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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 June 30, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 1-32583
 FULL HOUSE RESORTS, INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction 
of incorporation or organization)
    
    13-3391527(I.R.S. Employer
Identification No.)4670 S. Fort Apache, Ste. 190Las Vegas, Nevada
    
    89147(Address of principal executive offices)
    
    (Zip Code)
 (702) 221-7800  (Registrants telephone number, including area code)
 þ o
 Yes
o No 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 June 30, 2010 (Unaudited),
and December 31, 2009
    
    
    3Unaudited Consolidated Statements of Operations
for the three and six months ended June 30, 2010 and 2009
    
    
    4Unaudited Consolidated Statements of Stockholders Equity
for the six months ended June 30, 2010 and 2009
    
    
    5Unaudited Consolidated Statements of Cash Flows
for the six months ended June 30, 2010 and 2009
    
    
    6Notes to Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    14Item 4. Controls and Procedures
    
    
    22PART II. Other InformationItem 1. Legal Proceedings
    
    
    22Item 6. Exhibits
    
    
    23Signatures
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2010
    
    
    2009(Unaudited)ASSETSCurrent assetsCash and equivalents
    
    $
    15,353,306
    
    
    $
    9,198,399Notes receivable related to tribal casino project
    
    
    
    
    
    
    4,682,420Accounts receivable, net of allowance for doubtful accounts of $0 and $1,072
    
    
    1,663,282
    
    
    
    1,802,100Prepaid expenses
    
    
    640,987
    
    
    
    372,735Deferred tax asset
    
    
    101,071
    
    
    
    136,126Deposits and other
    
    
    89,418
    
    
    
    90,68517,848,064
    
    
    
    16,282,465Property and equipment, net of accumulated depreciation of $6,430,103 and $5,940,540
    
    
    7,830,361
    
    
    
    7,961,734Long-term assets related to tribal casino projectsNotes receivable, net of allowance of $618,875
    
    
    399,349
    
    
    
    430,467Contract rights, net of accumulated amortization of $2,934,672 and $1,748,570
    
    
    14,430,914
    
    
    
    15,617,01614,830,263
    
    
    
    16,047,483Other long-term assetsGoodwill
    
    
    10,308,520
    
    
    
    10,308,520Deposits and other
    
    
    919,432
    
    
    
    985,38411,227,952
    
    
    
    11,293,904$
    51,736,640
    
    
    $
    51,585,586LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesDebt to joint venture affiliate
    
    $
    
    
    
    $
    1,450,087Accounts payable
    
    
    72,074
    
    
    
    136,485Income tax payable
    
    
    
    
    
    
    2,273,777Accrued payroll and related
    
    
    644,045
    
    
    
    723,783Other accrued expenses
    
    
    478,283
    
    
    
    288,4431,194,402
    
    
    
    4,872,575Deferred tax liability
    
    
    1,761,719
    
    
    
    1,756,0852,956,121
    
    
    
    6,628,660Stockholders equityCommon stock, $.0001 par value, 25,000,000 shares authorized; 19,364,276 and
19,358,276 shares issued
    
    
    1,936
    
    
    
    1,936Additional paid-in capital
    
    
    42,699,533
    
    
    
    42,665,390Treasury stock, 1,356,595 common shares
    
    
    (1,654,075
    )
    
    
    (1,654,075
    )Retained earnings (deficit)
    
    
    1,975,412
    
    
    
    (1,504,320
    )43,022,806
    
    
    
    39,508,931Non-controlling interest in consolidated joint venture
    
    
    5,757,713
    
    
    
    5,447,99548,780,519
    
    
    
    44,956,926$
    51,736,640
    
    
    $
    51,585,586
   3




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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months
    
    
    Six monthsended June 30,
    
    
    ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009RevenuesCasino
    
    $
    1,574,987
    
    
    $
    1,886,289
    
    
    $
    3,286,999
    
    
    $
    3,755,231Food and beverage
    
    
    445,254
    
    
    
