMITMENTS  AND CONTINGENCIES**                                                                                                                                                  |   |                |       |                    |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| STOCKHOLDERS’  EQUITY:                                                                                                                                                         |   |                |       |                    |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| Cumulative,  preferred stock, par value $.0001, 5,000,000 shares authorized; 700,000  shares issued and outstanding; aggregate liquidation preference of $4,357,500  and $4,305,000 |   | 70                  |       | 70                      |   |
| Common  stock, par value $.0001, 25,000,000 shares authorized; 10,340,380 shares  issued and outstanding                                                                            |   | 1,034               |       | 1,034                   |   |
| Additional  paid in capital                                                                                                                                                         |   | 17,429,889          |       | 17,429,889              |   |
| Accumulated  deficit                                                                                                                                                                |   | (8,791,979          | )          | (8,851,129              | )      |
| Total  stockholders’ equity                                                                                                                                                    |   | 8,639,014           |       | 8,579,864               |   |
|                                                                                                                                                                                |   |                |       |                    |   |
| TOTAL                                                                                                                                                                               |   | $                   | 11,196,283 |                    | $      | 11,147,204 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

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**FULL HOUSE RESORTS, INC. AND SUBSIDIARIES**

## **UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

 
|                                                                     |   | **THREE  MONTHS ENDED  MARCH 31,** |    |
|--------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                     |   | **2003**                           |    | **2002** |   |
| OPERATING  REVENUES:                                                     |   |                               |    |   |   |
| Joint  venture earnings                                                  |   | $                                  | 803,608 |   | $ | 883,957 |   |
| Management  fees                                                         |   | —                             |    | 544,035 |   |
| Total  operating revenues                                                |   | 803,608                            |    | 1,427,992 |   |
|                                                                     |   |                               |    |   |   |
| OPERATING  COSTS AND EXPENSES:                                           |   |                               |    |   |   |
| Development  costs                                                       |   | 162,634                            |    | 215,561 |   |
| General  and administrative                                              |   | 394,313                            |    | 408,503 |   |
| Depreciation  and amortization                                           |   | 44,552                             |    | 60,457 |   |
| Total  operating costs and expenses                                      |   | 601,499                            |    | 684,521 |   |
|                                                                     |   |                               |    |   |   |
| INCOME  FROM OPERATIONS                                                  |   | 202,109                            |    | 743,471 |   |
|                                                                     |   |                               |    |   |   |
| Interest  expense                                                        |   | (24,954                            | )       | (51,625 | ) |
| Interest  and other income                                               |   | 295                                |    | 3,084 |   |
|                                                                     |   |                               |    |   |   |
| INCOME  BEFORE INCOME TAXES                                              |   | 177,450                            |    | 694,930 |   |
|                                                                     |   |                               |    |   |   |
| INCOME  TAX PROVISION                                                    |   | (118,300                           | )       | (280,841 | ) |
|                                                                     |   |                               |    |   |   |
| NET  INCOME                                                              |   | 59,150                             |    | 414,089 |   |
|                                                                     |   |                               |    |   |   |
| Less,  undeclared dividends on cumulative preferred stock                |   | 52,500                             |    | 52,500 |   |
|                                                                     |   |                               |    |   |   |
| NET  INCOME APPLICABLE TO COMMON SHARES                                  |   | $                                  | 6,650   |   | $ | 361,589 |   |
|                                                                     |   |                               |    |   |   |
| NET  INCOME PER COMMON SHARE, Basic and Diluted                          |   | $                                  | 0.00    |   | $ | 0.03 |   |
|                                                                     |   |                               |    |   |   |
| WEIGHTED  AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, Basic and Diluted |   | 10,340,380                         |    | 10,340,380 |   |

 

See notes to unaudited condensed consolidatedfinancial statements.

