U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934  [FEE REQUIRED]
                  For the fiscal year ended: December 31, 1996

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                         Commission file number 0-20630

                            FULL HOUSE RESORTS, INC.
                  ---------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

         DELAWARE                                               13-3391527
-------------------------------                            ---------------------
(State or Other Jurisdiction of                              (I.R.S. Employer
Incorporation or Organization)                              Identification No.)

      DEADWOOD GULCH RESORT, HIGHWAY 85 SOUTH, DEADWOOD, SOUTH DAKOTA 57732
      ---------------------------------------------------------------------
              (Address and zip code of principal executive offices)
                                (605) 578-1294
                         -------------------------------
               (Issuer's Telephone Number, Including Area Code)

       Securities registered under Section 12(b) of the Exchange Act:
 
          NONE                                                    NONE
   -------------------                                    ----------------------
  (Title of Each Class)                                   (Name of Each Exchange
                                                           on Which Registered)

         Securities registered under Section 12(g) of the Exchange Act:

                        COMMON STOCK, $.0001 PER SHARE
                        ------------------------------
                                (Title of class)

      Check whether the registrant:  (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.  Yes [X]  No [ ]

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.  [X]

      State issuer's revenues for its most recent fiscal year:  $7,670,338.

      The aggregate market value of registrant's voting $.0001 par value common
stock held by non-affiliates of the registrant, as of March 14, 1997, was:
$22,819,188.

      The number of shares outstanding of registrant's $.0001 par value common
stock, as of March 14, 1997, was 10,340,380 shares.

<PAGE>

                                     PART I


1.    DESCRIPTION OF BUSINESS.

      BACKGROUND

     Full House Resorts, Inc. ("Full House" or the "Company") was incorporated
in the State of Delaware as Hour Corp. on January 5, 1987. On November 20, 1992,
Full House, through the issuance of 4,901,850 shares of common stock, par value
$.0001 per share (the "Common Stock") and 1,000,000 shares of Series 1992-1
Preferred Stock, par value $.0001 per share (the "Preferred Stock"), acquired
Deadwood Gulch Resort and Gaming Corp.  On August 17, 1993, Full House completed
a registered public offering of units, each consisting of three shares of its
Common Stock and a warrant (the "Warrant") entitling the holder to purchase, for
$5.00, one additional share of Common Stock during the period between August 10,
1994 and August 9, 1996 for gross proceeds of $8,000,000. During 1996, the
Company extended the exercise period of the Warrants until February 10, 1997.
The expiration date was not extended beyond that date. The net proceeds to Full
House of the offering, after payment of costs and expenses, were $6,742,781.

      In connection with the public offering, Full House entered into an
Agreement to Provide and Accept Commitment to Restructure First and Second
Mortgage Loans ("Mortgage Restructuring Agreement"). In accordance with such
Agreement and upon the closing of the public offering and receipt of the
proceeds, two notes were issued in the amounts of $2,500,000 and $1,250,000. The
notes required the payment of interest only at the rate of 12% for one year from
the date of funding, payable monthly in arrears. Although the majority of the
funds needed were obtained from offering proceeds, an $8,000,000 line of credit
provided to Full House through an agreement with Allen E. Paulson (the Chairman
of the Board of Directors of Full House) enabled Full House to repay the
$2,500,000 note on March 14, 1994. In August, 1994, Full House began monthly
payments of principal and interest on the other note which was held by H. Joe
Frazier, a director of Full House until January, 1996. The entire principal
balance was repaid on May 31, 1995.

      Full House has been actively engaged in the process of identifying
business opportunities in the gaming industry to expand its base and has
determined that opportunities exist through the establishment of agreements with
Indian Tribes and racetracks at which machine gaming is allowed.

      In May 1994, Lee Iacocca brought to the attention of Full House management
certain opportunities to enter into gaming agreements. Specifically, Mr. Iacocca
advised Full House of his negotiations, together with Omega Properties, Inc.
("Omega"), with certain Indian Tribes (the "Organized Tribes") regarding the
development of a gaming operation in the Detroit, Michigan metropolitan area.
Mr. Iacocca also advised Full House of the ongoing discussions with a second
Indian Tribe in Michigan (the Nottawaseppi Huron Band of Potawatomi), a tribe in
southern California (the Torres Martinez Desert Cahuilla Indians) and a project
at the Delaware State Fairgrounds. In each case, the other parties had entered
into discussions with Mr. Iacocca based upon their perception of his integrity
and ability to facilitate completion of the proposed transactions. Mr. Iacocca
had conducted these negotiations through LAI Associates, Inc. ("LAI"), a
corporation owned by him.

      In addition, LAI owned a 25% interest in a total of 21 acres in Branson,
Missouri, consisting of a 1.75 acre parcel ("Parcel 15"), a 7.76 acre site
("Parcel 16") and an 11.51 acre site ("Parcel BB") (collectively, the 

                                      -2-

<PAGE>

"Branson Real Estate") and a 50% interest in royalties receivable pursuant to an
agreement (the "Royalty Agreement") which provided for receipt by LAI of $100
per apartment unit (2,353 units) and $250 per residential ownership unit (951
units) sold after October 25, 1993 in Branson Hills, a mixed use planned
community located in Taney County, Missouri.

      Following extensive discussions with the principals of LAI and Omega, Full
House determined that a merger transaction involving Full House, LAI and Omega
would provide Full House with the advantages of both the real estate development
opportunities in Branson and the opportunity to develop the gaming and
commercial nongaming activities, the rights to which were held by LAI and Omega.
During these negotiations, the parties agreed that the shareholders of LAI would
receive 1,250,000 shares of Full House Common Stock and that the shareholders of
Omega would receive 500,000 shares and a promissory note from Full House in the
principal amount of $375,000. This decision was based upon Full House's
determination that access to these four projects was only available through a
merger with LAI and Omega.

      Accordingly, on August 18, 1994, pursuant to a May 1994 letter of intent,
Full House entered into a Merger Agreement (the "Merger Agreement") with Full
House Subsidiary, Inc. ("FHS"), LAI and Omega (30% owned by William P. McComas,
a director and stockholder of Full House) whereby these entities were to merge
with FHS, a newly formed subsidiary of Full House. In exchange, the entities
were to receive 1,750,000 shares of common stock of Full House and a note from
Full House for $375,000 bearing interest at the "prime rate" of Bank of America,
N.A. and due on demand, but in no event prior to August 31, 1996. Although Full
House also entered into a Purchase Agreement with Mr. McComas on the same date
to purchase a portion of the assets originally included in the May 1994 letter
of intent in exchange for a $625,000 note from Full House, this portion of the
transaction was not consummated and the note was not issued.

      Subsequently, the parties determined that it was in their best interests
to proceed with the merger with LAI prior to consummating the merger with Omega.
On March 23, 1995, the parties amended the Merger Agreement and the Merger
between LAI and FHS was consummated on the same date. As a result of the Merger,
Full House obtained a 55% interest in the agreements with the Organized Tribes
and the Nottawaseppi Huron Band of Potawatomi, and a 50% interest in the
agreements with the Torres Martinez Desert Cahuilla Indians and the Delaware
State Fair.

      The parties again amended the Merger Agreement as of June 30, 1995 to
provide that, rather than Omega merging into FHS, the subsidiary of Full House
into which LAI was merged, a new wholly-owned subsidiary of Full House, Full
House Joint Venture Subsidiary, Inc. ("Full House Sub"), would be merged into
Omega. The merger was effected on November 20, 1995. In exchange, the
shareholders of Omega received an aggregate of 500,000 shares of Full House
Common Stock and a promissory note of Full House in the principal amount of
$375,000. The principal amount of this promissory note accrues interest, payable
quarterly, at a rate equal to the "prime" rate and such principal amount,
together with all accrued interest, is due and payable in full upon demand by
the holder(s) of this note, but in no event before August 31, 1996. William P.
McComas received the note and the other stockholder of Omega received the shares
in exchange for their interests as shareholders of Omega. As a result of such
merger, Full House obtained the remaining 45% interests in the agreements with
the Organized Tribes and the Nottawaseppi Huron Band of Potawatomi and the
remaining 50% interests in the agreements with the Torres Martinez Desert
Cahuilla Indians and the Delaware State Fair.

      The Omega transaction was accounted for as a purchase valued at
$2,500,700. The purchase price has been allocated to the following assets and
liabilities, based on their estimated relative fair values: cash $80 and gaming
agreements $2,500,620. The gaming agreements were valued, as of March 23, 1995,
by discounting to the net present value, as of the transaction date, the
estimated future after tax cash flow for the proposed ventures and by applying a
further discount based upon the expected likelihood of successfully developing
the projects. In making this determination, Full House estimated the cash needs,
the income and the cash flow related to its agreements with the Organized Tribes
(the "Organized Tribes Agreement") and the Nottawaseppi Huron Band of Potawatomi
(the "Nottawaseppi Agreement"). Through the use of these forecasts and an
after-tax discount rate, Full House valued the Organized Tribes Agreement and
the Nottawaseppi Agreement at $28 million and $37 million, respectively. The
after-tax discount rate used was 13.8

                                      -3-

<PAGE>

percent. This rate was derived through use of the capital asset pricing model
and/or the weighted average cost of capital model. Full House further reduced
the above valuations by applying a "success factor" to account for the
possibility that performance under the Organized Tribes Agreement and the
Nottawaseppi Agreement would not occur on schedule due to the failure to receive
or delays in the receipt of certain approvals. Although the actions of the
Governor of Michigan with respect to off reservation gaming have resulted in
Full House writing off the value of the Organized Tribes Agreement, Full House
believes that such action has increased the value of the Nottawaseppi Agreement.
Full House believes that the increase in the value of the Nottawaseppi
Agreement, together with the value of the other agreements discussed above,
supports the amount attributed to the gaming agreements.

      In late 1995, Full House was named as a defendant in a lawsuit in Taney
County, Missouri, as a result of its acquisition (through the merger of its
wholly-owned subsidiary with LAI) of an interest in the Branson Real Estate and
the Royalties Agreement. After negotiations with Mr. Iacocca, in March 1996 Mr.
Iacocca accepted the reconveyance of the interests in the Branson Real Estate
and Royalties in exchange for 193,529 shares of Common Stock to Full House which
the Company believes had a value equal to the appraised value of the surrendered
interests in the Real Estate and Royalty Agreement. Such action was intended to
minimize the Company's exposure to the litigation.

      Full House's executive offices are located at Highway 85 South, Deadwood,
South Dakota 57732, telephone (605) 578-1294.


      GTECH RELATIONSHIP

      Full House entered into a series of agreements with GTECH Corporation, a
wholly-owned subsidiary of GTECH Holdings Corporation, a leading supplier of
computerized on-line lottery systems and services for government-authorized
lotteries, to jointly pursue existing (except the Deadwood Gulch Resort) and
future gaming opportunities. Although the agreements were dated as of December
29, 1995, the parties agreed to share equally in the equity investment,
financing responsibility and in revenues and expenses of each project commencing
April 1, 1995. Pursuant to the agreements, joint venture companies equally owned
by Dreamport, Inc., the gaming and entertainment subsidiary of GTECH, and Full
House have been formed. Full House contributed its rights (as described below)
to the North Bend, Oregon facility and the rights to develop the Torres
Martinez, Nottawaseppi Huron Band of Potawatomi and Delaware State Fair projects
to the joint venture companies.

      In payment for its interest in the joint venture companies, GTECH
contributed cash and other intangible assets to the companies and committed to
loan the joint venture companies up to $16.4 million to complete the North Bend,
Oregon and Delaware facilities. Full House has agreed to guarantee one-half of
the obligations of the joint venture companies to GTECH under these loans and at
December 31, 1996 had guaranteed to GTECH one-half of a $2.0 million loan to the
Tribe and one-half of a $9.1 million loan to the Delaware venture. GTECH has
also agreed to make loans to Full House for its portion of the financing of
projects if Full House is unable to otherwise obtain financing. GTECH will also
provide project management, technology and other expertise to analyze and
develop/manage the implementation of opportunities developed by the joint
venture companies. GTECH has also loaned Full House $3 million, which loan is
convertible, subject to regulatory approval into 600,000 shares of Full House's
Common Stock. In addition, Full House has been reimbursed by one of the joint
venture companies for certain advances and expenditures made by Full House
relating to the gaming development agreements. As part of the GTECH
relationship, Allen E. Paulson, William P. McComas and Lee Iacocca have granted
to GTECH an option to purchase their shares should they propose to transfer the
same.

      In March, 1997, Full House and GTECH modified their agreement to no longer
require each party to present prospective business opportunities to the other.

      Set forth below is a brief description of each of the gaming opportunities
which have been transferred to the joint venture companies which are equally
owned by Full House and Dreamport.

                                      -4-

<PAGE>

      THE MILL CASINO--NORTH BEND, OREGON

      On May 19, 1995, the first phase of the facility known as the "Mill" was
opened with 250 video lottery terminals (336 as of December 31, 1996), nine
blackjack tables, three poker tables, a restaurant and buffet, a saloon, a bingo
hall, a gift shop and a snack bar on Tribal Trust Lands of the Coquille Indian
Tribe in North Bend, Oregon. A Full House - Dreamport joint venture entity
leases approximately 12.5 acres of Tribal Trust Lands from an entity owned by
the Coquille Indian Tribe on which the Mill is located and subleases a portion
of the land on which the casino is located back to the same entity. The master
lease expires in 2019 and the sublease expires in 2002 with options to renew.

      On July 19, 1995, an addendum to the agreement with the Coquille Indian
Tribe was signed by Full House and Dreamport, which reduced the obligations of
the joint venture company to provide financing to $10.4 million, extended the
date when repayments begin and modified the method of computing participating
rents and loan repayments. Lease and debt payments commenced on August 19, 1995
and September 19, 1995, respectively. In October, 1996, the Tribe secured a new
$17.5 million loan to refinance certain outstanding indebtedness, finance the
acquisition of gaming equipment and finance certain improvements to the gaming
facility. The joint venture company was repaid 100% of its original development
loan from the refinancing. GTECH Corporation purchased a $2 million
participation in that new loan, half of which is guaranteed by Full House. As
part of the loan, the joint venture company subordinated its rights to receive a
percentage of Gross Gaming Revenues. As rental under the sublease to the Tribal
entity, from October 8, 1996 through October 7, 1999, the joint venture company
will receive 13% of Gross Gaming Revenue. The monthly percentage rental will be
reduced to 12% from October 8, 1999 until October 8, 2000 when it will reduce to
11% until October 8, 2001. Thereafter, it will be 10% of Gross Gaming Revenue.
No Annual Percentage Rental will be paid after August 19, 2002; provided,
however, in the event Gross Gaming Revenue for any twelve month period exceeds
$20,000,000, 10% of amounts in excess of such threshold will be paid as rent
under the sublease.

      The Mill is located in North Bend, Oregon on the Port of Coos Bay. In
1996, the Coos County population, which includes the Bay area, was approximately
65,000. The Bay area's economy is primarily based on forestry and fishing.
Oregon's Coos Bay area is located on the Pacific Coast midway between San
Francisco, California and Seattle, Washington. The communities of Coos Bay,
North Bend and Charleston are approximately 115 miles from Eugene, Oregon's
second largest city. The North Bend Municipal Airport is Southwestern Oregon's
regional air terminal that provides commercial air service to and from Portland.