    458,890
    
    
    
    862,445
    
    
    
    889,624Management fees
    
    
    6,018,598
    
    
    
    
    
    
    
    12,180,704
    
    
    
    Other
    
    
    19,628
    
    
    
    19,624
    
    
    
    39,549
    
    
    
    39,8858,058,467
    
    
    
    2,364,803
    
    
    
    16,369,697
    
    
    
    4,684,740Operating costs and expensesCasino
    
    
    547,475
    
    
    
    559,485
    
    
    
    1,083,382
    
    
    
    1,139,394Food and beverage
    
    
    495,879
    
    
    
    484,012
    
    
    
    982,904
    
    
    
    964,672Project development costs
    
    
    68,126
    
    
    
    15,319
    
    
    
    135,804
    
    
    
    31,014Selling, general and administrative
    
    
    1,515,932
    
    
    
    1,519,075
    
    
    
    3,281,664
    
    
    
    3,048,969Depreciation and amortization
    
    
    859,634
    
    
    
    280,981
    
    
    
    1,720,976
    
    
    
    571,5333,487,046
    
    
    
    2,858,872
    
    
    
    7,204,730
    
    
    
    5,755,582Operating gains (losses)Equity in net income of unconsolidated joint venture, and related guaranteed
payments
    
    
    649,435
    
    
    
    839,700
    
    
    
    2,091,551
    
    
    
    2,091,876Unrealized gains (loss) on notes receivable, tribal governments
    
    
    (20,354
    )
    
    
    40,220
    
    
    
    (31,118
    )
    
    
    293,969Impairment loss
    
    
    
    
    
    
    (30,000
    )
    
    
    
    
    
    
    (30,000
    )629,081
    
    
    
    849,920
    
    
    
    2,060,433
    
    
    
    2,355,845Operating income
    
    
    5,200,502
    
    
    
    355,851
    
    
    
    11,225,400
    
    
    
    1,285,003Other income (expense)Interest and other income
    
    
    1,443
    
    
    
    12,936
    
    
    
    114,284
    
    
    
    35,590Interest expense
    
    
    (3,655
    )
    
    
    (58,353
    )
    
    
    (7,311
    )
    
    
    (147,162
    )Income before income taxes
    
    
    5,198,290
    
    
    
    310,434
    
    
    
    11,332,373
    
    
    
    1,173,431Income taxes
    
    
    (1,229,760
    )
    
    
    (205,253
    )
    
    
    (2,768,409
    )
    
    
    (591,225
    )Net income
    
    
    3,968,530
    
    
    
    105,181
    
    
    
    8,563,964
    
    
    
    582,206(Income) loss attributable to noncontrolling interest in consolidated joint venture
    
    
    (2,497,415
    )
    
    
    61,780
    
    
    
    (5,084,232
    )
    
    
    120,960Net income attributable to the Company
    
    $
    1,471,115
    
    
    $
    166,961
    
    
    $
    3,479,732
    
    
    $
    703,166Net income attributable to the Company per common shareBasic and diluted
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.19
    
    
    $
    0.04Weighted-average number of common shares outstandingBasic and diluted
    
    
    18,004,414
    
    
    
    17,996,525
    
    
    
    18,003,048
    
    
    
    18,049,495
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalSix months ended
    
    Common stock
    
    
    Treasury stock
    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersJune 30, 2010
    
    Shares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    capital
    
    
    (deficit)
    
    
    Interest
    
    
    equityBeginning balances
    
    
    19,358,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,665,390
    
    
    $
    (1,504,320
    )
    
    $
    5,447,995
    
    
    $
    44,956,926Previously deferred share-based compensation recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,683
    
    
    
    
    
    
    
    
    
    
    
    16,683Issuance of common stock
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,460
    
    
    
    
    
    
    
    
    
    
    
    17,460Distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,774,514
    )
    
    
    (4,774,514
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,479,732
    
    
    
    5,084,232
    
    
    