 

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**FULL HOUSE RESORTS, INC. AND SUBSIDIARIES**

## **UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

 
|                                                                               |   | **THREE  MONTHS ENDED  MARCH 31,** |      |
|------------------------------------------------------------------------------------|--------|------------------------------------|-----------|
|                                                                               |   | **2003**                           |      | **2002** |   |
| CASH  FLOWS FROM OPERATING ACTIVITIES:                                             |   |                               |      |   |   |
| Net  income                                                                        |   | $                                  | 59,150    |   | $ | 414,089 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |   |                               |      |   |   |
| Depreciation  and amortization                                                     |   | 44,552                             |      | 60,457 |   |
| Equity  in earnings of joint venture                                               |   | (803,608                           | )         | (883,957 | ) |
| Distributions  from joint venture                                                  |   | 686,267                            |      | 675,746 |   |
| Changes  in operating assets and liabilities:                                      |   |                               |      |   |   |
| Receivables                                                                        |   | 61,969                             |      | (81,284 | ) |
| Prepaid  expenses                                                                  |   | (24,865                            | )         | 36,613 |   |
| Deposits  and other assets                                                         |   | —                             |      | (2,931 | ) |
| Deferred  income taxes                                                             |   | 52,300                             |      | 32,959 |   |
| Accounts  payable and accrued expenses                                             |   | (10,071                            | )         | 40,420 |   |
|                                                                               |   |                               |      |   |   |
| Net  cash provided by operating activities                                         |   | 65,694                             |      | 292,112 |   |
|                                                                               |   |                               |      |   |   |
| CASH  FLOWS FROM INVESTING ACTIVITIES:                                             |   |                               |      |   |   |
| Advances  on receivable                                                            |   | (60,000                            | )         | (60,000 | ) |
| Purchase  of fixtures and equipment                                                |   | —                             |      | (15,725 | ) |
|                                                                               |   |                               |      |   |   |
| Net  cash used in investing activities                                             |   | (60,000                            | )         | (75,725 | ) |
|                                                                               |   |                               |      |   |   |
| CASH  FLOWS FROM FINANCING ACTIVITIES:                                             |   |                               |      |   |   |
| Proceeds  from RAM note                                                            |   | —                             |      | 2,381,260 |   |
| Repayment  of GTECH note                                                           |   | —                             |      | (3,000,000 | ) |
|                                                                               |   |                               |      |   |   |
| Net  cash used by financing activities                                             |   | —                             |      | (618,740 | ) |
|                                                                               |   |                               |      |   |   |
| NET  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |   | 5,694                              |      | (402,354 | ) |
| CASH  AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                    |   | 1,164,053                          |      | 867,419 |   |
|                                                                               |   |                               |      |   |   |
| CASH  AND CASH EQUIVALENTS, END OF PERIOD                                          |   | $                                  | 1,169,747 |   | $ | 465,065 |   |

 

See notes to unauditedcondensed consolidated financial statements.

 

5

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**FULL HOUSE RESORTS, INC. AND SUBSIDIARIES**

 

# **NOTES TO UNAUDITEDCONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.****                                      SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES**

 

***Interim Condensed Financial Statements -***The interim condensed consolidated financial statements of Full House Resorts,Inc. (the “Company” or “Full House”) included herein reflect all adjustmentswhich are, in the opinion of management, necessary to present fairly thefinancial position and results of operations for the interim periodspresented.  All such adjustments are ofa normal recurring nature. Certain information and note disclosures normally includedin financial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America have been omitted pursuantto the rules and regulations of the Securities and Exchange Commission.

 

These unaudited condensedconsolidated financial statements should be read in conjunction with theconsolidated financial statements and notes thereto included in the Company’sAnnual Report on Form 10-KSB for the year ended December 31, 2002.  The results of operations for the periodended March 31, 2003 are not necessarily indicative of the results to beexpected for the year ending December 31, 2003.

 

***Consolidation -*** The unauditedcondensed consolidated financial statements include the accounts of the Companyand its majority-owned subsidiaries. Prior to March 31, 2001, Full House had four joint ventureswith GTECH that were accounted for using the equity method.  On March 31, 2001 we purchased GTECH’s 50%interest in three of these joint ventures which are now wholly-owned by FullHouse, and accordingly are no longer accounted for using the equity method.  All material intercompany accounts andtransactions have been eliminated.

 

**2.****                                      RECENTLYISSUED ACCOUNTING STANDARDS**

 

In June 2001, the FASB issued SFAS No. 143 “Accounting forAsset Retirement Obligations” which addresses financial accounting andreporting for obligations associated with the retirement of tangible long-livedassets and the associated asset retirement costs.  This Statement applies to legal obligations associated with theretirement of long-lived assets that result from the acquisition, construction,development and / or normal operation, except for certain obligations oflessees.  This Statement is effectivefor fiscal years beginning after June 15, 2002.  The adoption of SFAS No. 143 is not expected to have a materialeffect on the Company’s financial statements.