      The Mill Casino is one of six Indian casinos presently operating in Oregon
with one additional Indian casino under construction. The closest competing
casino is located approximately 90 miles from North Bend and operates 230
devices, a card room, bingo and keno. The other casinos are located
approximately 140, 160, 265 and 435 miles from North Bend. The two facilities
which are 140 and 160 miles from North Bend are located closer to Portland,
Oregon. Full House believes that there are other Indian casinos presently being
contemplated in Oregon.


      MIDWAY SLOTS AND SIMULCAST--HARRINGTON, DELAWARE

      On August 20,1996 Midway Slots and Simulcast, owned by Harrington Raceway,
Inc., was opened. The 35,000 square foot facility located near Dover, Delaware,
was developed and financed and is managed by a Full House-Dreamport joint
venture company. The facility employs approximately 250 people, and features 500
gaming devices and a 150-seat simulcast parlor and racebook. Individual screens
for players broadcast horse racing from harness and thoroughbred tracks around
the world. The facility also features a 150-seat Las Vegas-style buffet, lounge,
and gift shop. The joint venture provided over $11 million in financing,
developed the project and acts as manager of the gaming facility pursuant to a
15-year contract. As of December 31, 1996, $9.1 million of the development loan
remained outstanding.

      Midway Slots and Simulcast is located in Harrington, Delaware on Route 13,
south of Dover, Delaware between Philadelphia and Baltimore/Washington, D.C.
Midway Slots and Simulcast is one of three facilities 

                                      -5-

<PAGE>

presently operating in Delaware. The closest competing casino is located
approximately 20 miles from Harrington and operates 1,000 devices. The other
facility is located approximately 60 miles from Harrington.

      Under the 15-year management agreement with the joint venture company, the
venture receives a percentage of Gross Revenues and Operating Profits, as
defined in the agreements. The joint venture company developed and constructed
the gaming facility and provided financing through a capital lease arrangement.


      NOTTAWASEPPI HURON BAND OF POTAWATOMI--BATTLE CREEK, MICHIGAN

      Full House entered into a series of agreements in January, 1995, with the
Nottawaseppi Huron Band of Potawatomi, a Michigan Indian Tribe, to develop
gaming and non-gaming commercial opportunities for the Tribe and to construct
and manage Class II and Class III gaming facilities. The Tribe's state
reservation lands are located in Southcentral Michigan. If developed, the
facility will target the Ft. Wayne, Indiana and Lansing and Detroit, Michigan
metropolitan areas. The Tribe intends to apply to have its existing State
reservation land as well as additional land in its ancestral territory taken
into trust by the Bureau of Indian Affairs. The agreements gave Greenhouse
Management, Inc., an entity 85% owned by Full House, the exclusive right to
provide financing and casino management expertise to the Tribe in exchange for a
defined percentage of net profits and certain other considerations from any
future gaming or related activities of the Tribe. These rights have been
assigned to a Full House-Dreamport joint venture company.

      In late 1996, the joint venture company formed by Full House and Dreamport
in Michigan renegotiated its management contract with the Nottawaseppi Huron
Band of Potawatomi, and with Green Acres Casino Management, originally a 15%
owner of Greenhouse Management, Inc. Under the new contract, the joint venture
company will finance, develop and manage Class III gaming for the Tribe on
reservation lands to be acquired near Battle Creek, Michigan. Green Acres Casino
Management will be paid a royalty fee in lieu of its original 15% ownership
interest in earlier contracts with the Tribe. The Huron Potawatomi achieved
final federal recognition as a tribe in April, 1996, and won a Class III Gaming
Compact from Michigan's governor early in 1997, to operate an unlimited number
of electronic gaming devices as well as roulette, Keno, dice and banking card
games and other Class III games. Legislative ratification of the Compact remains
pending, as does approval by the U. S. Department of the Interior and National
Indian Gaming Commission. On November 5, 1996, Michigan voters approved licenses
for three gaming facilities within the City of Detroit, approximately 100 miles
from the Battle Creek area. That legislation has been challenged in Michigan
courts. The Company does not believe that operation of three gaming facilities
in Detroit will adversely impact the proposed Huron Potawatomi casino.


      TORRES MARTINEZ BAND OF DESERT CAHUILLA INDIANS--THERMAL, CALIFORNIA.

      On April 21, 1995, Full House entered into a Gaming and Development
Agreement with the Torres Martinez Desert Cahuilla Indians. The agreement grants
Full House certain rights to develop, manage and operate gaming activities for
the Tribe and the right to receive 40% of the net revenues from gaming
activities subject to the obligation of Full House to pay the costs of the same.
For all non-gaming activities, Full House is to provide 50% of the financing for
development and will receive 50% of the net revenues from said activities,
subject to the obligation of Full House to lend funds to the Tribe prior to
commencement of gaming operations. On April 23, 1995, Full House and the Tribe
entered into a Gaming Management Agreement further defining Full House's and the
Tribe's rights and obligations under the Gaming and Development Agreement. As
noted above, the rights to these agreements have been assigned to a Full
House-Dreamport joint venture company.

      During 1996, the Tribe reached a settlement in its litigation with the
Department of Justice and two water districts, pursuant to which the Tribe will
be paid $14 million in compensation, and will have the right to select up to
11,200 acres of new reservation land to be taken into trust in replacement for
the same quantity of land which was flooded by the rising level of the Salton
Sea. That settlement, which requires legislative enactment, was approved by the
U. S. House of Representatives but stalled in the Senate as a result of
opposition from Nevada senators. The Tribe intends to seek enactment of a
similar bill during the current session of Congress.

                                      -6-

<PAGE>

ORGANIZED TRIBES

      Pursuant to a September 16, 1994 agreement with the Organized Tribes in
the State of Michigan, Full House obtained the right to pursue off-reservation
gaming and related non-gaming activities. On June 28, 1995, the Governor of the
State of Michigan determined to prohibit off-reservation gaming in the State of
Michigan. As a result of this action and reimbursement of certain costs to Full
House by GTECH, Full House wrote off project costs of $1,867,730 in 1995.


DEADWOOD GULCH RESORT.

      Full House operates Deadwood Gulch Resort in Deadwood, South Dakota. The
Deadwood Gulch Resort consists of a 56-acre complex which includes a 98-room
hotel (including an outdoor pool/recreation area) with two small casinos, a
freestanding restaurant and saloon, a freestanding 8,000 square foot conference
center, a convenience store/gas mart, a recreational vehicle park and campground
and the Gulches of Fun family center. DGR's hotel casinos occupy 1,575 square
feet and the Gulches of Fun occupies 2,400 square feet. The Recreational Vehicle
Campground contains 92 RV sites of which 90 are full service and an additional
30 tent sites. The Gulches of Fun family center includes an 18-hole miniature
golf course, a go-kart track, bumper boat pond, batting cages, kiddie playland
and rides and arcade and redemption games. Full House currently operates 96 slot
machines, two blackjack tables and three video lottery devices within the resort
complex.

      New management at Deadwood Gulch Resort has successfully increased
revenues and cut expenses, resulting in improved operating results. The Company
continues to actively market the Resort for sale, having determined that its
ownership is inconsistent with the Company's future plans which are to focus on
gaming facilities in areas of higher population density and at locations which
permit higher stakes and more types of gambling than are allowed in Deadwood,
South Dakota. On April 9, 1996, the Company signed a non-binding letter of
intent for the purchase of the Resort by RGB Deadwood Gulch LLC. Negotiations
under that letter of intent terminated unsuccessfully on May 15, 1996. From the
time of its acquisition through the end of 1996, the Resort had a cumulative
operating deficit of approximately $3.91 million and the Company has recognized
an impairment loss of $4.15 million through such date, including $1,051,070 in
1996. Any sale will be subject to a suitability finding by the South Dakota
Commission on Gaming, and there can be no assurance that a sale will ultimately
be consummated. Full House intends to continue to take steps to increase the
Resort's profitability while attempting to consummate a sale.

      DESCRIPTION OF RESORT. Deadwood is located in western South Dakota,
approximately 50 miles northwest of Rapid City and had a population of 1,800 in
1990. Deadwood originated in the 1870's with the discovery of gold nearby and
was the home of numerous gambling establishments, saloons and brothels, serving
the gold miners and prospectors. Statehood in 1889 brought constitutional
prohibitions against gambling. South Dakota amended its constitution to permit
limited gambling exclusively in Deadwood, commencing on November 1, 1989.

      Full House's management estimates that a large proportion of its customers
at Deadwood Gulch Resort are derived from the tourists, primarily families, who
visit Deadwood, South Dakota. Many of these tourists are attracted to the Black
Hills area of South Dakota and the Mount Rushmore National Memorial. Since the
Deadwood Gulch Resort significantly relies on the tourist trade, business at
Deadwood Gulch Resort has tended to be seasonal. Approximately 56% of the
operating revenues (net of promotional allowances) for the year ended December
31, 1996 were received in the four-month period from June through September.
While business probably will remain somewhat seasonal, Deadwood Gulch Resort has
attempted to market itself as a year-round destination resort by attracting
tourists who use the Black Hills for winter recreation such as skiing and
snowmobiling. Deadwood Gulch Resort is principally marketed through printed
brochures and advertising, billboards, radio, television and direct mail
promotions within a 600 mile market radius of Deadwood, South Dakota, including
the States of South Dakota, North Dakota, Wyoming, Colorado, and Iowa, and the
Province of Saskatchewan, Canada. In addition, Deadwood Gulch Resort promotes
group travel, including charter bus tours and gaming junkets, utilizing
independent travel agents, and trade and travel advertising. Deadwood Gulch
Resort also promotes periodic gaming tournaments and features entertainment
during selected periods.

                                      -7-

<PAGE>


      The following table sets forth the percent of total operating revenues
(net of promotional allowances) generated by the Deadwood Gulch Resort Casino,
Hotel/RV, Retail, Food and Beverage and Gulches of Fun operations for the
indicated periods.


                                     PERCENT OF TOTAL OPERATING
                                              REVENUES
                                       YEAR ENDED DECEMBER 31,
                                     --------------------------
         REVENUE SOURCE                 1995             1996
         --------------              ---------        ---------

         Casino                          27%               26%
         Hotel/RV                        26                27
         Retail                          22                23
         Food and beverage               10                11
         Gulches of Fun                  15                13
                                       ----              ----
                                        100%              100%

      Since the commencement of the Resort's gaming operations, most of its
gaming revenues have been derived from its operation of slot machines. For the
years ended December 31, 1995 and 1996, 95% and 94%, respectively, of the
Resort's gaming revenue was from slot machines. The remainder was from
blackjack.

      The average hotel occupancy rate for the years ended December 31, 1995 and
1996 were 63% and 72%, respectively, and the average daily hotel room rates for
such periods were $56.85 and $51.44, respectively.

      COMPETITION. Gaming operations at the Deadwood Gulch Resort are in
competition with a significant number of existing and proposed gaming operations
in South Dakota and Colorado, many of which are, or will be, owned or operated
by organizations which are significantly better capitalized than Full House,
which have or may have significantly larger facilities, and which may employ
personnel who have more experience in the gaming industry than those currently
employed, or proposed to be employed, by Full House. In addition, the Resort is
in competition with other businesses which provide opportunities for gambling,
such as racetracks and lotteries, or which provide entertainment which may
divert the spending of discretionary income from gaming activities. Furthermore,
the gaming industry is expanding rapidly, with more establishments competing for
a customer base which may not be expanding as rapidly, if at all.

      Gaming may be legally conducted in accordance with the South Dakota Gaming
Act by licensed operators in the City of Deadwood, South Dakota, and may also be
conducted by American Indian Tribes located in South Dakota under the Federal
Indian Gaming Regulatory Act of 1988. As of December 31, 1996 there were 97
licensed gaming establishments in Deadwood which operated approximately 2,367
slot machines and 61 table games, including poker and blackjack. The revenues
derived from the Resort's gaming operations accounted for approximately 3.1% and
3.3% of all gaming revenues in Deadwood, South Dakota for 1995 and 1996,
respectively. Factors which affect gaming competition in Deadwood are location
in relation to Deadwood's historic main street, proximity to motel rooms and
parking, and the ability to serve alcoholic beverages. Six gaming locations in
Deadwood offer a full range of alcoholic beverages, including Deadwood Gulch
Resort. Gaming in Deadwood is conducted primarily in establishments along a four
block long area on historic Main Street. Deadwood Gulch Resort is approximately
one mile south of this highly concentrated area, which may limit the pedestrian
traffic which passes Deadwood Gulch Resort. Full House's principal competitors
in Deadwood are the Mineral Palace, First Gold Hotel, the Franklin Hotel, the
Bullock Hotel, the Gold Dust Casino, the Silverado Casino and the Four Aces
Casino. In addition, a well known actor and others have commenced construction
of a large, upscale resort near the north entrance to Deadwood. Additional
groups of investors have also proposed other resorts for the north entrance to
Deadwood. No construction has commenced on these projects. Such resorts, if
completed, may have significantly larger facilities, including hotel and meeting
rooms, entertainment facilities, and more gaming devices than Deadwood Gulch
Resort and would likely offer significant direct competition for Deadwood Gulch
Resort.

                                      -8-

<PAGE>

      While Deadwood Gulch Resort may also be in competition with gaming
operations conducted by American Indian Tribes at or near Watertown, Flandreau,
Fort Randall, Pine Ridge and Lower Brule, South Dakota, all of these locations
are 250 miles or more from Deadwood, except for Pine Ridge, which is
approximately 100 miles from Deadwood. Although all operations in Deadwood, and
three of the four American Indian operations currently are subject to $5.00 bet
limits by law, the Sisseton Wahpeton Sioux Tribe at Watertown, South Dakota, 400
miles from Deadwood, is permitted to have up to $100 bet limits. In addition,
there are three other Indian tribes with reservations located within 100, 150
and 200 miles, respectively, from Deadwood, that could establish gaming
operations in the future.

      Deadwood Gulch Resort is also in competition with establishments
throughout the State of South Dakota holding beer and wine licenses or liquor
licenses, which may operate up to 10 "video lottery" gaming devices per
establishment. The video lottery devices allow customers to play electronic
versions of blackjack, poker, keno and bingo. Full House believes that there are
approximately 1,445 establishments with over 8,000 such video lottery devices
installed in the State of South Dakota. Full House currently operates three
video lottery devices.

      ROUTE OPERATION AGREEMENT. On July 1, 1995 the Company entered into a
route operation agreement with a new operator to place eight of the Company's
gaming devices in its convenience store/gas mart and pay him 5% of the net
profit from the machines. In February 1997, 13 gaming devices were added to the
existing agreement.

      Full House intends to seek additional such route operation agreements in
the future. However, there can be no assurance that Full House will be
successful in obtaining any such additional route operation agreements on terms
acceptable to Full House.

      FUEL SUPPLY AGREEMENT. DGR purchases its requirements of various fuels for
use and sale at its gas mart. The current term of the agreement is through June,
1997, and is renewable thereafter from year to year, provided that DGR may
cancel the agreement at the end of any such year by giving at least 30 days
prior written notice. In addition, the supplier may cancel the agreement at any
time on 10 days prior written notice. DGR pays $.01 per gallon above the
supplier's Rapid City, South Dakota posted Conoco prices, plus the then current
published freight charges from Rapid City to Deadwood. DGR has agreed to comply
with the brand and image/signage standards established for Conoco-branded retail
outlets.