    8,563,964Ending balances
    
    
    19,364,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,699,533
    
    
    $
    1,975,412
    
    
    $
    5,757,713
    
    
    $
    48,780,519
 Additional
    
    
    Retained
    
    
    
    
    
    
    TotalSix months ended
    
    Common stock
    
    
    Treasury stock
    
    
    paid-in
    
    
    earnings
    
    
    Non-controlling
    
    
    stockholdersJune 30, 2009
    
    Shares
    
    
    Dollars
    
    
    Shares
    
    
    Dollars
    
    
    capital
    
    
    (deficit)
    
    
    Interest
    
    
    equityBeginning balances
    
    
    19,350,276
    
    
    $
    1,935
    
    
    
    1,210,414
    
    
    $
    (1,502,182
    )
    
    $
    42,356,098
    
    
    $
    (6,272,559
    )
    
    $
    4,600,068
    
    
    $
    39,183,360Previously deferred share-based compensation recognized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,147
    
    
    
    
    
    
    
    
    
    
    
    222,147Issuance of common stock
    
    
    8,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    20,399
    
    
    
    
    
    
    
    
    
    
    
    20,400Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    146,181
    
    
    
    (151,893
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151,893
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    703,166
    
    
    
    (120,960
    )
    
    
    582,206Ending balances
    
    
    19,358,276
    
    
    $
    1,936
    
    
    
    1,356,595
    
    
    $
    (1,654,075
    )
    
    $
    42,598,644
    
    
    $
    (5,569,393
    )
    
    $
    4,479,108
    
    
    $
    39,856,220
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six monthsended June, 30,2010
    
    
    2009Net cash provided by operating activities
    
    $
    7,688,105
    
    
    $
    1,687,055Cash flows from investing activities:Purchase of property and equipment
    
    
    (309,797
    )
    
    
    (236,958
    )Proceeds from repayment of tribal advances
    
    
    5,000,000
    
    
    
    Proceeds from sale of assets
    
    
    1,200
    
    
    
    400Other
    
    
    
    
    
    
    854Net cash provided by (used in) investing activities
    
    
    4,691,403
    
    
    
    (235,704
    )Cash flows from financing activities:Payments on long-term debt to joint venture affiliate
    
    
    (1,450,087
    )
    
    
    (2,366,599
    )Proceeds from borrowings from joint venture affiliate
    
    
    
    
    
    
    305,000Purchase of treasury stock
    
    
    
    
    
    
    (151,893
    )Loan fees
    
    
    
    
    
    
    (4,250
    )Distributions to non-controlling interest in consolidated joint venture
    
    
    (4,774,514
    )
    
    
    Net cash used in financing activities
    
    
    (6,224,601
    )
    
    
    (2,217,742
    )Net increase (decrease) in cash and equivalents
    
    
    6,154,907
    
    
    
    (766,391
    )Cash and equivalents, beginning of period
    
    
    9,198,399
    
    
    
    5,304,755Cash and equivalents, end of period
    
    $
    15,353,306
    
    
    $
    4,538,364SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for income taxes
    
    $
    5,279,760
    
    
    $
    610,485Non-cash investing and financing activities:Purchases of property and equipment
financed with prior year deposit
    