 

In June 2002, the FASBissued SFAS No. 146, “Accounting for Costs Associated with Exit or DisposalActivities.”  SFAS No. 146 addressesfinancial accounting and reporting for costs associated with exit or disposalactivities and nullifies Emerging Issues Task Force (EITF) Issue 94-3,Liability Recognition for Certain Employee Termination Benefits and Other Coststo Exit an Activity. The provisions of this Statement are effective for exit ordisposal activities that are initiated after December 31, 2002, with earlyapplication encouraged. The adoption of SFAS No. 146 is not expected to have amaterial effect on the Company’s financial statements.

 

In November 2002, theFASB issued Interpretation No. 45, “Guarantor’s Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness to

 

6

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Others,” andinterpretation of FASB Statements No. 5, 57 and 107 and a rescission of FASBInterpretation No. 34. This Interpretation elaborates on the disclosures to bemade by a guarantor in its interim and annual financial statements about itsobligations under guarantees issued. The Interpretation also clarifies that aguarantor is required to recognize, at inception of a guarantee, a liabilityfor the fair value of the obligation undertaken. The initial recognition andmeasurement provisions of the Interpretation are applicable to guaranteesissued or modified after December 31, 2002 and are not expected to have amaterial effect on the Company’s financial statements. The disclosurerequirements are effective for financial statements of interim and annualperiods ending after December 31, 2002.

 

**3.****                                      JOINTVENTURE ACQUISITION**

 

On March 30, 2001, we acquired GTECH’s 50% interest inthree joint venture projects that had been equally owned by the two companies:Gaming Entertainment, LLC, owner of a development agreement continuing throughAugust 2002, with the Coquille Indian Tribe (“Oregon Tribe”), which conductsgaming at The Mill Casino in Oregon; Gaming Entertainment (Michigan), LLC,owner of a Management Agreement with the Nottawaseppi Huron Band of Potawatomi(“Michigan Tribe”) to develop and manage a gaming facility near Battle Creek;and Gaming Entertainment (California), LLC, owner of a Management Agreementwith the Torres-Martinez Band of Desert Cahuilla Indians (“California Tribe”)to develop and manage a gaming facility near Palm Springs.

 

The purchase price was $1,800,000, and was funded throughour existing credit facility.  As partof this transaction, GTECH extended the due date of our $3,000,000 promissorynote from January 25, 2001 until January 25, 2002, with interest at prime.  The note was paid in February 2002.  Also as part of this transaction, GTECH isno longer required to provide the necessary financing for the two developmentprojects (Michigan and California) that we acquired.

 

In addition to the gaming and contract rights, we acquiredthe other 50% interest in a note receivable from the Michigan Tribe in theamount of $396,146.  The excess purchaseprice over the fair value of assets acquired was allocated to the gaming andcontract rights acquired based on the discounted present value of expectedfuture cash flows.  The excess purchaseprice of $1,403,854 was allocated as follows:

 
|                |   | **Value** |      | **Amortization  Term** |      |
|---------------------|--------|-----------|-----------|------------------------|-----------|
| Michigan contract   |   | $         | 1,141,682 |                   | 8.0 years |   |
| California contract |   | 182,776   |      | 8.0 years              |      |
| Oregon Contract     |   | 79,396    |      | 1.4 years              |      |
|                |   | $         | 1,403,854 |                   |      |   |

 

**4.****                                      GAMINGAND CONTRACT RIGHTS**

 

As a result of the GTECHacquisition, the three joint ventures that had previously been accounted forusing the equity method are now wholly owned consolidated entities.  A substantial portion of our investment in thesejoint ventures was comprised of previously contributed Michigan gaming rightsof $4,155,213 that we acquired in 1995 and which represent the Company’sacquisition of a 50% ownership of the right to manage the planned facilitythrough the management agreement held by the joint ventures.  Amortization of the contributed Michigangaming rights will

 