      GOVERNMENT REGULATION.

      The ownership and operation of a gaming business by Full House, wherever
conducted in the United States, will be subject to extensive and complex
governmental regulation and control under federal, state and/or local laws and
regulations.

      INDIAN GAMING. Gaming on Indian Lands (lands over which Indian tribes
exercise jurisdiction and which meet the definition of Indian Lands under the
Indian Gaming Regulatory Act of 1988 ("IGRA")) is extensively regulated by
federal, state and tribal governments. The current regulatory environment
regarding Indian gaming is evolving rapidly. Changes in federal, state or tribal
law or regulations may limit or otherwise affect Indian gaming or may be applied
retroactively and could therefore have a material, adverse effect on the Company
or its operations.

      The terms and conditions of management contracts and collateral
agreements, and the operation of casinos on Indian Land, are subject to IGRA,
which is implemented by the National Indian Gaming Commission (the "Gaming
Commission"), and also are subject to the provisions of statutes relating to
contracts with Indian tribes, which are overseen by the Secretary of the U.S.
Department of the Interior (the "Secretary"). IGRA is subject to interpretation
by the Secretary and the Gaming Commission and may be subject to judicial and
legislative clarification or amendment. Under IGRA, the Gaming Commission has
the power to inspect and examine certain Indian gaming facilities, to conduct
background checks on persons associated with Indian gaming, to inspect, copy and
audit all records of Indian gaming facilities, and to hold hearings, issue
subpoenas, take 

                                      -9-
<PAGE>

depositions, and adopt regulations in furtherance of its responsibilities. IGRA
authorizes the Gaming Commission to impose civil penalties for violations of the
IGRA or the regulations promulgated thereunder (the "Regulations"), including
fines, and to temporarily or permanently close gaming facilities for violations
of the law or the Regulations. The Department of Justice may also impose federal
criminal sanctions for illegal gaming on Indian Lands and for theft from Indian
gaming facilities.

      IGRA also requires that the Gaming Commission review tribal gaming
ordinances and approve such ordinances only if they meet certain requirements
relating to the ownership, security, personnel background, recordkeeping, and
auditing of the tribe's gaming enterprises; the use of the revenues from such
gaming; and the protection of the environment and the public health and safety.

      IGRA also regulates Indian gaming management contracts, requiring the
Gaming Commission to approve management contracts and collateral agreements,
which include agreements such as promissory notes, loan agreements and security
agreements. A management contract can be approved only after determination that
the contract provides for: (i) adequate accounting procedures and verifiable
financial reports, which must be furnished to the tribe; (ii) tribal access to
the daily operations of the gaming enterprise, including the right to verify
daily gross revenues and income; (iii) minimum guaranteed payments to the tribe,
which must have priority over the retirement of development and constructions
costs; (iv) a ceiling on the repayment of such development and constructions
costs; and (v) a contract term not exceeding five years and a management fee not
exceeding 30% of profits if the Chairman of the Gaming Commission determines
that the fee is reasonable considering the circumstances; provided that the
Gaming Commission may approve up to a seven year term and a management fee not
to exceed 40% of net revenues if the Gaming Commission is satisfied that the
capital investment required or the income projections for the particular gaming
activity justify the larger profit allocation and longer term.

      Under IGRA, the Company must provide the Gaming Commission with background
information on each person with management responsibility for a management
contract, each director of the Company and the ten persons who have the greatest
direct or indirect financial interest in a management contract to which the
Company is a party (an "Interested Party"), including a complete financial
statement and a description of such person's gaming experience. Such a person
must also agree to respond to questions from the Gaming Commission.

      The Gaming Commission will not approve a management company and may void
an existing management contract if a director, key employee or an Interested
Party of the management company is (i) an elected member of the Indian tribal
government that owns the facility being managed; (ii) has been or is convicted
of a felony or misdemeanor gaming offense; (iii) has knowingly and willfully
provided materially false information to the Gaming Commission or a tribe; (iv)
has refused to respond to questions from the Gaming Commission; or (v) is a
person whose prior history, reputation and associations pose a threat to the
public interest or to effective gaming regulation and control, or create or
enhance the chance of unsuitable, unfair or illegal activities in gaming or the
business and financial arrangements incidental thereto. In addition, the Gaming
Commission will not approve a management contract if the management company or
any of its agents has attempted to unduly influence any decision or process of
tribal government relating to gaming, or if the management company has
materially breached the terms of the management contract, or the tribe's gaming
ordinance, or, if a trustee, exercising the skill and diligence to which a
trustee is commonly held, would not approve such management contract.

      IGRA divides games that may be played on Indian Land into three
categories. Class I Gaming includes traditional Indian games and private social
games and is not regulated under IGRA. Class II Gaming includes bingo, pull
tabs, lotto, punch boards, tip jars, instant bingo, and other games similar to
bingo, if those games are played at a location where bingo is played. Class III
Gaming includes all other commercial forms of gaming, such as video casino games
(e.g., video slots, video blackjack); so-called "table games" (e.g., blackjack,
craps, roulette); and other commercial gaming (e.g., sports betting and
pari-mutuel wagering).

      Class II Gaming is permitted on Indian Land if conducted in accordance
with a tribal ordinance which has been approved by the Gaming Commission and the
state in which the Indian Land is located permits such gaming for any purpose.
Class II Gaming also must comply with several other requirements, including a
requirement that key management officials and employees be licensed by the
tribe.

                                      -10-

<PAGE>

      Class III Gaming is permitted on Indian Land if the conditions applicable
to Class II Gaming are met and, in addition, if the gaming is conducted in
compliance with the terms of a written agreement between the tribe and the host
state. IGRA requires states to negotiate in good faith with Indian tribes that
seek to enter into tribal-state compacts, and grants Indian tribes the right to
seek a federal court order to compel such negotiations. The negotiation and
adoption of tribal-state compacts is susceptible to daily legal and political
developments that may impact the Company's future revenues and securities
prices. The Company cannot predict which additional states, if any, will approve
casino gaming on Indian Land, the timing of any such approval, the types of
gaming permitted by each tribal-state compact, any limits on the number of
gaming machines allowed per facility or whether states will attempt to
renegotiate or take other steps that may affect existing compacts.

      Under IGRA, Indian tribal governments have primary regulatory authority
over gaming on Indian Land within the tribe's jurisdiction unless a tribal-state
compact has delegated this authority. Therefore, persons engaged in gaming
activities, including the Company, are subject to the provisions of tribal
ordinances and regulations on gaming.

      The Gaming Commission has determined that provisions of IGRA relating to
management agreements do not govern the current operations of Full House in
North Bend, Oregon.

      Tribal-State Compacts have been the subject of litigation in several
states, including California. Among the issues being litigated is the
constitutionality of the provision of IGRA that entitles tribes to sue in
federal court to force states to negotiate Tribal-State Compacts. On March 27,
1996, the United States Supreme Court ruled that the portion of IGRA permitting
tribes to sue states for failing to negotiate in good faith over compacts was
unconstitutional. In addition, several bills have been introduced in Congress
which would amend IGRA. If IGRA were amended, the amendment could change the
governmental structure and requirements within which Indian tribes may conduct
gaming.

      SOUTH DAKOTA. The ownership and operation of a gaming business in South
Dakota is subject to gaming laws established by the State of South Dakota (the
"South Dakota Laws"), and regulations (the "South Dakota Regulations")
promulgated by the South Dakota Commission on Gaming (the "South Dakota
Commission") established by the South Dakota Laws. Except for gaming which may
be conducted on American Indian Lands, and except for any establishment holding
a beer and wine license or liquor license in South Dakota which may operate up
to 10 video lottery machines, gaming in South Dakota can be legally conducted
only in the City of Deadwood.

      The South Dakota Laws require that each retailer who maintains gaming at
his place of business, each operator of gaming devices, and each route operator
(including any corporation or other entity) must have a gaming license in order
to conduct gaming operations in Deadwood. The South Dakota Laws also require
that key employees of the licensee, and support persons who are directly engaged
in the gaming operation, such as dealers, be licensed through the South Dakota
Commission. A license will be approved only if the applicant and the location
where gaming is to be conducted, after an in-depth investigation, are found
suitable by the South Dakota Commission. Under the South Dakota Laws, each
licensee, and any officer, director or shareholder owning in excess of 5% of any
corporation (or others which the Commission, in the exercise of its discretion,
elects to review) engaged in the retail operation of the gaming establishment
(i) is required to be of good character, honesty and integrity, (ii) shall not
have been convicted of a felony or found to have violated the South Dakota Laws
and Regulations, and (iii) may not be viewed as posing a threat to public
interest or the conduct of gaming by reason of any prior activities, criminal
record, reputation, habits or associations. All such licenses must be renewed
annually.

      The South Dakota Laws specify that no one person may hold a financial
interest in more than three retail licenses. However, one person may operate
under an unlimited number of additional gaming licenses pursuant to Route
Operation Agreements, if approved by the South Dakota Commission. Each retail
licensee is limited to 30 gaming devices (for example, 25 slot machines, three
blackjack and two poker tables). Full House has three retail licenses covering 
its operations in the two hotel casinos and in the Gulches of Fun family center.
Full House has 

                                      -11-

<PAGE>

leased the Casino space in the convenience store to Richard Cleveland, who has
obtained a retail license in his name which permits him to conduct gaming on
these premises. Full House has entered into a Route Operation Agreement with Mr.
Cleveland whereby Full House furnishes the gaming equipment and employees and
conducts the gaming operations. See "-- Route Operation Agreement."

      Gaming in Deadwood is limited under the South Dakota Regulations to slot
machines, and with respect to card games, to blackjack and poker. Currently,
each wager on any game is limited (in the case of poker per betting round) to
$5.00. The $5.00 limit will stay in effect until at least December, 1997. The
South Dakota Laws prohibit the extension of credit to another person for
participation in gaming.

      The South Dakota Commission is vested with broad enforcement powers, and
upon an opportunity for hearing, may suspend or revoke any gaming license for
cause, including a violation of the South Dakota Laws or South Dakota
Regulations, or conviction of a crime of moral turpitude or a felony. In
addition, the South Dakota Commission can fine any licensee who operates a
retail gaming establishment up to $12,500, any key employee licensee up to
$5,000, and any support licensee up to $2,500, for violations. The South Dakota
Commission may inspect all premises where gaming is conducted or gaming
equipment is located, without notice to the interested parties. The South Dakota
Commission may also seize and remove gaming equipment or supplies without notice
for purposes of inspection, as well as inspect or remove papers, books or
records at any time. A suspension of all gaming activities is within the
discretion of the South Dakota Commission after a disaster, such as a flood,
fire or earthquake, or in the event of war or national emergency. Moreover, a
retail operating licensee must report to the South Dakota Commission at least
quarterly the full name and address of every person who has a right to share in
the revenue of licensed games or to whom any interest or share in the profits of
a licensed game has been pledged or deposited as security.

      Each retail gaming licensee who operates a gaming establishment must pay
an annual license fee of $100 and an annual license stamp fee of $2,000 upon
each slot machine or card game located on a licensed premise. In addition, each
operator who places slot machines upon his own business premises or engages in
the business of placing and operating slot machines or gaming within Deadwood
must pay an annual license fee of $200. South Dakota also imposes an 8% gaming
tax on adjusted gross gaming receipts (gross receipts less payouts to customers
as winnings) subject to change by the South Dakota Commission. However, if the
South Dakota Commission proposes to change the tax, the rate may not be
decreased to less than 5% or increased to more than 15%. The gaming taxes are in
lieu of any sales, use or amusement tax which might otherwise be imposed on
gaming activity.

      EMPLOYEES

      As of March 15, 1997, the Company and its subsidiaries had approximately
57 full-time employees, three of which are executive officers of the Company,
and 26 part-time employees. The Company's management believes that its
relationship with its employees is good. None of the Company's employees are
currently represented by a labor union, although such representation could occur
in the future.

2.    DESCRIPTION OF PROPERTY.

      A Full House-Dreamport joint venture company leases approximately 12.5
acres of Tribal Trust Lands from an entity owned by the Coquille Indian Tribe on
which the Mill is located. The joint venture company subleases the land on which
the casino is located back to the same entity. The master lease expires in 2019
and the sublease expires in 2002 with options to renew. Pursuant to a July 19,
1995 addendum, the joint venture company receives a percentage of "Gross Gaming
Revenues" (as defined) of the casino. Payments commenced August 19, 1995. See
"--Description of Business."

      A Full House-Dreamport joint venture company has a lease and leaseback
agreement with Harrington Raceway, Inc. The lease encumbers the land on which
the gaming facility is located. The lease is treated as a capital lease and
payments commenced on August 20, 1996. See "Description of Business."

                                      -12-

<PAGE>

      Full House currently owns approximately 56 acres of property and the
improvements thereon, consisting primarily of Deadwood Gulch Resort.

      Full House was made aware, in November 1993, of claimed easements over a
portion of its RV Resort and Campground property with respect to access to
property at higher elevations. Management is in the process of negotiating the
scope of the easement and does not believe that there will be any material
financial expense or other material adverse impact on Full House as a result of
these claims.

3.    LEGAL PROCEEDINGS.

      In October 1995, litigation was filed against Full House relating to
ownership and access pertaining to a portion (approximately 1,200 square feet)
of the Deadwood Gulch Resort hotel and parking lot property. That litigation has
been settled by the Resort's purchase of the disputed encroachment of the
parking lot onto neighboring property, and the acknowledgment of the unspecified
easement to properties behind the hotel, and payment of nominal attorney's fees.

      In October 1994, Full House filed an action for declaratory relief in
Mississippi, seeking a determination by the court that no relationship exists
between it and Lone Star Casino Corporation regarding the potential acquisition
of a riverboat casino on the Mississippi gulf coast (FULL HOUSE RESORTS, INC. V.
LONE STAR CASINO CORPORATION V. ALLEN E. PAULSON, Second Judicial District of
the Chancery Court of Harrison County, Mississippi). Lone Star filed a
counterclaim alleging breaches of fiduciary duty, breach of contract, conspiracy
to breach contract and to breach fiduciary duty and common law fraud. The trial
court granted summary judgment in favor of all defendants on that counterclaim,
and Lone Star's appeal of that judgment is currently pending in the Mississippi
appellate court. A decision is expected by the end of 1997. Management is unable
to determine the outcome of this litigation, but does not believe the outcome
will have a material adverse effect on Full House's financial condition.

      In late 1995, Branson Hills Associates, L.P. (the "Plaintiff") filed a
lawsuit in the Circuit Court of Taney County, Missouri, naming Lee Iacocca,
William P. McComas, Ron Richey, and the Company and certain of its subsidiaries
as defendants (collectively, the "Defendants"). The suit involves a claim that
Messrs. Iacocca and McComas failed to use their best efforts to find a developer
and financing for the Plaintiff in connection with the development of properties
owned by the Plaintiff. The Plaintiff seeks rescission of the contract granting
certain property rights to Iacocca and McComas in consideration of said best
efforts, and further seeks damages for fraud and breach of contract arising out
of Mr. McComas' loaning of funds to Plaintiff when alternative financing could
not be arranged. Mr. Richey and the Company are further named in a count of
conspiracy. A portion of the property rights involved in the lawsuit were
briefly held by the Company subsequent to the merger involving LAI as described
above, and have since been returned to Mr. Iacocca. The Company no longer holds
any interest in such property. See "Business - Background." All Defendants
vigorously dispute liability. The lawsuit is currently in the discovery phase,
and no trial date has been set. Management is unable to determine the outcome of
this litigation, but does not believe the outcome will have a material adverse
effect on Full House's financial condition or results of operations.