    $
    94,784
    
    
    $
    
   6




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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF PRESENTATION
 The interim consolidated financial statements of Full House Resorts, Inc. and subsidiaries
(collectively, FHR or the Company) included herein reflect all adjustments that are, in
the opinion of management, necessary to present fairly the financial position and results of
operations for the interim periods presented. Certain information normally included in
annual financial statements prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) has been omitted pursuant to the interim
financial information rules and regulations of the United States Securities and Exchange
Commission.
 These unaudited interim consolidated financial statements should be read in conjunction with
the annual audited consolidated financial statements and notes thereto included in the
Companys Annual Report on Form 10-K filed March 24, 2010, for the year ended December 31,
2009, from which the balance sheet information as of that date was derived. Certain minor
reclassifications of amounts previously reported have been made to conform to the current
period presentation, none of which affected previously reported net income or earnings per
share. The results of operations for the periods ended June 30, 2010, are not necessarily
indicative of results to be expected for the year ending December 31, 2010.
 The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, including Stockmans Casino (Stockmans). Gaming Entertainment
(Michigan), LLC (GEM), a 50%-owned investee of the Company that is jointly owned by RAM
Entertainment, LLC (RAM), has been consolidated pursuant to the relevant portions of
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic
810, Consolidation. The Company accounts for its investment in Gaming Entertainment
(Delaware), LLC (GED) (Note 3) using the equity method of accounting. All material
intercompany accounts and transactions have been eliminated. In addition, on January 1,
2009, the Company retroactively adopted the requirements of ASC Topic 810 for the
non-controlling or minority interest in a subsidiary. The adoption of Topic 810 did not have
any effect on the Companys consolidated net income or net income per share attributable to
the Company for the periods presented.
 2.
    
    SHARE-BASED COMPENSATION
 For the three months ended June 30, 2009, the Company recognized share-based compensation
expense of $115,932, related to the amortization of restricted stock grants issued in prior
years and stock grants issued in May 2009, which is included in selling, general and
administrative expenses. For the six months ended June 30, 2010 and 2009, share-based
compensation expense recognized was $16,683 and $242,546, respectively. All stock grants
were fully vested as of March 31, 2010.
 3.
    
    VARIABLE INTEREST ENTITIES
 GED. The Companys investment in unconsolidated joint venture is a 50% ownership interest
in GED, a joint venture between the Company and Harrington Raceway Inc. (HRI). GED has a
management agreement with Harrington Raceway and Casino (Harrington) (formerly known as
Midway Slots and Simulcast), which is located in Harrington, Delaware. The Company receives
the greater of 50% of GEDs net income as currently prescribed under the joint venture
agreement, or a 5% growth rate in its 50% share of GEDs prior year net income through the
expiration of the GED management contract in August 2011.
 GED is a variable interest entity, but the Company is not the primary beneficiary due to the
fact that the Company holds a 50% non-controlling interest in GED and will not absorb or
receive over 50% of GEDs profits and losses. This is due to the Management Reorganization
Agreement with HRI where the Company obtained a guaranteed growth rate in the cash flow from
GED in exchange for lack of involvement in GEDs operations. Due to this agreement, the
Company does not have the power to direct the activities of GED that
most significantly impact the economic performance. Therefore, the Company does not
consolidate but accounts for the investment using the equity method.
  7




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The Company believes the maximum exposure to loss is the management fee receivable and the
Companys investment in GED less any payables since GED has no long-term indebtedness. The
Companys assets and liabilities related to its investment in GED consisted of an amount due
to HRI included in other accruals of $0.2 million as of June 30, 2010 and a receivable of
$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 June 30, 2010, and December 31,
2009, respectively, included in deposits and other.
 GED has no non-operating income or expenses, is treated as a partnership for income tax
reporting purposes and consequently recognizes no federal or state income tax provision. As
a result, income from operations for GED is equal to its net income for each period
presented and there are no material differences between GEDs income for financial and tax
reporting purposes. An unaudited summary for GEDs operations are as follows:
 GED CONDENSED BALANCE SHEET INFORMATION
 June 30,
    
    
    December 31,2010
    
    
    2009Total assets
    
    $
    737,828
    
    
    $
    420,907Total liabilities
    
    
    188,771
    
    
    
    205,838
 GED CONDENSED STATEMENT OF INCOME INFORMATION
 June 30,
    
    
    June 30,2010
    
    
    2009Revenues
    
    $
    12,877,063
    
    
    $
    12,177,092Net income
    
    
    3,335,072
    
    
    