7

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commence when theassociated facility is developed and becomes operational and will be on astraight-line basis over seven years, or the term of the managementcontract.  Now that these arewholly-owned consolidated entities, these rights are reflected in Gaming andContract Rights, along with the contract rights acquired in the GTECHacquisition of $1,403,854.  The contractrights acquired in the GTECH acquisition represent the Company’s acquisition of100% ownership and management’s ability to control the operations of theseentities.  Therefore, amortization ofthe acquired contract rights commenced as of April 1, 2001.  Gaming and Contract Rights, net, as of March31, 2003 is comprised of the following: 

 
| Contributed Michigan gaming rights |   | $         | 4,155,213 |   |
|------------------------------------|--------|-----------|-----------|--------|
| Acquired contract rights           |   | 1,403,854 |      |
| Less accumulated amortization      |   | (410,509  | )         |
| Gaming Contract Rights, net        |   | $         | 5,148,558 |   |

 

Annual amortizationexpense related to the acquired contract rights is $165,560 through 2008, withthe then remaining balance of $41,374 expensed in 2009.  As of March 31, 2003, the weighted averageamortization period for acquired contract rights is 6 years.

 

The Michigan and California ventures are in the developmentstage.  Successful development, andultimately, sustaining profitable operations is dependent on future events,including appropriate regulatory approvals and adequate market demand.  These two ventures have not generated anyrevenues, and the costs incurred to date relate to pre-opening expenses such aspayroll, legal and consulting.

 

**5.****                                      JOINTVENTURE INVESTMENTS**

 

The Investments in JointVenture on the balance sheet now reflects our ownership interest in only theDelaware LLC.  The joint venture revenuerecorded in the statements of operation represents a 50% interest in the netincome of the joint venture.

 

SUMMARY INFORMATION FORTHE DELAWARE LLC FOR THE THREE MONTH PERIODS ENDED MARCH 31, is as follows:

 
|                    |   | **2003**  |      | **2002**  |   |
|-------------------------|--------|-----------|-----------|-----------|--------|
|                    |   |      |      |      |   |
| Revenues                |   | $         | 4,689,569 |      | $      | 4,768,676 |   |
| Income  from operations |   | 1,607,216 |      | 1,767,913 |   |
| Net  income             |   | 1,607,216 |      | 1,767,913 |   |
|                         |        |           |           |           |        |  |  |

 

**6.****                                      LONG– TERM DEBT**

 

On February 15, 2002, we entered into an agreement with RAMEntertainment, LLC (“RAM”), a privately held investment company, whereby RAMwill acquire a 50% interest in the California and Michigan projects and providethe necessary funding for their development. RAM advanced $2,381,260 to Full House in the form of a loan, to beforgiven upon receipt by the Huron Potawatomi Tribe of federal approvals forits proposed casino near Battle Creek, Michigan.  The loan bears interest adjustable daily at prime and requiresinterest payments monthly.  Theprincipal was originally due on February 15, 2003 unless earlier forgivenpursuant to the terms.

 

8

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On February 15, 2003 we entered into an agreement with RAMto extend the due date until August 15, 2003 for receipt of regulatory approvals,or the repayment of the note. The loan continues to bear interest adjustabledaily at prime and requires interest payments monthly.  The legal challenge preventing the land frombeing taken into trust is pending in Federal District Court.  A status conference concerning this matterhas been scheduled for June 5, 2003.

 

**7.****                                      SEGMENTINFORMATION**

 

We view our business in three primary businesssegments.  The Operations segmentincludes the performance of the Delaware and Oregon projects.  The Development segment includes costsassociated with our activities in Michigan, California, and Mississippi.  The Corporate segment reflects themanagement and administrative expenses of the business.

 

SUMMARY INFORMATION FOR THE THREE MONTHS ENDED MARCH 31,

 

**2003**
|                          |   | **Operations** |    | **Development** |   | **Corporate** |   | **Consolidated** |   |
|-------------------------------|--------|----------------|---------|-----------------|--------|---------------|--------|------------------|--------|
|                          |   |           |    |            |   |          |   |             |   |
| Revenues                      |   | $              | 803,608 |            | $      | —        |   | $                | — |   | $ | 803,608 |   |
| Development costs             |   | —         |    | 162,634         |   | —        |   | 162,634          |   |
| Income (loss) from operations |   | 803,608        |    | (204,023        | )      | (397,476      | )      | 202,109          |   |
| Net income (loss)             |   | 470,017        |    | (148,727        | )      | (262,140      | )      | 59,150           |   |
|                               |        |                |         |                 |        |               |        |                  |        |  |  |  |  |