4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      None

                                      -13-

<PAGE>

                                     PART II


5.    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      (A)    MARKET INFORMATION.

      The Company's Common Stock is listed on the Nasdaq SmallCap Market under
the symbol FHRI. Set forth below are the high and low bid sales price of the
Company's Common Stock as reported on the Nasdaq SmallCap Market System for the
periods indicated.

                                               HIGH        LOW
                                               ----        ---

      YEAR ENDED DECEMBER 31, 1995
      ----------------------------

      First Quarter                           $6-1/8      $4-3/8
      Second Quarter                           7-7/8       5-1/8
      Third Quarter                            6-1/4       2-3/4
      Fourth Quarter                           4-7/8       2-1/2

      YEAR ENDED DECEMBER 31, 1996
      ----------------------------

      First Quarter                           $5-1/8      $2-5/8
      Second Quarter                           4-1/2       3
      Third Quarter                            5-1/16      2-11/16
      Fourth Quarter                           4-13/16     2-7/8


      The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions. On March 14,
1997, the last sale price of the Common Stock as reported by the Nasdaq SmallCap
Market was $3-15/16.

      (B)    HOLDERS.

      As of March 14, 1997 the Company had approximately 200 holders of record
of its Common Stock. The Company believes that there are over 2,000 beneficial
owners of its Common Stock.

      (C)    DIVIDENDS.

      The Company has paid no dividends on its Common Stock or Preferred Stock
since its inception. Holders of the Company's Common Stock are entitled to
receive such dividends as may be declared by the Board of Directors out of funds
legally available therefor.

      Holders of the Company's Series 1992-1 Preferred Stock (each share of
which is convertible at the option of the holder into one share of Common Stock)
are entitled to receive dividends, when, as and if declared by the Board of
Directors out of funds legally available therefor, in the annual amount of $.30
per share, payable in arrears semi-annually on the 15th day of December and
June, in each year. Dividends on the Series 1992-1 Preferred Stock commenced
accruing on July 1, 1992 and are cumulative. The Company did not declare or pay
the accrued dividends on its Preferred Stock which were payable on December 15,
1992, June 15 and December 15, 

                                      -14-

<PAGE>

1993, June 15 and December 15, 1994, June 15 and December 15, 1995, and June 15
and December 15, 1996, totaling $945,000 and, accordingly, is in default in
regard thereto.

      If the Company is in default in declaring, setting apart for payment or
paying dividends on the Preferred Stock, it is restricted from paying any
dividend or making any other distribution or redeeming any stock ranking junior
to the Preferred Stock.

      The Company intends to retain future earnings, if any, to provide funds
for the operation of its business, retirement of its debt and payment of
preferred stock dividends and, accordingly, does not anticipate paying any cash
dividends on its common stock in the reasonably foreseeable future.

      (D)   REGISTRATION RIGHTS

      The Company has granted certain demand and piggyback registration rights
with respect to 700,000 shares of its Common Stock which might be acquired upon
the conversion of the 700,000 outstanding shares of its Series 1992-1 Preferred
Stock.

      (E)   WARRANTS

      In August 1993, Full House issued an aggregate of 800,000 Warrants
comprising a portion of the Units sold in its initial public offering. Each
Warrant originally entitled the holder to purchase one share of Full House
Common Stock for $5.00. As a result of certain adjustments, the exercise price
of the Warrants was lowered to $4.20 and the payment of such amount entitled the
holder to purchase 1.1894 shares. The period during which Warrants could be
exercised, which originally expired on August 9, 1996, was extended until
February 10, 1997. The expiration date was not extended beyond February 10,
1997. A total of 22,166 Warrants to purchase 26,356 shares were exercised.

      The underwriters in the Company's initial public offering hold warrants to
purchase 22,500 Units which currently consist of three shares of Common Stock.
The exercise price is $13.17 per Unit and the warrants may be exercised through
August 9, 1998.

6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

      Revenues for the year ended December 31, 1996 increased $2,037,192 to
$7,670,338, as compared with revenues of $5,633,146 for the year ended December
31, 1995. The increase was due to additional revenues from joint ventures of
$1,948,809 and additional Resort revenues of $88,383. Earnings before interest,
taxes, depreciation and amortization (EBITDA) improved by $2,470,048 over 1995
to $1,363,181 after exclusion of the abandoned project cost (Detroit gaming
cost) and impairment of long-lived assets (sale of Deadwood Gulch Resort). This
was primarily due to the increase in joint venture revenues of $1,948,809, a
reduction of 16.6% in non-resort general and administrative costs of $301,633
and net improved operating results at Deadwood Gulch Resort as a whole of
$219,606.

      JOINT VENTURES. During 1995, four limited liability joint venture
companies were formed by Full House and GTECH to pursue gaming opportunities and
to which Full House transferred its present gaming ventures excluding the
Deadwood Gulch Resort. Full House and GTECH each have a 50% interest in each
limited liability company. Full House's share of the income generated by those
companies was $160,224 and $2,109,033 for the years ended December 31, 1995 and
1996, respectively. The increase in income in 1996 was due to the inclusion of
the fees from the Mill Casino for a full year, reimbursement of prior year's
expenses by Dreamport, Inc. (the 

                                      -15-

<PAGE>

other participant in the joint venture companies) and management fees received
by the joint venture company from the Delaware State Fair project which opened
in August 1996.

      CASINO OPERATIONS. Total Deadwood, South Dakota gaming revenues decreased
6.1% in 1996 as compared to 1995. In an effort to increase market share, Full
House incurred additional expenditures to attract tour bus business. As a result
of these factors, revenues from casino operations decreased $8,286 or 0.6% for
the year ended December 31, 1996 over the same period in 1995. Departmental
expenses increased $15,546 or 1.5% for the year ended December 31, 1996 from
1995. As a result of the decrease in revenues and the increase in expenses,
departmental profit decreased by $23,832 as compared to the same period in 1995.

      HOTEL/RV RESORT. Hotel occupancy increased 14.2% for the year ended
December 31, 1996, and the average daily rate decreased 9.5% to $51.44. As a
result, revenues for the year increased $39,983 or 3.0% for the Hotel.
Campground revenues increased $59,011 or 54.3% in 1996 over 1995. As a result,
Hotel/RV Resort departmental profit increased $134,126 or 17.0%. Management
attributes the improvements to an aggressive promotion of Tour Bus business and
a full operating season for the Campground in 1996 as compared to 1995 when a
flood impacted operations.

      RETAIL. Although revenues increased by $21,387 or 1.7% for the year ended
December 31, 1996 from 1995, expenses increased by $65,553 or 6%. As a result,
departmental profit decreased by $44,166 for the year ended December 31, 1996
from 1995. This decline in profits was due to increased competition and the
Company's attempt to maintain its market share.

      FOOD AND BEVERAGE. Revenues for 1996 were $766,442 (which includes
$132,292 of promotional allowances), an increase of $38,577 or 5.3% from 1995
revenues of $727,865 (which included $176,742 of promotional allowances). The
departmental profit after subtracting promotional allowances increased $49,726
from a loss in 1995. Management attributes the improvement to better cost of
sales management.

      GULCHES OF FUN FAMILY CENTER. Although revenues for the year ended
December 31, 1996 decreased $118,685 or 14.4% from 1995 due principally to
closure of the Center during the winter season of 1996, a 5% decrease in area
visitation and poor weather during major holidays. Departmental expenses
decreased $127,903 or 20.2% from 1995 and, as a result, departmental profit
increased $9,218 over the previous year.

      SALES AND MARKETING EXPENSES. Sales and Marketing expenses increased
$35,465 or 15.8% due to an aggressive tour bus program for the year ended
December 31, 1996 from 1995.

      GENERAL AND ADMINISTRATIVE EXPENSES - RESORT. Expenses decreased $46,761
or 7.4% for the year ended December 31, 1996 from 1995.

      NON-RESORT GENERAL AND ADMINISTRATION EXPENSES. Non-Resort expenses for
the year ended December 31, 1996 totaled $1,519,100, a decrease of $301,633 or
16.6% over the prior year. This decline is due to centralization of the
Company's administrative offices, partially offset by increases in
administrative staff. In 1996, the Company continued to incur costs related to
the investigation, due diligence and pre-development of various ongoing
opportunities for expansion of its business and the increase in the Company's
corporate structure necessary to administer the Company's expansion.

      DEPRECIATION.  Depreciation and amortization decreased $728,862 or
58.8% for the year ended December 31, 1996 over 1995.  This decrease was due
to suspension of depreciation of the Resort offset by the amortization of
goodwill.

      IMPAIRMENT OF LONG LIVED ASSETS. In January, 1996, the Company announced
its intent to dispose of the Deadwood Gulch Resort. The Company adopted the
provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, during the fourth quarter of the
year ended December 31, 1995. Under SFAS No. 121, the Company reviews the
carrying values of its long-lived 

                                      -16-

<PAGE>

and identifiable intangible assets for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of assets may not be
recoverable. Based upon available information which indicates that an additional
loss may be incurred upon disposition, the Company further reduced the carrying
value of the Deadwood Gulch Resort in 1996 by $1,051,070.

      INTEREST EXPENSE AND DEBT ISSUE COSTS.  Interest expense and debt issue
costs decreased by $189,992 primarily due to reduced borrowings which was offset
by debt discount.

      INTEREST AND OTHER INCOME. Interest and other income decreased by $570,564
or 68.9% in 1996 as compared to 1995, as a result of the joint venture company
reimbursing Full House for its interest-bearing advances to the owner of The
Mill Casino in North Bend, Oregon.

      INCOME TAX BENEFIT. The income tax benefit decreased to -0- in 1996 from
$1,944,710 in 1995. At December 31, 1996, the Company had net operating loss
carryforwards for income tax purposes of approximately $3,166,000, which may be
carried forward to offset future taxable income. The loss carryforwards expire
in 2007 through 2010. The availability of the loss carryforwards may be limited
in the event of a significant change in ownership of the Company or its
subsidiaries.


YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

      Revenues for the year ended December 31, 1995 decreased $59,374 to
$5,633,146, as compared with revenues of $5,692,520 for the year ended December
31, 1994. The decrease was offset by income from joint venture companies of
$160,224.

      JOINT VENTURES. During 1995, four limited liability joint venture
companies were formed by Full House and GTECH to pursue gaming opportunities and
to which Full House transferred its present gaming ventures excluding the
Deadwood Gulch Resort. Full House and GTECH each have a 50% interest in each
limited liability company. Full House's share of the income generated by those
companies was $160,224.

      CASINO OPERATIONS. Revenues decreased $218,951 or 13.1% for the ended
December 31, 1995 over the same period in 1994. Departmental expenses decreased
$3,292 or .3% for the year ended December 31, 1995 from 1994. As a result of the
decrease in revenues, departmental profit decreased by $215,659 or 34.8% as
compared to the same period in 1994. Management attributes the decrease in
revenues to the decline in gaming activity in the entire Deadwood market as
reported by the South Dakota Commission on Gaming.

      HOTEL/RV RESORT. Although hotel occupancy declined 10.7% for the year
ended December 31, 1995, the average daily rate increased 8.6% to $56.85. As a
result, revenues for the period decreased $57,891 or 4.2% for the hotel.
Revenues at the RV Resort increased $18,211 for the year ended December 31, 1995
from $90,553 for the same period in 1994. The combination of these factors
resulted in an increase in Hotel/RV Resort departmental profit of $25,305 or
3.0%. Management attributes the decline in revenues of the Hotel to a decline in
tourism due to snowfall levels of approximately 60% of normal in the Black Hills
during the first and second quarters of 1995, compared to snowfall of 175% of
normal in 1994.

      RETAIL. Revenues declined by $7,697 or .6% for the year ended December 31,
1995 from 1994 due to the poor 1995 winter skiing and snowmobiling conditions.
Departmental profit increased $22,543 for the year ended December 31, 1995 from
1994. Management attributes the increase in departmental profit to more
aggressive pricing, as well as increased productivity.

      FOOD AND BEVERAGE. Revenues for 1995 were $727,865 (which includes
$176,742 of promotional allowances), an decrease of $16,844 or 2.3% from 1994
revenues of $744,709 (which included $166,632 of promotional allowances). The
departmental loss after subtracting promotional allowances decreased $21,128
over 

                                      -17-

<PAGE>

1994. Management attributes the improvement to better cost of sales management
and the development of a new menu, repositioning the restaurant in the market.

      GULCHES OF FUN FAMILY CENTER. Although revenues for the year ended
December 31, 1995 increased $65,983 from 1994, departmental profit decreased
$90,581 from 1994. The summer season of 1995 was one of the three wettest in the
recent history of the Black Hills and management attributes the decrease in
departmental profit to adverse weather conditions during peak operating times
for the outdoor activities.

      GENERAL AND ADMINISTRATIVE EXPENSES - RESORT. Expenses increased $33,833
for the year ended December 31, 1995 from 1994. Resort general and
administrative expenses reflect increased property taxes and insurance as a
result of the completion of the Gulches of Fun Family center and the RV Resort.
All other Resort specific general and administrative expenses declined as
compared to the prior periods.

      NON-RESORT GENERAL AND ADMINISTRATION EXPENSES. Non-Resort expenses for
the year ended December 31, 1995 totaled $1,820,733, an increase of $756,011
over the prior year. In 1995, the Company continued to incur costs related to
the investigation, due diligence and pre-development of various ongoing
opportunities for expansion of its business and the increase in the Company's
corporate structure necessary to administer the Company's expansion.

      DEPRECIATION.  Depreciation and amortization increased $735,235 for the
year ended December 31, 1995 over 1994.  This increase is primarily due to
the amortization of goodwill in 1995 which totaled $615,307.

      ABANDONED PROJECT COST. On June 28, 1995, the Governor of the State of
Michigan determined to prohibit off-reservation gaming in the State of Michigan.
As a result, the Company recognized a loss of $1,867.730 relating to costs
associated with its proposed gaming project in Detroit, Michigan.

      IMPAIRMENT OF LONG LIVED ASSETS. In January, 1996, the Company announced
its intent to dispose of the Deadwood Gulch Resort. The Company adopted the
provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, DURING THE FOURTH QUARTER OF THE
YEAR ENDED DECEMBER 31, 1995. Under SFAS No. 121, the Company reviews the
carrying values of its long-lived and identifiable intangible assets for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets may not be recoverable. Based upon available
information which indicates a loss may be incurred upon disposition, the Company
reduced the carrying value of the Deadwood Gulch Resort in 1995 and recognized
an impairment loss of $3,100,000.

      INTEREST EXPENSE AND DEBT ISSUE COSTS. Interest expense and debt issue
costs increased by $187,061 due to refinancing the first mortgage on the
Deadwood Gulch Resort, use of the Company's line of credit and the $4,000,000
loan from GTECH (which was repaid in 1996). This increase was offset by reduced
levels of debt issue costs in 1995 versus 1994.

      INTEREST AND OTHER INCOME. Interest and other income increased to $828,302
in 1995 as compared to $57,645 in 1994, principally as a result of $804,390 of
interest income relating to Full House's advances in connection with certain
gaming agreements.