    3,744,570
 GEM. Due to the Companys financing arrangement for the development and management of the
FireKeepers project through GEM, a 50%-owned joint venture, the Company believes it is
exposed to the majority of risk of economic loss from the joint ventures activities.
Therefore, the Company considers the joint venture to be a variable interest entity of which
the Company is the primary beneficiary, therefore requiring consolidation in the financial
statements. The Company considers itself to be the primary beneficiary because it has the
majority of the invested capital, will receive the majority of GEMs income or absorb the
majority of GEMs losses until GEM has fully repaid FHR, which is currently anticipated to
be in the third quarter of 2010, and the Company primarily directs the activities of GEM
including the direct oversight of FireKeepers Casino.
 Management believes the maximum exposure to loss is $6.5 million, which is composed of the
Companys equity investment and current receivable (which are eliminated in consolidation).
Currently, GEM has no debt other than the $0.7 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 had been paid and accordingly, the Company receives 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
$10.5 million and $11.4 million in contract rights, net of amortization as of June 30, 2010
and December 31, 2009, respectively. Amounts due to the members related to GEM member
agreement are $0.7 million and $11.8 million for June 30, 2010 and December 31, 2009,
respectively. GEM has no long-term liabilities.
  8




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An unaudited summary of GEMs financial position and operations are as follows:
 GEM CONDENSED BALANCE SHEET INFORMATION
 June 30,
    
    
    December 31,2010
    
    
    2009Current assets
    
    $
    1,782,610
    
    
    $
    6,006,779Long-term assets
    
    
    10,488,266
    
    
    
    11,351,133Current liabilities
    
    
    755,978
    
    
    
    9,251,338
 GEM CONDENSED STATEMENT OF INCOME INFORMATION
 June 30,
    
    
    June 30,2010
    
    
    2009Revenues
    
    $
    $12,180,704
    
    
    $
    Net income
    
    
    10,168,464
    
    
    
    (241,920
    )
 4.
    
    FAIR VALUE MEASUREMENTS
 The carrying value of the Companys cash and 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, as
defined in ASC Topic 820, consisting of interest rates offered to the Company for loans of
the same or similar remaining maturities and bearing similar risks.
 In January 2010, the FASB issued ASU 2010-6, Improving Disclosures About Fair Value
Measurements, which requires reporting entities to make new disclosures about recurring or
nonrecurring fair-value measurements including significant transfers into and out of level 1
and level 2 fair value measurements, also, as defined in ASC Topic 820, and information on
purchases, sales, issuances, and settlements on a gross basis in the reconciliation of level
3 fair value measurements. ASU 2010-6 was effective for 2010, except for level 3
reconciliation disclosures, which will become effective for 2011. The adoption of ASU 2010-6
did not have a material effect on the Companys financial statements or disclosures for the
three months ended June 30, 2010, and it is not expected that the adoption of level 3
reconciliation disclosures will have a material effect in 2011.
 Due to the absence of observable market quotes on the Companys notes receivable from tribal
governments (Note 5), tribal notes receivable are recorded and subsequently re-measured and
adjusted periodically to estimated fair value based only on level 3 inputs. These level 3
inputs are based primarily on managements estimates of expected cash flow streams, based on
factors such as future interest rates, casino opening dates and discount rates.
 The estimated casino opening dates used in the valuations take into account project-specific
circumstances such as ongoing litigation, the status of required regulatory approvals,
construction periods and other factors. Factors considered in the determination of an
appropriate discount rate include discount rates typically used by gaming industry investors
and appraisers to value individual casino properties in the appropriate regions, and
discount rates produced by the widely-accepted Capital Asset Pricing Model (CAPM). The
following key assumptions are used in the CAPM:
 
    
    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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##### Table of Contents



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 June 30, 2010, and December 31, 2009, notes receivable from tribal governments were as
follows:
 June 30,
    
    
    December 31,2010
    
    
    2009Contractual (stated) amountFireKeepers Development Authority
    
    $
    
    
    
    $
    5,000,000Northern Cheyenne
    
    
    618,875
    
    
    
    618,875Nambe Pueblo
    
    
    661,600
    
    
    
    661,600$
    1,280,475
    
    
    $
    6,280,475Estimated fair value of notes receivable
related to tribal casino projects:FireKeepers Development Authority
    