** **

**2002**
|                          |   | **Operations** |      | **Development** |   | **Corporate** |   | **Consolidated** |   |
|-------------------------------|--------|----------------|-----------|-----------------|--------|---------------|--------|------------------|--------|
|                          |   |           |      |            |   |          |   |             |   |
| Revenues                      |   | $              | 1,427,992 |            | $      | —        |   | $                | — |   | $ | 1,427,992 |   |
| Development costs             |   | —         |      | 215,561         |   | —        |   | 215,561          |   |
| Income (loss) from operations |   | 1,413,981      |      | (256,951        | )      | (413,559      | )      | 743,471          |   |
| Net income (loss)             |   | 868,663        |      | (183,660        | )      | (270,914      | )      | 414,089          |   |
|                               |        |                |           |                 |        |               |        |                  |        |  |  |  |  |

** **

**8.****                                      SUBSEQUENTEVENT**

 

On April 4,2003 theCompany entered into an agreement to sell its one-acre parcel of land locatedin Biloxi, Mississippi.  The sellingprice is $2,500,000, and closing is scheduled to occur on, or before, June 1,2003.  The buyer has deposited $75,000into escrow.

 

9

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**Item2****.****           Management’s Discussionand Analysis of Financial Condition and Results of Operations.**

 

### **AccountingPolicies**

 

Thepreparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptionsabout future events that affect the amounts reported in the financialstatements and accompanying notes. Future events and their effects cannot be determined with absolutecertainty.  Therefore, the determinationof estimates requires the exercise of judgment.  Actual results inevitably will differ from those estimates andsuch differences may be material to the financial statements. Our accountingpolicies are more fully described in Note 2 of Notes to ConsolidatedFinancial Statements included in our Form 10-KSB dated December 31, 2002.

 

The mostsignificant accounting estimates inherent in the preparation of our financialstatements include estimates associated with management’s evaluation of therecoverability of intangibles.  Variousassumptions and other factors underlie the determination of these significantestimates.  The process of determiningsignificant estimates is fact specific and takes into account factors such ashistorical experience, current and expected economic conditions.  We constantly re-evaluate these significantfactors and make adjustments where facts and circumstances dictate.  Historically, actual results have notsignificantly deviated from those determined using the estimates describedabove.

 

**Results of Operations**

 

**First Quarter Ended March 31, 2003 Compared to First QuarterEnded March 31, 2002**

 

**Revenues**.  As a result of the expiration of the Oregon contract in August2002 pursuant to its terms, our Delaware joint venture contract represents ouronly current revenue source.  Revenuerelated to the Oregon contract for 2002 is reported as management fees.

 

***Delaware Joint Venture.*** Our share of income from the Delaware jointventure was $803,608 for the first quarter ended March 31, 2003, compared to$883,957 in the prior year.  Thisdecrease is attributable to two primary factors: a statewide smoking ban andadverse weather conditions.

 

In late November 2002, a statewide smoking ban tookeffect in Delaware that prohibits smoking in the casino facilities.  Additionally, adverse weather conditions inJanuary and February, which caused the facility to be closed for two days ofPresident’s Day weekend, had a significant impact on operations.  Statewide VLT (Video Lottery Terminal)revenue declined approximately 8%, 28%, and 11% for January, February andMarch, respectively, compared to the prior year periods.  VLT revenue at our managed facility declinedapproximately 8%, 28%, and 7% on a comparative basis.  We are unable to accurately determine the relative impactattributable to each factor, however, we believe the smoking ban, which isexpected to be permanent, may be responsible for monthly revenue declinesapproximating 10%.

 

***Oregon.*** This agreement expired inAugust 2002 pursuant to its terms, and no further fees will be paid.  Our management fees from the Oregon contractwere $544,035 in the prior year period.

 

**Development Costs**.  Total developmentrelated costs for the Michigan project were $162,634 during the first quarterof 2003, compared to $215,561 for the prior year.  These costs were primarily for legal and consulting fees toassist the Tribe in obtaining suitable land and complying with the requirementsof the Indian Gaming Regulatory Act.