      INCOME TAX BENEFIT.  The income tax benefit increased to $1,944,710 in
1995 from $2,000 in 1994.  This tax benefit is a result of the Company's 1995
net loss of $5,550,888.

LIQUIDITY AND CAPITAL RESOURCES

      For the year ended December 31, 1996, cash flow from operating activities
was negative in the amount of $496,352. Included was the net loss of $760,600,
more fully explained above, reduced by depreciation and amortization of $511,584
and recognition of impairment in long-lived assets of $1,051,070 but increased
by the equity earnings of joint ventures of $1,274,663 and other net changes of
$23,743. Cash flow from investing activities was positive in the

                                      -18-

<PAGE>

amount of $9,580,137 as a result of payments from the joint venture companies.
Cash flows used by financing activities were the result of borrowings of $3
million from GTECH Corporation, reduced by repayment of debt totaling
$11,391,356. As a result of the above factors, there was a net increase in cash
and cash equivalents of $692,429.

      On March 24, 1994, Allen E. Paulson purchased 1,000,000 shares of Full
House's common stock for $800,000. Full House also issued 500,000 shares of its
Common Stock to Mr. Paulson in exchange for his agreement to individually
provide or to take such actions as were required for a financial institution to
provide a commercial line of credit to Full House in the minimum amount of $8
million. Full House valued the shares of stock at $.80 per share based upon the
size of the transaction, the fact that the shares were not registered and are
not subject to registration rights. In addition, a large block of shares was
repurchased by the Company from an unaffiliated then principal stockholder at a
price per share and time sequence reasonably close to the transaction with Mr.
Paulson. The 500,000 shares issued to Mr. Paulson as compensation for securing
the $8 million financing were charged as a period cost in Full House's results
of operation for 1994. On June 7, 1994, Bank of America, as a result of the
joint and several guarantees of the full amount of the loan by Mr. Paulson and
the other directors of Full House, provided Full House with a line of credit in
the amount of $8 million at the "reference rate" of Bank of America, N.A. All
amounts outstanding under this line were repaid in 1996 and the line was
cancelled. Full House believes that it would have been unable to obtain this
line of credit without the actions of Mr. Paulson, as its financial condition
would not have supported such an extension of credit.

      On November 20, 1995, Full House merged a wholly-owned subsidiary into
Omega Properties Inc. (30% owned by William P. McComas, a director/stockholder
of the Company). In exchange, the shareholders of Omega received an aggregate of
500,000 shares of Full House Common Stock and a promissory note of Full House in
the principal amount of $375,000. The principal amount of this promissory note
accrues interest, payable quarterly, at a rate equal to the "prime" rate and
such principal amount, together with all accrued interest, is due and payable in
full upon demand by the holder(s) of this note, but in no event before August
31, 1996. William P. McComas received the note and Mr. Fugazy, the other
stockholder of Omega, received the shares in exchange for their interests as
shareholders of Omega.

      Full House entered into a series of agreements with GTECH Corporation, a
leading supplier of computerized systems and services for government-authorized
lotteries, effective as of December 29, 1995 to jointly pursue certain gaming
opportunities. Pursuant to the agreements, joint venture companies equally owned
by GTECH and Full House have been formed. Full House has contributed its rights
to the North Bend, Oregon facility and the rights to develop the Torres
Martinez, Nottawaseppi Huron Band of Potawatomi and Delaware State Fair projects
to the joint venture companies. See "Business." GTECH has contributed cash and
other intangible assets and has agreed to loan the joint venture entities up to
$16.4 million to complete the North Bend, Oregon and Delaware facilities. Full
House has agreed to guarantee one-half of the obligations of the joint venture
companies to GTECH under these loans and at December 31, 1996 had guaranteed to
GTECH one-half of $10.4 million of such loans to the North Bend, Oregon joint
venture company. GTECH will also provide project management, technology and
other expertise to analyze and develop/manage the implementation of
opportunities developed by the joint venture entities. GTECH has also loaned
Full House $3 million, which loan is convertible, subject to regulatory approval
into 600,000 shares of Full House's Common Stock. In addition, Full House has
been reimbursed by one of the joint venture companies for certain advances and
expenditures made by Full House relating to the gaming development agreements.
As part of this transaction, Allen E. Paulson, William P. McComas and Lee
Iacocca have granted to GTECH an option to purchase their shares should they
propose to transfer the same. The agreement with GTECH was modified in February
1997 to provide that the parties would no longer be required to present gaming
opportunities to the other for joint development.

      The Company advanced funds to the Delaware joint venture company during
1996 and 1995 totaling $1,886,498. Such amount bears interest at prime plus 1%
(9.25% at December 31, 1996) and is payable from available operating cash flow
of the joint venture company. The note is secured by a similar receivable from
Midway Slots and Simulcast, a division of Harrington Raceway, Inc. to the
Delaware joint venture company with the same terms and interest rate. As the
note is payable to FHRI based upon available cash flows, the current portion as
of December 31, 1996 reflects payments made through March 1997.

                                      -19-

<PAGE>

      As part of its agreement with GTECH and in addition to the amounts
referred to above, Full House borrowed $4 million from GTECH and repaid the same
on January 29, 1996. Interest expense was $270,517.

      As a result of its agreements with GTECH, receipt by Full House of
revenues from the operations of projects (other than the Deadwood Gulch Resort)
is governed by the terms of the joint venture agreements applicable to such
projects. These contracts provide that net cash flow (after certain deductions)
is to be distributed monthly to Full House and GTECH. While Full House does not
believe that this arrangement will adversely impact its liquidity, no assurances
of the same can be given based upon the lack of operating experience with this
structure.

      Full House has determined that continued ownership of the Deadwood Gulch
Resort is not consistent with its future growth plans. It has therefore listed
the Resort for sale. No assurance can be given that a sale will ultimately be
consummated.

      On July 19, 1995, an addendum to the agreement with the Coquille Indian
Tribe was executed. Pending regulatory approval, the addendum will reduce the
obligation of the Full House-Dreamport joint venture company to provide
financing to $10.4 million, extend the date when repayments begin and modify the
method of computing participating rents (from net revenues to modified gross
revenues) and loan repayments. Lease and debt payments commenced on August 19,
1995, and September 19, 1995, respectively.

      Pursuant to a September 16, 1994 agreement with the Organized Tribes in
the State of Michigan, Full House obtained the rights to pursue off-reservation
gaming and related non-gaming activities. On June 28, 1995, the Governor of the
State of Michigan determined to prohibit off-reservation gaming in the State of
Michigan. As a result of this action and after reimbursement of certain costs
incurred by Full House from GTECH, Full House wrote off project costs of
$1,867,730 in 1995.

      On May 31, 1995, DGR borrowed $5 million, secured by its real property.
The proceeds from the loan were used to repay its obligation to H. Joe Frazier,
a stockholder and a then director of the Company, and to repay a portion of the
revolving note payable to Bank of America. The note bears interest at 10.25%
through May, 1996, and at prime plus 2-1/4% for the period June 1, 1996 through
May 1, 2002. Payments are due in monthly installments of principal and interest
based on a ten-year amortization with the remaining balance due on May 31, 2002.
A portion of the loan has been guaranteed by Messrs. Frazier, McComas and
Paulson. The agreements executed by DGR in connection with the note limit
payments by DGR to Full House. The agreements included financial covenants which
require maintenance of minimum tangible net worth and debt service coverage
ratios. The Company was not in compliance with these covenants at December 31,
1996. However, the lender has waived these defaults for the year ended December
31, 1996. The Company prepaid $751,827 of this indebtedness in March, 1996.

      As of December 31, 1996, Full House had cumulative undeclared and unpaid
dividends in the amount of $945,000 on the 700,000 outstanding shares of its
1992-1 Preferred Stock. Such dividends are cumulative whether or not declared,
and are currently in arrears.

      Full House had a working capital surplus of $966,250 as of December 31,
1996.

      Additional financing will be required for the Company to effect its
business strategy and no assurance can be given that such financing will be
available upon commercially reasonable terms.

7.    FINANCIAL STATEMENTS.

      The following financial statements are filed as part of this Report

      /bullet/ Independent Auditors' Report

                                      -20-

<PAGE>

      /bullet/ Consolidated Balance Sheet as of December 31, 1996

      /bullet/ Consolidated Statements of Operations for the years ended
               December 31, 1996 and 1995

      /bullet/ Consolidated Statements of Stockholders' Equity for the Years
               Ended December 31, 1996 and 1995

      /bullet/ Consolidated Statements of Cash Flows for the Years Ended
               December 31, 1996 and 1995

      /bullet/ Notes to Consolidated Financial Statements

8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE.

      None

                                      -21-

<PAGE>

                                    PART III

9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE 
      WITH SECTION 16(A) OF THE EXCHANGE ACT.

      (a)   DIRECTORS OF THE COMPANY

            The information required regarding the identification of the
Company's directors is incorporated by reference to the information in the Proxy
Statement for the 1997 Annual Meeting of Stockholders of the Company.

       (b)  EXECUTIVE OFFICERS OF THE COMPANY

            The executive officers of the Company and their ages as of March 21,
1997 are as follows:


               NAME           AGE                 POSITIONS
               ----           ---                 ---------

        Robert L. Kelley       64    President and Chief Operating
                                     Officer
        

        William R. Jackson     47    Executive Vice President-Corporate Finance
        

        Megan G. McIntosh      41    Secretary


      ROBERT L. KELLEY has been the President and Chief Operating Officer of the
Company since August 10, 1994. Mr. Kelley was the Executive Vice President in
charge of casino operations for Lone Star Casino Corporation from May, 1993
until beginning employment with Full House. Mr. Kelley was a partner in a
consulting partnership that evaluated hotel casinos from April, 1990 until May,
1991. Prior to that, Mr. Kelley had over 20 years experience as a senior
executive of Las Vegas hotel casinos including the Las Vegas Hilton, Flamingo
Hilton and Tropicana Hotel and Casino.

      WILLIAM R. JACKSON has been Executive Vice President--Corporate Finance
of Full House since June, 1994.  Mr. Jackson was the Chief Financial Officer
of Westinghouse Communities, Inc. for over 6 years.  Mr. Jackson received a
Bachelor of Business Administration Degree in Accounting from Stetson
University in Deland, Florida.  He is a member of the American Institute of
Certified Public Accountants and the Florida Institute of Certified Public
Accountants.

      MEGAN G. MCINTOSH has been employed by Full House since December 1, 1994
and has been the Secretary of Full House since November 20, 1995. From April
1991 until she joined Full House, Ms. McIntosh was an administrative assistant
for a civil engineering firm located in California. Prior to that time, Ms.
McIntosh was an administrative assistant for a real estate development firm
located in Southern California.

10.   EXECUTIVE COMPENSATION.

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Stockholders of the Company.

11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Stockholders of the Company.

                                      -22-

<PAGE>

12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The information required in response to this item is incorporated by
reference to the information contained in the Proxy Statement for the 1997
Annual Meeting of Stockholders of the Company.

13.   EXHIBITS AND REPORTS ON FORM 8-K.

      (A)   EXHIBITS.

                  2.1   Letter of Intent (Incorporated by reference to 
      Exhibit 2.1 to the Company's Amended Registration Statement on Form 10)

                  2.2   Stock Acquisition Agreement Among Full House Resorts,
      Inc., Deadwood Gulch Resort and Gaming Corp. and the Stockholders thereof,
      dated November 6, 1992 (Incorporated by reference to Exhibit 2.2 to the
      Company's Amended Registration Statement on Form 10)

                  2.3   Agreement Among Joint Venturers of Deadwood Hotel Joint
      Venture, dated June 30, 1992 (Incorporated by reference to Exhibit 2.3 to
      the Company's Amended Registration Statement on Form 10)

                  2.4   Agreement for Transfer of Property to Corporation 
      Pursuant to Section 351 of the Internal Revenue Code, dated June 30, 1992
      (Incorporated by reference to Exhibit 2.4 to the Company's Amended
      Registration Statement on Form 10 )

                  3.1   Certificate of Incorporation of Full House Resorts, Inc.
      (Incorporated by reference to Exhibit 3.1 to the Company's Amended
      Registration Statement on Form 10)

                  3.2   Bylaws of Full House Resorts, Inc. (Incorporated by
      reference to Exhibit 3.2 to the Company's Amended Registration
      Statement on Form 10)

                  4.1   Certificate of Designation of Series 1992-1 Preferred
      Stock of Full House Resorts, Inc., dated November 6, 1992 (Incorporated by
      reference to Exhibit 4.1 to the Company's Amended Registration Statement
      on Form 10)

                  4.2   Form of Underwriter's Warrant (incorporated by reference
      to Exhibit (4)(c) to the Registration Statement on Form S-18 (No.
      33-15292-NY) of Full House Resorts, Inc. (Incorporated by reference to
      Exhibit 4.2 to the Company's Amended Registration Statement on Form 10)

                  10.1  1992 Non-Employee Director Stock Plan of Full House
      Resorts, Inc. (Incorporated by reference to Exhibit 10.1 to the
      Company's Amended Registration Statement on Form 10)

                  10.2  1992 Incentive Plan of Full House Resorts, Inc.
      (Incorporated by reference to Exhibit 10.2 to the Company's Amended
      Registration Statement on Form 10)

                  10.3  Mortgage-180 Day Redemption, dated August 30, 1991,
      Between Deadwood Hotel Joint Venture and Eugene V. Gatti (Incorporated
      by reference to Exhibit 10.3 to the Company's Amended Registration
      Statement on Form 10)

                  10.4  Mortgage-180 Day Redemption, dated January 27, 1992,
      Among Deadwood Hotel Joint Venture, Eugene V. Gatti, William P.
      McComas, Hotel Properties, Inc. and Kober Corporation (Incorporated by
      reference to Exhibit 10.4 to the Company's Amended Registration
      Statement on Form 10)

                  10.5  Debt Reduction Agreement, dated July 27, 1991, among
      Westdak Limited Partnership, Gatti & McComas, Inc., Eugene V. Gatti,
      William P. McComas, James E. Hosch, William J. Durst, and James E.
      Hosch as Trustee of the Interest of William J. Durst in Westdak Limited
      Partnership (Incorporated by reference to Exhibit 10.5 to the Company's
      Amended Registration Statement on Form 10)

                                      -23-

<PAGE>

                  10.6  Deadwood Hotel Joint Venture Standard Route Operation
      Agreement, dated June 30, 1992, Between Deadwood Hotel Joint Venture and
      Lucky 8 Gaming Hall (Incorporated by reference to Exhibit 10.6 to the
      Company's Amended Registration Statement on Form 10)

                  10.7  Management and Operating Agreement between Trimark Hotel
      Corporation and Deadwood Hotel Joint Venture, dated February 23, 1990
      (Incorporated by reference to Exhibit 10.7 to the Company's Amended
      Registration Statement on Form 10)

                  10.8  Franchise Agreement Between Park Inns International,
      Inc. and Deadwood Hotel Joint Venture, dated February 28, 1990
      (Incorporated by reference to Exhibit 10.8 to the Company's Amended
      Registration Statement on Form 10)

                  10.9  Dealer Gasoline and Franchise Agreement, dated June
      8, 1992, between M.G. Oil Company and Deadwood Gulch Resort
      (Incorporated by reference to Exhibit 10.9 to the Company's Amended
      Registration Statement on Form 10)