    $
    
    
    
    $
    4,682,420Northern Cheyenne
    
    
    
    
    
    
    Nambe Pueblo
    
    
    399,349
    
    
    
    430,467$
    399,349
    
    
    $
    5,112,887
 The $5.0 million due from the 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 financing sources to fund the gaming development. Based on information available
about the current status of the financing effort, the Companys management believes funding
may be completed in the third quarter of 2010 with the expected facility opening during the
third 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 June 30, 2010, and adjusted its
carrying value accordingly. There can be no assurance that the facility will be opened or
that the receivable will be paid.
 The following table summarizes changes in the estimated fair value of notes receivable from
tribal governments, which consisted of the Nambé Pueblo project, determined using level 3
estimated fair value inputs, from January 1, 2010, to June 30, 2010:
 Nambe PuebloProjectBalances, January 1, 2010
    
    $
    430,467Unrealized loss included in earnings
    
    
    (31,118
    )Balances, June 30, 2010
    
    $
    399,349
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6.
    
    GOODWILL
 Goodwill represents the excess of the purchase price over fair market value of net assets
acquired in connection with the Stockmans casino operation. The Companys review of
goodwill as of June 30, 2010 resulted in a 4.4% excess of estimated fair value over the
carrying amount of Stockmans goodwill and related assets using an income approach
considering an earnings multiple of 6.5 times. The calculation contemplates changes for both
current year and future year estimates in earnings and the impact of these changes to the
fair value of Stockmans, although there is some uncertainty in key assumptions including
projected future earnings growth. Management believes Stockmans could sustain a further
10% decline in current year projected earnings or a future year 1% decline in projected
earnings growth without impairment.
 7.
    
    DEBT
 At June 30, 2010, there was no long-term debt outstanding. At December 31, 2009, long-term
debt consisted of $1.5 million due to joint venture affiliate (RAM).
 Debt to joint venture affiliate.On October 9, 2009, effective September 30, 2009, an
agreement was reached between the Company and RAM (GEM Financial Resolution) clarifying the
treatment of the following items:
 
    
    Reimbursable and non-reimbursable advances funded by the members, before RAM
acquired its interest in GEM.
 
    
    Repayments of disproportionate advances by the Company as prior agreements were
unclear as to the treatment.
 Reducing Revolving Loan (the Revolver).Effective January 1, 2010, based upon an amendment
to the Revolver, the maximum amount permitted to be outstanding decreases $329,000
semiannually on January 1 and July 1 of each year and any outstanding amounts above such
reduced maximum must be repaid on each such date. Draws on the Revolver are payable over 15
years at a variable interest rate based on the five year LIBOR/Swap rate plus 2.1%. This
rate adjusts annually based on the funded debt to EBITDA ratio of Stockmans with
adjustments based on the five-year LIBOR/Swap rates. Stockmans assets are pledged as
collateral for the loan. The Revolver also contains certain customary financial
representations and warranties and requires that Stockmans maintain specified financial
covenants, including a fixed charge coverage ratio, a funded debt to EBITDA ratio and a
minimum tangible net worth. In addition, the Revolver provides restrictions on certain
distributions and capital expenditures by Stockmans, and also provides for customary events
of default including payment defaults and covenant defaults. Management is not aware of any
covenant violations through the date of this filing. As of June 30, 2010 and December 31,
2009, there were no amounts drawn on the Revolver, and the Company was in full compliance
with the debt covenants. The Company had $8.2 million of availability under its revolving
credit line as of June 30, 2010, which decreased to $7.9 million on July 1, 2010.
 8.
    