 

**General and Administrative Expenses*.***   Expenses for the three months ended March31, 2003 

 

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were $394,313, a decrease of $14,190 from the comparable period in2002.  This level of expenditures foroperating overhead has been fairly consistent, and is expected to remain so.

 

**Depreciation and Amortization**.  The $44,552expense is comprised of depreciation of fixtures and equipment in the amount of$3,163 and amortization of the Contract Rights acquired in the GTECHacquisition in the amount of $41,389. The prior year amount included $5,056 of depreciation and $55,401 ofamortization.  The prior year period includedamortization related to the Oregon contract of $14,012.

 

**Interest Expense*.***  Interest expense decreased by $26,671 as aresult of lower interest rates and a reduction in outstanding debt.

 

**Interest and Other Income*.***  Interest and other income was comparable tothe prior year period and results primarily from interest on invested cashbalances.

 

**Income Tax Provision*.***   Income tax expense was $118,300. Theeffective tax rate reflects Delaware state taxes on joint venture earningsdetermined on a separate return basis, combined with the tax effect ofnon-deductible amortization expenses. Although consolidated earnings before taxes decreased significantly, thestate tax provision only reflects a decrease related to the Delaware jointventure earnings.

 

**Liquidity and Capital Resources**

 

At March 31, 2003, we had cash and cash equivalents of$1,169,747.  For the three months endedMarch 31, 2003, cash of $65,694 was provided by operating activities, ascompared to $292,112 in the prior year period. This change is primarily due to decreased earnings resulting from thetermination of our Oregon contract.  Netcash used in investing activities was $60,000 for advances to the Michigantribe, compared to the same level of advances in the prior year coupled with $15,725for fixtures and equipment.  There wereno financing activities in the current year period.  In the prior year we used $618,740 which reflected the $3,000,000repayment of the GTECH note and the receipt of a $2,381,260 advance under theRAM note.

 

In 1998, weobtained a $2,000,000 line of credit with Coast Community Bank of Mississippiwith an initial maturity date of February  25, 1999.  We have renewed this line on an annualbasis.  In February 2002, the renewalreduced the availability to $1,000,000 and extended the maturity date to May12, 2003.  The line bears interestadjustable daily at one-half percent above prime (4.75% at March 31, 2003)and requires interest payments monthly on the outstanding balance with allprincipal and accrued interest due at maturity on May  12, 2003.  At March 31, 2003, there was nothingoutstanding on the bank line.

 

On April 4,2003, we entered into an agreement to sellour one-acre parcel of land located in Biloxi, Mississippi.  The selling price is $2,500,000, and closingis scheduled to occur on, or before, June 1, 2003.  The buyer has deposited $75,000 into escrow.

 

On February15, 2002, we entered into an agreement with RAM Entertainment, LLC, a privatelyheld investment company, whereby RAM may acquire a 50% interest in theCalifornia and Michigan projects and provide the necessary funding for theirdevelopment.  RAM advanced $2,381,260 tous in the form of a loan, to be forgiven upon receipt by the Huron PotawatomiTribe of federal approvals for its proposed casino near Battle Creek,Michigan.  The loan bears interestadjustable daily at prime and requires interest payments monthly.  The principal was due at maturity onFebruary  15, 2003 unless earlier forgiven pursuant to its terms.  The anticipated approvals have not yet beenreceived, and the parties have extended the maturity date to August 15,2003.  The legal challenge preventingthe land from being taken

 

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into trust is pending inFederal District Court.  A statusconference concerning this matter has been scheduled for June 5, 2003.

 

As a resultof our agreement with RAM, development funding cash needs for the Michiganproject may be primarily provided by RAM. Therefore, our future cash requirements will primarily be to fundgeneral and administrative expenses. Our Oregon contract expired in August 2002, leaving the Delaware jointventure as our sole source of operating cash flow.  We believe that adequate financial resources will be available toexecute our current business plan.

 

On April15, 2002 we announced the intent to hire an investment advisor to assist inenhancing shareholder value through the exploration of strategicalternatives.  Although the process isongoing, there can be no assurance that any substantive results will beachieved.

 

As a resultof our agreement with GTECH, receipt by Full House of revenues from theDelaware venture is governed by the terms of the joint venture agreement.  The contract provides that net cash flow(after certain deductions) is to be distributed monthly to Full House andGTECH.  While Full House does notbelieve that this arrangement will adversely impact its liquidity, ourcontinuing cash flow is dependent on the operating performance of this jointventure, and the ability to receive monthly distributions.