                  10.10  Common Stock Purchase Warrant of Full House Resorts,
      Inc. issued to Generation Capital Associates, dated November 20, 1992
      (Incorporated by reference to Exhibit 10.10 to the Company's Amended
      Registration Statement on Form 10)

                  10.11  Promissory Note of Full House Resorts, Inc. in the
      amount of $90,000, dated November 10, 1992, payable to Bearer
      (Incorporated by reference to Exhibit 10.11 to the Company's Amended
      Registration Statement on Form 10)

                  10.12  Employment Agreement between Full House Resorts, Inc.
      and David K. Cantley, dated December 1, 1992 (Incorporated by reference
      to Exhibit 10.12 to the Company's Amended Registration Statement on
      Form 10)

                  10.13  Letter of Intent between Full House Resorts, Inc. and
      Stuart, Coleman & Co., Inc., dated February 23, 1993 (Incorporated by
      reference to Exhibit 10.13 to the Company's Amended Registration
      Statement on Form 10)

                  10.14  Agreement to Provide and Accept Commitment to
      Restructure First and Second Mortgage Loans Among Full House Resorts,
      Inc., Deadwood Gulch Resort and Gaming Corp., Eugene V. Gatti, William
      P. McComas, H. Joe Frazier and Rober Corporation, dated March 15, 1993
      (Incorporated by reference to Exhibit 10.14 to the Company's Amended
      Registration Statement on Form 10)

                  10.15  $1,000,000 Term Life Insurance Policy, dated March 19,
      1993, on the life of David K. Cantley, issued by Federal Kemper Life
      Assurance Company (Incorporated by reference to the Company's Annual
      Report on Form 10-KSB for the year ended December 31, 1992)

                  10.16  Agreement dated February 11, 1994 and Amendment to
      Agreement dated March 13, 1994 among the Company, H. Joe Frazier, William
      P. McComas and Allan Paulson (Incorporated by reference to the Company's
      Annual Report on Form 10-KSB for the year ended December 31, 1993)

                  10.17  Debt Reduction Agreement, dated April 16, 1993, among
      the Company, Deadwood Gulch Resort and Gaming Corp., Eugene V. Gatti,
      William P. McComas and H. Joe Frazier (Incorporated by reference to the
      Company's Registration Statement on Form SB-2, No. 33-61580 as filed
      with the Securities and Exchange Commission)

                  10.18  Letter Agreement, dated May 17, 1993, between the
      Company and H. Joe Frazier, extending mortgage commitment expiration date
      to July 7, 1993 (Incorporated by reference to the Company's Registration
      Statement on Form SB-2, No. 33-61580 as filed with the Securities and
      Exchange Commission)

                  10.19  Letter Agreement, dated May 17, 1993, between the
      Company and Eugene V. Gatti, extending mortgage commitment expiration date
      to July 7, 1993 (Incorporated by reference to the Company's Registration
      Statement on Form SB-2, No. 33-61580 as filed with the Securities and
      Exchange Commission)

                                      -24-

<PAGE>

                  10.20  General Release and Covenant Not to Sue, dated June 7,
      1993, among the Company, Deadwood Gulch Resort and Gaming Corp., Trimark
      Hotel Corporation and Park Inns International, Inc. (Incorporated by
      reference to the Company's Registration Statement on Form SB-2, No.
      33-61580 as filed with the Securities and Exchange Commission)

                  10.21  Letter Agreement, dated July 23, 1993, between the
      Company and H. Joe Frazier, extending mortgage commitment expiration date
      to August 7, 1993 (Incorporated by reference to the Company's Registration
      Statement on Form SB-2, No. 33-61580 as filed with the Securities and
      Exchange Commission)

                  10.22  Letter Agreement, dated July 2, 1993, between the
      Company and Eugene V. Gatti, extending mortgage commitment expiration date
      to August 7, 1993 (Incorporated by reference to the Company's Registration
      Statement on Form SB-2, No. 33-61580 as filed with the Securities and
      Exchange Commission)

                  10.23  Lock-Up Agreement, dated June 16, 1993, among the
      Company, David K. Cantley, Thomas M. Blair, James E. Hosch, H. Joe
      Frazier, Eugene V. Gatti, Kober Corporation, William P. McComas,
      Richard M. Gawlik, George M. Bashara and the Director of the South
      Dakota Division of Securities (Incorporated by reference to the
      Company's Registration Statement on Form SB-2, No. 33-61580 as filed
      with the Securities and Exchange Commission)

                  10.24  Stock Purchase Agreement, dated July 20, 1993, among
      Kober Corporation, H. Joe Frazier, William P. McComas, James E. Hosch
      and Peter N. Bowinski (Incorporated by reference to the Company's
      Registration Statement on Form SB-2, No. 33-61580 as filed with the
      Securities and Exchange Commission)

                  10.25  Master Lease between Coquille Economic Development
      Corporation ("CEDC") and the Company (Incorporated by reference to the
      Company's Post Effective Amendment No. 1 to Registration Statement on
      Form SB-2, No. 33-61580 as filed with the Securities and Exchange
      Commission on July 28, 1994)

                  10.26  Participating lease between CEDC and the Company
      (Incorporated by reference to the Company's Post Effective Amendment
      No. 1 to Registration Statement on Form SB-2, No. 33-61580 as filed
      with the Securities and Exchange Commission on July 28, 1994)

                  10.27  Loan Agreement between CEDC and the Company
      (Incorporated by reference to the Company's Post Effective Amendment
      No. 1 to Registration Statement on Form SB-2, No. 33-61580 as filed
      with the Securities and Exchange Commission on July 28, 1994)

                  10.28  Promissory Note from The Coquille Indian Tribe and
      CEDC to the Company.  (Incorporated by reference to the Company's Post
      Effective Amendment No. 1 to Registration Statement on Form SB-2, No.
      33-61580 as filed with the Securities and Exchange Commission on
      July 28, 1994)

                  10.29  Security Agreement between The Coquille Indian Tribe,
      CEDC and the Company (Incorporated by reference to the Company's Post
      Effective Amendment No. 1 to Registration Statement on Form SB-2, No.
      33-61580 as filed with the Securities and Exchange Commission on July 28,
      1994)

                  10.30  Absolute Assignment of Rents and Leases from The
      Coquille Indian Tribe to the Company (Incorporated by reference to the
      Company's Post Effective Amendment No. 1 to Registration Statement on
      Form SB-2, No. 33-61580 as filed with the Securities and Exchange
      Commission on July 28, 1994)

                  10.31  Escrow Agreement by and among the Company, CEDC, The
      Coquille Indian Tribe, Sun Plywood, Inc. and Ticor Title Insurance
      Company of California (Incorporated by reference to the Company's Post
      Effective Amendment No. 1. to Registration Statement on Form SB-2, No.
      33-61580 as filed with the Securities and Exchange Commission on
      July 28, 1994)

                                      -25-

<PAGE>

                  10.32  Purchase Agreement between the Company and William P.
      McComas dated August 18, 1994 (Incorporated by reference to the Company's
      Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994)

                  10.33  Agreement among the Company, Hannahville Indian
      Community, Lac Vieux Desert Band of Lake Superior Chippewa Indians, Grand
      Traverse Band of Ohawa and Chippewa Indians and Keween and Bay Indian
      Community dated September 10, 1994 (Incorporated by reference to the
      Company's Annual Report on Form 10-KSB for the fiscal year ended December
      31, 1994)

                  10.34  Agreement between Green Acres Casino Management
      Company, Inc. and the Company dated January 4, 1995 (Incorporated by
      reference to the Company's Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 1994)

                  10.35  Agreement for Commercial Development between the
      Nottawaseppi Huron Band of Potawatomi, Green Acres Casino Management
      Company, Inc. and the Company dated January 11, 1995 (Incorporated by
      reference to the Company's Annual Report on Form 10-KSB for the fiscal
      year ended December 31, 1994)

                  10.36  Addendum to Class II and III Management Agreements 
      among the Nottawaseppi Huron Band of Potawatomi, Green Acres Casino
      Management Company, Inc. and the Company dated January 12, 1995
      (Incorporated by reference to the Company's Annual Report on Form 10-KSB
      for the fiscal year ended December 31, 1994)

                  10.37  Gaming and Development Agreement between the Company 
      and the Torres Martinez Desert, Cahuilla, Indiana dated March 21, 1993
      (incorporated by reference to the Company's Quarterly Report on Form
      10-QSB for the quarter ended March 31, 1995)

                  10.38  Gaming Management Agreement between the Company and the
      Torres Martinez Desert, Cahuilla, Indiana dated April 23, 1993
      (incorporated by reference to the Company's Quarterly Report on Form
      10-QSB for the quarter ended March 31, 1995)

                  10.39  Agreement between the Company and GTECH Corporation
      dated May 20, 1995 (Incorporated by reference to the Company's Post
      Effective Amendment No. 2 to Registration Statement on Form SB-2, No.
      33-61580 as filed with the Securities and Exchange Commission on
      May 26, 1995)

                  10.40  Promissory Note dated November 20, 1995 in the original
      principal amount of $375,000 from the Company to William P. McComas
      (Incorporated by reference to the Company's Annual Report on Form 10-KSB
      for the fiscal year ended December 31, 1995)

                  10.41  Master Agreement dated as of December 29, 1995 by and
      between GTECH Corporation and the Company (Incorporated by reference to
      the Company's Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 1995)

                  10.42  Option Agreement dated as of December 29, 1995 by and
      among GTECH Corporation, the Company, Lee Iacocca, William P. McComas and
      Allen E. Paulson (Incorporated by reference to the Company's Annual Report
      on Form 10-KSB for the fiscal year ended December 31, 1995)

                  10.43  Convertible Note dated July 26, 1996 in the original
      principal amount of $3,000,000 payable by the Company to GTECH Corporation
      (Incorporated by reference to the Company's Annual Report on Form 10-KSB
      for the fiscal year ended December 31, 1995)

                  10.44  Guaranty Agreement dated as of December 29, 1995 from
      the Company to GTECH Corporation pursuant to which the Company guarantees
      50% of the obligations of Gaming Entertainment, L.L.C. to GTECH under a
      Promissory Note of even date therewith in the amount of $10,400,000
      (Incorporated by reference to the Company's Annual Report on Form 10-KSB
      for the fiscal year ended December 31, 1995)

                  10.45  Guaranty Agreement dated as of December 29, 1995 from
      the Company to GTECH Corporation pursuant to which the Company guarantees
      50% of the obligations of Gaming 

                                      -26-

<PAGE>



      Entertainment (Delaware), L.L.C. to GTECH in an amount not to exceed
      $6,000,000 (Incorporated by reference to the Company's Annual Report on
      Form 10-KSB for the fiscal year ended December 31, 1995)

                  10.46  Loan Agreement dated as of May 31, 1995 between 
      Deadwood Gulch Resort and Gaming Corp. and Miller & Schroeder Investment
      Corporation; Guaranty dated as of May 31, 1995 by Allen E. Paulson, H. Joe
      Frazier and William P. McComas; Subordination Agreement dated as of May
      31, 1995 among Miller & Schroeder Investment Corporation, Deadwood Gulch
      Resort and Gaming Corp. and the Corporation; Waiver of Breach of Covenants
      and Amendment Number 1 to Loan Agreement dated March 28, 1996; and
      Guaranty dated March 28, 1996 by the Company (Incorporated by reference to
      the Company's Annual Report on Form 10-KSB for the fiscal year ended
      December 31, 1995)

                  10.47  Subordination and Participation  Agreement dated as of
      October 8, 1996 between Gaming Entertainment L.L.C. and Miller & Schroeder
      Investments Corporation*

                  10.48  First Amended and Restated  Participating  Lease dated
      as of October 8, 1996 between Gaming Entertainment L.L.C. and Coquille
      Economic Development Corporation*

                  10.49  First Amended and Restated Master Lease dated as of
      October 8, 1996 between Gaming Entertainment L.L.C. and Coquille Economic 
      Development Corporation*

                  10.50  Agreement dated as of November 18, 1996 by and among
      Green Acres Casino Management Company, GTECH Corporation, Gaming
      Entertainment (Michigan) L.L.C. and the Company

                  10.51  Amended and Restated Class III Management Agreement
      dated November 18, 1996 between Nottawaseppi Huron Band of Potawatomi and
      Gaming Entertainment (Michigan) L.L.C.

                  21     List of Subsidiaries of Full House Resorts, Inc.*

                  23.1   Consent of Deloitte & Touche LLP, Certified Public
      Accountants*

                  27.1   Financial Data Schedule
--------------------
*   Filed herewith.


      (B)   REPORTS ON FORM 8-K.

      None.

                                      -27-

<PAGE>

                                   SIGNATURES


      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    FULL HOUSE RESORTS, INC.


                                        /s/ ROBERT L. KELLEY
Date:  March 28, 1997               By: -------------------------------
                                        Robert L. Kelley, President



      In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.


             NAME AND CAPACITY                                 DATE
             -----------------                                 ----

/s/ ALLEN E. PAULSON                                      March 28, 1997
--------------------------------------------
Allen E. Paulson, Chairman of the Board

/s/ WILLIAM P. MCCOMAS                                    March 28, 1997
--------------------------------------------
William P. McComas, Director

/s/ RONALD K. RICHEY                                      March 28, 1997
--------------------------------------------
Ronald K. Richey, Director

/s/ ROBERT L. KELLEY                                      March 28, 1997
-------------------------------------------
Robert L. Kelley, President and Chief
Operating Officer

/s/ WILLIAM R. JACKSON                                    March 28, 1997
------------------------------------------------
William R. Jackson, Executive 
Vice-President-Corporate Finance (Principal
Financial and Accounting Officer)

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
    of Full House Resorts, Inc.:

We have audited the accompanying consolidated balance sheet of Full House
Resorts, Inc. and Subsidiaries (the "Company") as of December 31, 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1996 and 1995. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Full House Resorts, Inc. and
Subsidiaries as of December 31, 1996, and the results of their operations and
their cash flows for the years ended December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Reno, Nevada
March 7, 1997

                                       F-1

<PAGE>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
-------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                         $ 1,049,183
  Note receivable - joint venture, current-portion                      626,042
  Restricted cash                                                       585,934
  Accounts receivable, net of allowance of $15,000                       20,489
  Inventories                                                            92,578
  Prepaid expenses                                                      317,724
                                                                    -----------
    Total current assets                                              2,691,950



ASSETS HELD FOR SALE - net                                            5,574,500

INVESTMENTS IN JOINT VENTURES                                         5,183,454

GOODWILL - net                                                        2,404,785

NOTE RECEIVABLE - JOINT VENTURE                                       1,260,456

OTHER ASSETS                                                             32,384
                                                                    -----------

TOTAL                                                               $17,147,529
                                                                    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                 $   667,258
  Accounts payable                                                      130,030
  Accrued expenses                                                      411,625
  Payable to joint ventures                                             516,787
                                                                    -----------
    Total current liabilities                                         1,725,700
                                                                    -----------

LONG-TERM DEBT, net of current portion                                6,290,655
                                                                    -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Cumulative, convertible preferred stock, par value
    $.0001, 5,000,000 shares authorized; 700,000 shares
    issued and outstanding; aggregate liquidation
    preference of $3,045,000                                                 70
  Common stock, par value $.0001, 25,000,000 shares
    authorized; 10,339,549 shares issued and outstanding                  1,034
  Additional paid in capital                                         16,853,042
  Accumulated deficit                                                (7,722,972)
                                                                    -----------
    Total stockholders' equity                                        9,131,174
                                                                    -----------

TOTAL                                                               $17,147,529
                                                                    ===========

See notes to consolidated financial statements.