    SEGMENT REPORTING
 The Company is composed of three primary business segments. The following tables reflect
selected segment information for the three and six months ended June 30, 2010 and 2009. The
operations segment includes the Stockmans Casino operation in Fallon, Nevada. The
development/management segment includes costs associated with tribal casino development
projects and the Michigan and Delaware joint ventures. The Corporate segment includes
general and administrative expenses of the Company.
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Selected statement of operations data for the three months ended June 30:
 Development/Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    2,039,869
    
    
    $
    6,018,598
    
    
    $
    
    
    
    $
    8,058,467Selling, general and administrative expense
    
    
    414,550
    
    
    
    155,416
    
    
    
    945,966
    
    
    
    1,515,932Depreciation and amortization
    
    
    240,990
    
    
    
    593,195
    
    
    
    25,449
    
    
    
    859,634Operating gains
    
    
    
    
    
    
    629,081
    
    
    
    
    
    
    
    629,081Operating income (loss)
    
    
    340,977
    
    
    
    5,897,734
    
    
    
    (1,038,209
    )
    
    
    5,200,502Net income (loss) attributable to Company
    
    
    225,724
    
    
    
    1,932,747
    
    
    
    (687,356
    )
    
    
    1,471,1152009Revenues
    
    $
    2,364,803
    
    
    $
    
    
    
    $
    
    
    
    $
    2,364,803Selling, general and administrative expense
    
    
    401,892
    
    
    
    132,552
    
    
    
    984,631
    
    
    
    1,519,075Depreciation and amortization
    
    
    246,778
    
    
    
    13,500
    
    
    
    20,703
    
    
    
    280,981Operating gains
    
    
    
    
    
    
    849,920
    
    
    
    
    
    
    
    849,920Operating income (loss)
    
    
    672,637
    
    
    
    690,507
    
    
    
    (1,007,293
    )
    
    
    355,851Net income (loss) attributable to Company
    
    
    444,485
    
    
    
    395,237
    
    
    
    (672,761
    )
    
    
    166,961
 Selected statement of operations data for the six months ended June 30:
 Development/Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    4,188,993
    
    
    $
    12,180,704
    
    
    $
    
    
    
    $
    16,369,697Selling, general and administrative expense
    
    
    860,826
    
    
    
    400,824
    
    
    
    2,020,014
    
    
    
    3,281,664Depreciation and amortization
    
    
    486,072
    
    
    
    1,186,389
    
    
    
    48,515
    
    
    
    1,720,976Operating gains
    
    
    
    
    
    
    2,060,433
    
    
    
    
    
    
    
    2,060,433Operating income (loss)
    
    
    775,809
    
    
    
    12,652,190
    
    
    
    (2,202,599
    )
    
    
    11,225,400Net income (loss) attributable to Company
    
    
    512,836
    
    
    
    4,418,869
    
    
    
    (1,451,973
    )
    
    
    3,479,7322009Revenues
    
    $
    4,684,740
    
    
    $
    
    
    
    $
    
    
    
    $
    4,684,740Selling, general and administrative expense
    
    
    848,558
    
    
    
    256,473
    
    
    
    1,943,938
    
    
    
    3,048,969Depreciation and amortization
    
    
    503,662
    
    
    
    26,950
    
    
    
    40,921
    
    
    
    571,533Operating gains
    
    
    
    
    
    
    2,355,845
    
    
    
    
    
    
    
    2,355,845Operating income (loss)
    
    
    1,228,452
    
    
    
    2,044,068
    
    
    
    (1,987,517
    )
    
    
    1,285,003Net income (loss) attributable to Company
    
    
    810,409
    
    
    
    1,233,991
    
    
    
    (1,341,234
    )
    
    
    703,166
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Selected balance sheet data as of June 30, 2010 and December 31, 2009:
 Development/Casino Operations
    
    
    Management
    
    
    Corporate
    
    
    Consolidated2010Total Assets
    
    $
    19,653,480
    
    
    $
    16,952,172
    
    
    $
    15,130,988
    
    
    $
    51,736,640Property and equipment, net
    
    
    7,705,221
    
    
    
    529
    
    
    
    124,611
    
    
    
    7,830,361Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    1,156,985
    
    
    
    1,244,492
    
    
    
    554,644
    
    
    
    2,956,1212009Total Assets
    
    $
    19,800,305
    
    
    $
    22,790,171
    
    
    $
    8,995,110
    
    
    $
    51,585,586Property and equipment, net
    
    
    7,834,951
    
    
    
    818
    
    
    
    125,965
    
    
    
    7,961,734Goodwill
    
    
    10,308,520
    
    
    
    
    
    
    
    
    
    
    
    10,308,520Liabilities
    
    
    1,125,099
    
    
    
    2,871,553
    
    
    
    2,632,008
    
    
    
    6,628,660
 9.
    