 

As part ofthe Michigan and California management agreements with the tribes, we haveadvanced funds for tribal operations and the construction of a tribal communitycenter.  The Receivable is attributableto this funding, and the repayment obligation is dependent on the futureprofitable operation of the tribes’ gaming enterprises.  In August 2001, we received a notice fromthe Torres-Martinez Tribe in California purporting to sever ourrelationship.  Our balance sheetincludes as a receivable a $25,000 advance due from Torres-Martinez Tribe, andincluded in Gaming and Contract Rights is approximately $140,000 attributableto this contact.  We have incurredaggregate expenses of approximately $1 million, including interest, on behalfof Torres-Martinez Tribe.  InJune 2002, the Tribe requested additional documentation concerning these costs,which we have provided.  We arediscussing an appropriate resolution of this matter including reimbursement forcosts that we incurred.   We believe that these amounts are recoverable based upon theexpressed intentions of Torres-Martinez Tribe, as well as our contractualrights.

 

In November 2002, we executed a termination agreementwith respect to our Hard Rock licensing rights in Biloxi, Mississippi inexchange for a $100,000 termination fee. Additionally, if Hard Rock executes a new licensing agreement for Biloxiwithin one year of the termination agreement, we agreed to provide consultingservices to Hard Rock for a two year period.

 

**ContractualObligations.**

 

The following table summarizes our contractualobligations as of March 31, 2003:

 
|              |   |      |      | **Payments  Due by Period** |   |      |   |
|-------------------|--------|-----------|-----------|-----------------------------|--------|-----------|--------|
|              |   | **Total** |      | **2003**                    |   | **2004**  |   | **2005** |   | **Thereafter** |   |
| Long  term debt   |   | $         | 2,381,260 |                        | $      | 2,381,260 |   | $ | — |   | $ | — |   | $ | — |   |
| Operating  leases |   | 155,379   |      | 27,171                      |   | 37,677    |   | 39,184 |   | 51,347 |   |
| Total             |   | $         | 2,536,639 |                        | $      | 2,408,431 |   | $ | 37,677 |   | $ | 39,184 |   | $ | 51,347 |   |

 

As ofMarch 31, 2003, we had cumulative undeclared and unpaid dividends in theamount of $2,257,500 on the 700,000 outstanding shares of our 1992-1 Preferred Stock.  Such dividends are cumulative whether or notdeclared, and are currently in arrears.

 

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**Recent AccountingPronouncements**.  In June 2001, the FASB issued SFAS No. 143 “Accounting for Asset Retirement Obligations” which addressesfinancial accounting and reporting for obligations associated with theretirement of tangible long-lived assets and the associated asset retirementcosts.  This Statement applies to legalobligations associated with the retirement of long-lived assets that resultfrom the acquisition, construction, development and / or normal operation,except for certain obligations of lessees. This Statement is effective for fiscal years beginning after June 15, 2002.  The adoption of SFASNo. 143 is not expected to have a material effect on the Company’s financialstatements.

 

In June 2002, the FASB issued SFAS No. 146,“Accounting for Costs Associated with Exit or Disposal Activities.”  SFAS No. 146 addresses financial accountingand reporting for costs associated with exit or disposal activities andnullifies Emerging Issues Task Force (EITF) Issue 94-3, Liability Recognitionfor Certain Employee Termination Benefits and Other Costs to Exit an Activity.The provisions of this Statement are effective for exit or disposal activitiesthat are initiated after December 31, 2002, with early application encouraged.The adoption of SFAS No. 146 is not expected to have a material effect on theCompany’s financial statements.

 

 In November2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting andDisclosure Requirements for Guarantees, Including Indirect Guarantees ofIndebtedness to Others,” and interpretation of FASB Statements No. 5, 57 and 107and a rescission of FASB Interpretation No. 34. This Interpretation elaborateson the disclosures to be made by a guarantor in its interim and annualfinancial statements about its obligations under guarantees issued. TheInterpretation also clarifies that a guarantor is required to recognize, atinception of a guarantee, a liability for the fair value of the obligationundertaken. The initial recognition and measurement provisions of theInterpretation are applicable to guarantees issued or modified after December31, 2002 and are not expected to have a material effect on the Company’sfinancial statements. The disclosure requirements are effective for financialstatements of interim and annual periods ending after December 31, 2002.