                                      F-2

<PAGE>

<TABLE>
<CAPTION>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
--------------------------------------------------------------------------------

                                                           1996           1995
                                                       -----------    -----------
<S>                                                    <C>            <C>
OPERATING REVENUES:
  Casino                                               $ 1,445,322    $ 1,453,608
  Hotel/RV park                                          1,523,422      1,424,428
  Retail                                                 1,270,672      1,249,285
  Food and beverage                                        766,442        727,865
  Fun park                                                 704,208        822,893
  Joint ventures                                         2,109,033        160,224
                                                       -----------    -----------
                                                         7,819,099      5,838,303
  Less:  promotional allowances                           (148,761)      (205,157)
                                                       -----------    -----------
      Net operating revenues                             7,670,338      5,633,146
                                                       -----------    -----------

OPERATING COSTS AND EXPENSES:
  Casino                                                 1,064,909      1,049,363
  Hotel/ RV park                                           601,930        637,062
  Retail                                                 1,156,504      1,090,951
  Food and beverage                                        611,985        578,684
  Fun park                                                 504,991        632,894
  Sales and marketing                                      259,799        224,334
  General and administrative                             2,102,414      2,450,808
  Depreciation and amortization                            511,584      1,240,446
  Abandoned project cost                                      --        1,867,730
  Impairment of long-lived assets                        1,051,070      3,100,000
  Other                                                      4,625         75,917
                                                       -----------    -----------
           Total operating costs and expenses            7,869,811     12,948,189
                                                       -----------    -----------

LOSS FROM OPERATIONS                                      (199,473)    (7,315,043)

OTHER INCOME (EXPENSE):
  Interest expense and debt issue costs
    (including $34,872 and $81,015 to
    related parties)                                      (818,865)    (1,008,857)
  Interest and other income                                257,738        828,302
                                                       -----------    -----------

LOSS BEFORE INCOME TAXES                                  (760,600)    (7,495,598)

INCOME TAX BENEFIT                                            --        1,944,710
                                                       -----------    -----------

NET LOSS                                                  (760,600)    (5,550,888)

Less, undeclared dividends
   on cumulative preferred stock                          (210,000)      (210,000)
                                                       -----------    -----------

NET LOSS APPLICABLE TO
  COMMON SHARES                                        $  (970,600)   $(5,760,888)
                                                       ===========    ===========

LOSS PER COMMON SHARE                                  $     (0.09)   $     (0.59)
                                                       ===========    ===========

WEIGHTED AVERAGE NUMBER OF
    COMMON SHARES OUTSTANDING                           10,339,549      9,806,723
                                                       ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                      F-3

<PAGE>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
-------------------------------------------------------------------------------

                                                                                  ADDITIONAL
                                  PREFERRED STOCK           COMMON STOCK            PAID-IN        ACCUMULATED
                                  SHARES   AMOUNT        SHARES       AMOUNT        CAPITAL          DEFICIT           TOTAL
                                  -------  ------      ---------      ------      -----------      -----------      -----------
<S>                               <C>       <C>        <C>            <C>         <C>              <C>              <C>
BALANCE,
  JANUARY 1, 1995                 700,000   $  70      8,768,017      $  877      $ 9,780,402      $(1,411,484)     $ 8,369,865

Net loss                           --        --             --          --               --         (5,550,888)      (5,550,888)

Shares issued for acquisition
  of LAI Associates, Inc. 
  ("LAI")                          --        --        1,250,000         125        5,312,375             --          5,312,500

Return of shares issued for
  acquisition of LAI               --        --         (193,529)        (19)        (822,481)            --           (822,500)

Shares issued for acquisition
  of Omega Properties, Inc.        --        --          500,000          50        2,124,950             --          2,125,000

Exercise of warrants, net of
  $45,189 in registration
  costs                            --        --           15,061           1           18,069             --             18,070
                                  -----     -----     ----------      ------      -----------      -----------      -----------
BALANCE,
  DECEMBER 31, 1995               700,000      70     10,339,549       1,034       16,413,315       (6,962,372)       9,452,047

Issuance of convertible debt       --        --             --          --            439,727             --            439,727

Net loss                           --        --             --          --               --           (760,600)        (760,600)
                                  -----     -----     ----------      ------      -----------      -----------      -----------
BALANCE,
  DECEMBER 31, 1996               700,000   $  70     10,339,549      $1,034      $16,853,042      $(7,722,972)     $ 9,131,174
                                  =======   =====     ==========      ======      ===========      ===========      ===========
</TABLE>

See notes to consolidated financial statements.

                                  F-4

<PAGE>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
-------------------------------------------------------------------------------

                                                                      1996            1995
                                                                 ------------     ------------
<S>                                                              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                       $   (760,600)   $ (5,550,888)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization                                     511,584       1,240,446
    Debt issue costs and debt discount                                238,790          41,170
    Abandoned project costs                                              --         1,867,730
    Impairment of long-lived assets                                 1,051,070       3,100,000
    Loss on disposition of assets                                       4,625            --
    Equity in earnings of joint ventures                           (1,274,663)       (160,224)
    Changes in assets and liabilities:
      Increase in restricted cash                                    (361,159)       (224,775)
      (Increase) decrease in accounts receivable                        4,470        (207,505)
      Increase in inventories                                          (1,848)           (588)
      (Increase) decrease in prepaid expenses                          55,495        (177,380)
      Increase in other assets                                        (24,305)           --
      Increase in accounts payable
        and accrued expenses                                           60,189         582,933
      Decrease in deferred tax liability                                 --        (1,944,710)
                                                                 ------------    ------------
        Net cash used in operating activities                        (496,352)     (1,433,791)
                                                                 ------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Increase in assets held for sale                                   (107,110)       (431,495)
  Increase in notes receivable                                     (1,736,498)       (150,000)
  (Increase) decrease in receivables from
    GTECH and joint ventures                                       10,314,817      (9,769,079)
  Gaming development costs                                               --          (607,245)
  Acquisition of businesses, net of cash acquired                        --          (172,736)
  Distributions from joint ventures                                 1,383,298            --
  Investments in joint ventures                                      (274,370)           --
                                                                 ------------    ------------
        Net cash (used in) provided by investing activities         9,580,137     (11,130,555)
                                                                 ------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of debt                                    3,000,000      14,306,285
  Repayment of debt                                               (11,391,356)     (1,527,107)
  Payment of debt issue costs                                            --          (260,818)
  Proceeds from sale of common stock and exercise of warrants,
    net of offering costs                                                --            18,070
                                                                 ------------    ------------
        Net cash provided by (used in) financing activities        (8,391,356)     12,536,430
                                                                 ------------    ------------
</TABLE>
                                                                     (Continued)
                                      F-5

<PAGE>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
-------------------------------------------------------------------------------
                                                   1996             1995
                                                ----------       ---------  
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                 692,429        (27,916)
                                                            
CASH AND CASH EQUIVALENTS,                                  
  BEGINNING OF YEAR                                356,754        384,670
                                                ----------       --------
CASH AND CASH EQUIVALENTS,                                  
  END OF YEAR                                   $1,049,183       $356,754
                                                ==========       ========

See notes to consolidated financial statements.

                                      F-6

<PAGE>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1.  ORGANIZATION AND NATURE OF OPERATIONS

    Full House Resorts, Inc. ("FHRI") was incorporated in the State of Delaware
    as Hour Corp. on January 5, 1987.  FHRI is currently pursuing various gaming
    opportunities throughout North America and the U.S. Virgin Islands.

    On November 20, 1992, FHRI acquired 100% of the outstanding common stock of
    Deadwood Gulch Resort and Gaming Corp. ("DGR"). DGR currently operates a
    98-room hotel, a recreational vehicle park and campground, conference
    center, convenience store/gas mart, restaurant, lounge, family entertainment
    facility and two small casinos in Deadwood, South Dakota. During January
    1996, the Company announced its intent to dispose of DGR and is actively
    seeking a buyer. The Company has classified the assets of DGR as assets held
    for sale. (See Note 4).

    Effective December 29, 1995, FHRI entered into a series of agreements with
    GTECH Corporation ("GTECH") to jointly pursue gaming opportunities. Pursuant
    to the agreements, four limited liability companies were formed. FHRI has a
    50% interest in the joint ventures, which interest is accounted for using
    the equity method.

    The consolidated financial statements include the accounts and operations of
    FHRI and its wholly owned and majority owned subsidiaries (the "Company").
    All significant intercompany accounts and transactions have been eliminated
    in consolidation.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The accounting policies of the Company conform to generally accepted
    accounting principles. The following is a summary of the more significant of
    such policies.

    CASH AND CASH EQUIVALENTS - Cash and cash equivalents include cash required
    for gaming operations. Cash in excess of daily requirements is invested in
    short-term investments with maturities of three months or less when
    purchased. Such investments are stated at cost, which approximates market,
    and are deemed to be cash equivalents for purposes of the consolidated
    statements of cash flows.

    The cash of DGR is recorded as restricted cash pursuant to covenants of the
    first mortgage note payable (Note 6) which restrict the uses of
    substantially all of DGR's cash to operations and debt service of DGR.

    At December 31, 1996, the Company had bank deposits exceeding federally
    insured limits by $1,410,523.

    INVENTORIES - Inventories consisting principally of fuel, groceries, food
    and beverage items are recorded at the lower of first-in, first-out cost or
    market.

    INVESTMENTS IN JOINT VENTURES - Investments in joint ventures are accounted
    for using the equity method of accounting.

                                      F-7
<PAGE>

    GOODWILL - Goodwill represents the excess cost over the net assets of
    businesses acquired during 1995 (See Note 3). Goodwill is being amortized on
    the straight-line basis over 6 years. The Company reviews the carrying value
    of goodwill quarterly to determine whether any impairment has occurred.
    Amortization expense for 1996 and 1995 totaled $507,914, and $615,307
    respectively.

    GAMING RIGHTS AND DEVELOPMENT COSTS - Costs associated with gaming rights
    and gaming development activities for which the Company has signed
    agreements are capitalized until the project begins operations and are
    thereafter amortized over the term of the respective agreements. If a
    project is unsuccessful, and its value is determined to be impaired, the
    related deferred costs are charged to expense at the time of impairment. The
    Company reviews each project in process and the costs capitalized on a
    quarterly basis for accounting purposes to determine whether any impairment
    of the assets has occurred. The Company had no such capitalized costs at
    December 31, 1996.

    CASINO REVENUES - Casino revenue is the net win from gaming activities,
    which is the difference between gaming wins and losses.

    PROMOTIONAL ALLOWANCES - Food and beverage furnished without charge to
    customers is included in gross revenues at a value which approximates retail
    and then deducted as complimentary services to arrive at net revenues. The
    estimated cost of such complimentary services is charged to the casino
    department and was $40,916 and $57,912 for the years ended December 31, 1996
    and 1995.

    IMPAIRMENT OF LONG-LIVED ASSETS - Statement of Financial Accounting
    Standards ("SFAS") No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
    ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, was issued by the
    Financial Accounting Standards Board ("FASB") in March 1995, and established
    accounting standards for the impairment of long-lived assets, certain
    identifiable intangibles, and goodwill related to those assets to be held
    and used and for long-lived assets and certain identifiable intangibles to
    be disposed of. The Company adopted the provisions of SFAS No. 121 during
    the fourth quarter of the year ended December 31, 1995. The Company reviews
    the carrying values of its long-lived and identifiable intangible assets for
    possible impairment whenever events or changes in circumstances indicate
    that the carrying amount of assets may not be recoverable.

    FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of the Company's
    cash and cash equivalents, restricted cash, accounts receivable, accounts
    payable, accrued expenses, and payable to joint ventures approximates fair
    value because of the short maturity of those instruments. The Company
    estimates the fair value of its note receivable and long-term debt based on
    the current rates offered to the Company for loans of the same remaining
    maturities. The estimated fair values of the Company's note receivable and
    long-term debt approximate their recorded values at December 31, 1996.

    INCOME TAXES - The Company accounts for income taxes in accordance with
    Statement of Financial Accounting Standards ("SFAS") No. 109 ACCOUNTING FOR
    INCOME TAXES, which requires recognition of deferred tax assets and
    liabilities for the expected future tax consequences of events that have
    been reflected in the financial statements or tax returns. Deferred income
    taxes reflect the net effect of (a) temporary differences between the
    carrying amounts of assets and liabilities for financial reporting purposes
    and the amounts used for income tax purposes, and (b) operating loss and tax
    credit carryforwards.

    LOSS PER COMMON SHARE - Loss per common share is computed based upon the
    weighted average number of common and common equivalent shares outstanding
    during the year. The common

                                      F-8
<PAGE>

    equivalent shares resulting from stock options and warrants have not been
    included in the computations since their inclusion would have an
    anti-dilutive effect.

    AWARDS OF STOCK-BASED COMPENSATION - The FASB issued in October, 1995 SFAS
    No. 123 "ACCOUNTING FOR AWARDS OF STOCK-BASED COMPENSATION". This statement,
    effective for the Company's fiscal year ending December 31, 1996,
    establishes financial accounting and reporting standards for stock-based
    employee compensation plans and for transactions where equity securities are
    issued for goods and services. This statement defines a fair value based
    method of accounting for an employee stock option or similar equity
    instrument and encourages all entities to adopt that method of accounting
    for all of their employee stock compensation plans. However, it also allows
    an entity to continue to measure compensation cost for those plans using the
    intrinsic value based method of accounting prescribed by APB Opinion No. 25,
    "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES". The Company will continue to
    apply APB Opinion No. 25 to its stock based compensation awards to employees
    and will disclose the required pro forma effect on net loss and net loss per
    common share (see Note 14).

    USE OF ESTIMATES - The preparation of financial statements in conformity
    with generally accepted accounting principles requires management to make
    estimates and assumptions that affect the reported amounts of assets and
    liabilities at the date of the financial statements and the reported amounts
    of revenues and expenses during the reporting period. Actual results could
    differ from those estimates.

    RECLASSIFICATIONS - Certain 1995 amounts have been reclassified to conform
    to the current year presentation.

3.  ACQUISITIONS

    On March 23, 1995, LAI (a company owned 100% by Lee A. Iacocca) merged into
    the Company's wholly-owned subsidiary, FHS. Pursuant to the merger, Mr.
    Iacocca received 1,250,000 shares of the Company's restricted common stock.
    In late 1995, the Company was named as a defendant in a lawsuit in Taney
    County, Missouri, as a result of its acquisition through the LAI merger of
    certain assets. After negotiations with Mr. Iacocca, in March 1996 Mr.
    Iacocca accepted the reconveyance of the interests in the assets in exchange
    for 193,529 shares of common stock of the Company, which the Company
    believes had a value equal to the book value of the surrendered interest in
    the assets. Such action was intended to minimize the Company's exposure to
    the litigation. As a result, the book value of the assets returned was
    reduced by $822,500 at December 31, 1995, the value assigned to the assets
    in the acquisition, and no gain or loss was recorded on the transaction. In
    addition, as of December 31, 1995, stockholders' equity has been reduced by
    $822,500 for the shares of stock returned, and the number of common shares
    outstanding has been reduced by 193,529 shares.