    CONTINGENCIES
 Economic conditions and related risks and uncertainties.The United States has experienced a
severe and widespread recession accompanied by, among other things, weakness in consumer
spending including gaming activity and reduced credit and capital financing availability,
and is also engaged in war, all of which are likely to continue to have far-reaching effects
on economic conditions in the country for an indeterminate period. The Companys operations
are currently concentrated in northern Nevada, Delaware and Michigan. Accordingly, future
operations could be affected by adverse economic conditions particularly in those areas and
their key feeder markets in neighboring states. The effects and duration of these conditions
and related risks and uncertainties on the Companys future operations and cash flows,
including its access to capital or credit financing, cannot be estimated at this time, but
may likely be significant.
 HRI arbitration.On April 26, 2010, an American Arbitration Association (AAA) arbitrator
in Wilmington, Delaware, ruled in the Companys favor denying an interpretation by HRI of
the Management Reorganization Agreement entered into on June 18, 2007, that HRI had been
overpaying the share of the management fee due to the Company. The arbitrator upheld the
Companys formulation of the fee, both past and future, that 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 May 25, 2010,
the Company received notice from the AAA that the arbitrator declined to consider the
request for an award of attorneys fees and additional costs.
 IRS examination.Effective May 1, 2010, the Company is under examination by the Internal
Revenue Service (IRS) for the year ended December 31, 2008. As of the date of this filing,
no issues have been presented which would necessitate an adjustment to prior periods.
 
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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Safe harbor provision
   
    
    our growth strategies;
 
    
    our development and potential acquisition of new facilities;
 
    
    risks related to development and construction activities;
 
    
    anticipated trends in the gaming industries;
 
    
    patron demographics;
 
    
    general market and economic conditions;
 
    
    access to capital and credit, including our ability to finance future business
requirements;
 
    
    the availability of adequate levels of insurance;
 
    
    changes in federal, state, and local laws and regulations, including
environmental and gaming license legislation and regulations;
 
    
    regulatory approvals;
 
    
    competitive environment;
 
    
    risks, uncertainties and other factors described from time to time in this and
our other SEC filings and reports.
  Overview
   14




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##### Table of Contents



Critical accounting estimates and policies
        15




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##### Table of Contents



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




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##### Table of Contents



Results of operations
  Three Months Ended June 30, 2010, Compared to Three Months Ended June 30, 2009
 Operating revenues.
 Operating costs and expenses.
 Project development costs.
 Selling, general and administrative expense.
 Operating gains.
 Other income (expense).
  17




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##### Table of Contents



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



Non-controlling interest.
 Liquidity and capital resources
 Economic conditions and related risks and uncertainties
       19




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##### Table of Contents



FireKeepers project
   
    
    Reimbursable and non-reimbursable advances funded by the members, before RAM
acquired its interest in GEM.
 
    
    Repayments of disproportionate advances by us as prior agreements were unclear
as to the treatment.
  Other projects
   20




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##### Table of Contents



Seasonality
  Regulation and taxes
    21




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##### Table of Contents



Off-balance sheet arrangements
  
 Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
 Changes in Internal Control Over Financial Reporting
 
 PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
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##### Table of Contents



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  23




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SIGNATURES
  FULL HOUSE RESORTS, INC.Date: August 6, 2010
    
    By:

    /s/ MARK MILLERMark Miller
Chief Financial Officer and Chief Operating Officer (on behalf of the
Registrant and as principal financial officer)
  24