 

**Item3****.****           Controls and Procedures**

 

Evaluation of Disclosure Controls and Procedures.  Full House’s chief executive and financialofficers, after evaluating the effectiveness of the Company’s disclosurecontrols and procedures (as defined in Sections 13a-14(c) and 15d-14(c) of theSecurities Exchange Act of 1934) as of a date (“Evaluation Date”) within 90days before the filing of this quarterly report, have concluded that as of theEffective Date, the Company’s disclosure controls and procedures were effectiveand designed to ensure that material information relating to the Company wouldbe made known to them to allow timely decisions regarding disclosures.

 

Changes in Internal Controls.  Full House does not believe that there aresignificant deficiencies in the design or operation of its internal controlsthat could adversely effect its ability to record, process, summarize andreport financial data.  There were nosignificant changes in our internal controls or in other factors that couldsignificantly affect those controls subsequent to the Evaluation Date.

 

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**PARTII******-**OTHERINFORMATION**

 

**Item1****.****           Legal Proceedings**

                None.

**Item 3.****           Defaults upon Senior Securities**

 

As of March 31, 2003,cumulative dividends were $2,257,500, which were undeclared, unpaid and were inarrears, with respect to the Company’s Series 1992-1 Preferred Stock,which class ranks prior to the Company’s Common Stock with regard to dividendand liquidation rights.

 

**Item6****.****           Exhibits and Reports onForm 8-K**

 

(a)                                  Exhibits.

99.1

 

(b)                                 Reportson Form 8-K;

None

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, as amended, the Company has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.

 
|                     |   | **FULL HOUSE RESORTS, INC.**                                         |
|--------------------------|--------|----------------------------------------------------------------------|
|                     |   |                                                                 |
| Date:  May 11, 2003 |   |                                                                 |
|                     |   |                                                                 |
|                     |   | By:                                                                  | /s/ MICHAEL P.  SHAUNNESSY |   |
|                     |   | Michael P. Shaunnessy,  Executive V. P.  and Chief Financial Officer |
|                     |   | (on  behalf of the Registrant and  as principal financial officer)   |

 

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**CERTIFICATION**

 

I, William P. McComas,certify that:

 

1.                           I havereviewed this quarterly report on Form 10 - QSB of Full House Resorts, Inc.;

 

2.                           Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make  the statements made, in light of thecircumstances under which such statements were made, not misleading withrespect to the period covered by this quarterly report;

 

3.                           Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this report;

 

4.                           Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)                   designed such disclosurecontrols and procedures to ensure that material information relating to theregistrant, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)                  evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                   presented inthis quarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                           Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                   all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                  any fraud,whether or not material, that involves management of other employees who have asignificant role in the registrant’s internal controls; and

 

6.                           Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Dated: May 11, 2003 | By:    | /s/ William P. McComas   |   |
|---------------------|--------|--------------------------|--------|
|                |   | William  P. McComas      |   |
|                |   | Chief  Executive Officer |   |

 

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**CERTIFICATION**

 

I, Michael P. Shaunnessy, certify that:

 

1.                           I havereviewed this quarterly report on Form 10-K of Full House Resorts, Inc.;

 

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

 

3.                           Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                           Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)                   designed suchdisclosure controls and procedures to ensure that material information relatingto the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which thisquarterly report is being prepared;

 

b)                  evaluated theeffectiveness of the registrant’s disclosure controls and procedures as of adate within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                   presented inthis quarterly report our conclusions about the effectiveness of the disclosurecontrols and procedures based on our evaluation as of the Evaluation Date;

 

5.                           Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee of theregistrant’s board of directors (or persons performing the equivalentfunction):

 

a)                   all significantdeficiencies in the design or operation of internal controls which couldadversely affect the registrant’s ability to record, process, summarize andreport financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                  any fraud,whether or not material, that involves management of other employees who have asignificant role in the registrant’s internal controls; and

 

6.                           Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 
| Dated: May 11, 2003 | By:    | /s/ Michael P.  Shaunnessy |   |
|---------------------|--------|----------------------------|--------|
|                |   | Michael  P. Shaunnessy     |   |
|                |   | Chief  Financial Officer   |   |

 

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