    On November 20, 1995, FHJVS merged into Omega (a company owned 30% by a
    director and stockholder of the Company). Pursuant to this agreement the
    stockholders of Omega received 500,000 shares of the Company's restricted
    common stock and a note from the Company in the amount of $375,000.

    The transactions have been recorded using the purchase method.

                                      F-9
<PAGE>

    The purchase price of the acquisitions and related allocation (as adjusted
    for the return of assets and stock discussed above) consist of the
    following:

Purchase price
  Issuance of 1,556,471 unregistered shares of common stock of the Company
    valued at $4.25 per share:
    Common stock                                                   $       156
    Additional paid-in capital                                       6,614,844
  Issuance of note payable                                             375,000
  Transaction costs                                                    181,858
                                                                   -----------

  Total purchase price                                             $ 7,171,858
                                                                   ===========
Allocation of purchase price
  Current assets                                                   $     9,122
  Goodwill                                                           3,555,634
  Gaming rights                                                      5,556,313
  Current liabilities                                                   (4,501)
  Deferred tax liability                                            (1,944,710)
                                                                  ------------

  Total                                                           $  7,171,858
                                                                  ============

    The operating results of the acquired businesses are included in the
    Company's consolidated results of operations from the respective dates of
    acquisition.

4.  ASSETS HELD FOR SALE / IMPAIRMENT OF LONG-LIVED ASSETS

    Because of the Company's intent to dispose of DGR, the Company has
    reclassified certain assets of DGR to other assets - assets held for sale.

    The Company has determined that the carrying amount of the assets held for
    sale may not be recoverable. The calculated impairment of long-lived assets
    as of December 31, 1996, was $4,151,070 based upon available information
    which indicates the estimated loss which could be incurred upon disposition,
    based on estimated fair value of the assets, less costs of disposition.

    During the years ended December 31, 1996 and 1995, DGR incurred net losses
    before taxes of $769,479 and $3,586,446, including the impairment losses of
    $1,051,070 and $3,100,000 respectively.

5.  INVESTMENTS IN JOINT VENTURES

    GTECH RELATIONSHIP

    The Company entered into a series of agreements with GTECH to jointly pursue
    gaming opportunities.  Pursuant to the agreements, the following limited
    liability companies, equally owned by Dreamport, Inc. ("Dreamport"), a
    subsidiary of GTECH, and the Company were formed:  Gaming Entertainment
    L.L.C. ("GELLC"), Gaming Entertainment (Delaware) L.L.C. ("GEDLLC"), Gaming
    Entertainment (Michigan) L.L.C. ("GEMLLC"), and Gaming Entertainment
    (California) L.L.C. ("GECLLC").

    Although the agreements were dated December 29, 1995, the joint venture
    participants agreed to share equally in the equity investment, financing
    responsibility, and revenues and expenses commencing

                                      F-10
<PAGE>

    April 1, 1995. Therefore, revenues received or expenses paid by participants
    on behalf of the joint ventures from April 1, 1995 were to be collected from
    or repaid to the participants by the joint ventures. In addition, the
    participants agreed to reimburse each other directly, such that certain
    costs and expenses were shared equally. The Company contributed to capital
    its rights to the North Bend, Oregon facility and the rights to develop the
    Torres Martinez, Nottawaseppi Huron Band of Potawatomi and Delaware State
    Fair projects to the joint ventures.

    In payment for its interest in the joint ventures, GTECH contributed cash
    and other intangible assets to the companies and committed to loan the joint
    ventures up to $16.4 million to complete the North Bend, Oregon, and
    Delaware facilities. The Company has agreed to guarantee one-half of the
    obligations of the joint ventures to GTECH under these loans. At December
    31, 1996, the Company had guaranteed one-half of a $2.0 million loan to
    GELLC and one-half of a $9.1 million loan to GEDLLC. GTECH has also agreed
    to make loans to the Company for its portion of the financing of projects if
    the Company is unable to otherwise obtain financing. GTECH will also provide
    project management, technology and other expertise to analyze and
    develop/manage the implementation of opportunities developed by the joint
    ventures.

    As part of the formation of the joint ventures, certain directors of the
    Company and Mr. Iacocca have granted to GTECH an option to purchase their
    shares should they propose to transfer the same.

    In March 1997, the Company and GTECH modified their agreement to no longer
    require each party to present prospective business opportunities to the
    other.

    The following is a summary of each of the gaming opportunities and the items
    which have been contributed at book value to capital of the joint ventures
    by the Company.

    GELLC

    During 1994, the Company entered into a series of agreements with the
    Coquille Indian Tribe to finance and develop a gaming and entertainment
    facility in North Bend, Oregon. The financing obligation and the gaming
    agreements (which had no recorded book value), gaming development costs of
    $152,321, and an obligation to contribute cash of $12,500 were contributed
    to capital by the Company. The Company had advanced $10,169,079 to the tribe
    through December 29, 1995. The advances were converted to a promissory note,
    bearing interest at prime plus 2% and receivable in installments through
    August 2002, which note was transferred by the Company to GELLC. The Company
    was reimbursed for these advances by GELLC from funding received by the
    joint venture from GTECH. GELLC leases approximately 12.5 acres of Tribal
    Trust Lands from an entity owned by the tribe on which the gaming facility
    is located and subleases a portion of the land back to the same entity. The
    master lease expires in 2019 and the sublease expires in 2002 with options
    to renew. In July 1995, an addendum to the agreement with the tribe was
    signed by the Company and Dreamport, which reduced the obligations of GELLC
    to provide financing to $10.4 million, extended the date when payments begin
    and modified the method of computing participating rents and loan
    repayments. During 1995, the facility began operations. During 1996, the
    Company contributed to capital additional gaming development costs of
    $5,467.

    In October 1996, the tribe secured a new $17.5 million loan to refinance
    certain outstanding indebtedness, finance the acquisition of gaming
    equipment and finance certain improvements to the gaming facility. GELLC was
    repaid 100% of its original development loan from the financing. As part of
    the loan, the joint venture subordinated its rights to receive a percentage
    of Gross Gaming Revenues,

                                      F-11
<PAGE>

    as defined. As rental under the sublease to the tribal entity, GELLC will
    receive rental payments based on a schedule of percentages of Gross Gaming
    Revenues through 2002.

    GEDLLC

    On April 12, 1995, the Company entered into an agreement with the Delaware
    State Fair, Inc. to provide management services and funding for the
    development of a gaming entertainment center at Harrington Raceway in
    Harrington, Delaware. The Company agreed to provide $6.3 million in
    financing. The Company contributed to capital of GEDLLC gaming development
    costs of $23,548, the financing obligation and the gaming agreement (which
    had no recorded book value), an obligation to contribute cash of $12,500,
    and notes receivable of $160,806. GEDLLC developed, constructed and equipped
    the gaming facility and provided financing through a capital lease
    arrangement. GEDLLC has a 15 year management agreement and is compensated
    based upon a percentage of Gross Revenues and a percentage of Operating
    Profits, as both are defined. The facility began operations in August 1996.

    Through December 31, 1996, the Company has advanced funds to GEDLLC totaling
    $1,886,498. This note receivable bears interest at prime plus 1% (9.25% at
    December 31, 1996) and is payable from available operating cash flows. The
    note is secured by a similar receivable from Midway Slots and Simulcast, a
    division of Harrington Raceway, Inc., with the same terms and interest rate.
    The current portion of the note receivable recorded at December 31, 1996 is
    based upon cash payments received through March 1997.

    GEMLLC

    As a result of the acquisitions discussed in Note 3, the Company acquired an
    85% interest in a series of agreements with the Nottawaseppi Huron Band of
    Potawatomi, a Michigan Indian Tribe, to finance, develop, construct and
    manage gaming and non-gaming commercial opportunities for the tribe. The
    Company agreed, subject to the approval of the tribe, to assign the
    development rights to GEMLLC. The financing obligation, gaming development
    costs of $252,214 and an obligation to contribute cash of $12,500 were
    contributed to capital of GEMLLC by the Company.

    In late 1996, GEMLLC renegotiated its management contract with the tribe and
    with the 15% owner of the interests in the agreements. Under the new
    contract, the joint venture will finance, develop and manage gaming
    operations on reservation lands to be acquired near Battle Creek, Michigan.
    The 15% owner will be paid a royalty fee in lieu of its original 15%
    ownership in earlier contracts with the tribe. The assignment of the
    development rights was approved by the tribe, and gaming development costs
    of $4,372,446 were contributed to capital of GEMLLC by the Company. GEMLLC
    is a development stage company as of December 31, 1996.

    GECLLC

    On April 21, 1995, the Company entered into a Gaming and Development
    Agreement with the Torres Martinez Desert Cahuilla Indians. The agreement
    grants the Company certain rights to develop, manage and operate gaming
    activities for the Tribe and the right to receive 40% of the net revenues
    from gaming activities subject to the obligation of the Company to pay the
    costs of the same. For all non-gaming activities, the Company is to provide
    50% of the financing for development and will receive 50% of the net
    revenues from said activities, subject to the obligation of the Company to
    lend funds to the Tribe prior to commencement of gaming operations. The
    financing obligation, gaming

                                      F-12
<PAGE>

    development costs of $63,397, the gaming agreement (which had no recorded
    book value), and an obligation to contribute cash of $12,500 were
    contributed to capital of GECLLC by the Company.

    During 1996, the Company contributed additional gaming development costs of
    $51,670 to capital of GECLLC. GECLLC is a development stage company as of
    December 31, 1996.

    The following is a summary of condensed financial information for the joint
    ventures as of December 31, 1996 and for the years ended December 31, 1996
    and 1995:

<TABLE>
<CAPTION>
1996
CONDENSED BALANCE SHEETS

                                         GELLC         GEMLLC          GEDLLC         GECLLC           TOTAL
                                     ------------   ------------    ------------   ------------    ------------
<S>                                  <C>            <C>             <C>            <C>             <C>
Current assets                       $    256,792   $       --      $  2,930,644   $       --      $  3,187,436
Noncurrent
  assets                                  214,012      5,094,106       7,448,316        208,569      12,965,003
                                     ------------   ------------    ------------   ------------    ------------

Total                                $    470,804   $  5,094,106    $ 10,378,960   $    208,569    $ 16,152,439
                                     ============   ============    ============   ============    ============

Current liabilities                  $     67,092   $    125,960    $  2,299,569   $     40,358    $  2,532,979
Noncurrent
  liabilities                                --             --         7,407,762           --         7,407,762
Members' capital                          403,712      4,968,146         671,629        168,211       6,211,698
                                     ------------   ------------    ------------   ------------    ------------

Total                                $    470,804   $  5,094,106    $ 10,378,960   $    208,569    $ 16,152,439
                                     ============   ============    ============   ============    ============
Company's equity
  in net assets                      $    201,856   $  4,561,679    $    335,814   $     84,105    $  5,183,454
                                     ============   ============    ============   ============    ============
1996
CONDENSED STATEMENTS OF OPERATIONS

Revenues                             $  1,755,646   $       --      $  3,069,516   $       --      $  4,825,162
                                     ============   ============    ============   ============    ============

Net income (loss)                    $  1,655,498   $    (79,037)   $  1,038,223   $    (65,358)   $  2,549,326
                                     ============   ============    ============   ============    ============
Company's equity
  in net income (loss)               $    827,749   $    (39,519)   $     519,11   $    (32,679)   $  1,274,663
                                     ============   ============    ============   ============    ============
</TABLE>

    Revenues from joint ventures in 1996 include the Company's equity in net
    income of the joint ventures of $1,274,663 and reimbursements of $834,370
    from GTECH for prior year costs pursuant to the joint venture agreements
    with GTECH.

                                      F-13
<PAGE>

<TABLE>
<CAPTION>
                                         GELLC        GEMLLC         GEDLLC        GECLLC         TOTAL
                                     ------------  -----------    -----------   ------------  ------------
<S>                                  <C>           <C>            <C>           <C>           <C>

1995
CONDENSED BALANCE SHEETS
Current assets                       $ 1,666,850   $    25,000    $    25,000    $    25,000   $ 1,741,850
Noncurrent assets                      9,347,147       504,427        368,706        126,794    10,347,074
                                     -----------   -----------    -----------    -----------   -----------

Total                                $11,013,997   $   529,427    $   393,706    $   151,794   $12,088,924
                                     ===========   ===========    ===========    ===========   ===========

Current liabilities                  $10,289,178   $    71,923    $     2,806    $      --     $10,363,907
Members' capital                         724,819       457,504        390,900        151,794     1,725,017
                                     -----------   -----------    -----------    -----------   -----------

Total                                $11,013,997   $   529,427    $   393,707    $   151,794   $12,088,924
                                     ===========   ===========    ===========    ===========   ===========
Company's equity
  in net assets                      $    362,40   $   228,752    $   195,450    $    75,897   $   862,508
                                     ===========   ===========    ===========    ===========   ===========
1995
CONDENSED STATEMENTS OF OPERATIONS

Revenues                             $   527,557   $      --      $      --      $      --     $   527,557
                                     ===========   ===========    ===========    ===========   ===========

Net income (loss)                    $   395,176   $   (71,923)   $    (2,806)   $      --     $   320,447
                                     ===========   ===========    ===========    ===========   ===========
Company's equity in
  net income
  (loss)                             $   197,588   $   (35,962)   $    (1,402)   $      --     $   160,224
                                     ===========   ===========    ===========    ===========   ===========
</TABLE>

                                      F-14
<PAGE>

6.  DEBT

    Debt consists of the following at December 31, 1996:

<TABLE>
<CAPTION>
<S>                                                                                 <C>
Note payable, secured by a first mortgage on all real property of DGR (included
  in assets held for sale) and partially secured by the guarantee of FHRI, the
  personal guarantee of certain stockholders and the Company's Chief Executive
  Officer; interest at prime plus 2 1/4% for the period of June 1, 1996 through
  May 31, 2002 (10.5% at December 31, 1996); principal and interest due
  in monthly installments of $57,089 through May 31, 2002, at which time
  all unpaid principal and interest are due.                                        $3,821,098

Convertible, unsecured note payable to GTECH Corporation; original principal
  amount of $3,000,000, no payments or accrued interest until January 25, 1998
  at which point interest will accrue at the lesser of the maximum lawful rate
  of interest, or the prime rate; interest due monthly beginning February 1,
  1998 through January 25, 2001, at which time all unpaid principal and interest
  are due. The note is convertible, subject to regulatory approval, at the
  holders option in whole or part at any time prior to January 25, 1998 into
  common stock of the Company at a conversion price of five dollars principal
  amount of the note for one share of stock (less unamortized discount of
  $238,185 based on imputed interest rate of 8.25%).                                 2,761,815

Note payable to stockholder; interest at prime (8.25% at December 31, 1996)
  payable quarterly commencing on January 31, 1996; principal payable
  on demand.                                                                           375,000
                                                                                    ----------

Total                                                                                6,957,913
Less current portion                                                                  (667,258)
                                                                                    ----------
Long-term portion                                                                   $6,290,655
                                                                                    ==========

</TABLE>

    The first mortgage note payable includes certain financial covenants which
    restrict the uses of DGR's cash to the operations and debt service of DGR
    and which require DGR to maintain a certain tangible net worth and debt
    service coverage ratio. DGR was not in compliance with the tangible net
    worth requirement and the debt service coverage ratio at December 31, 1996.
    However, DGR has obtained a waiver of the tangible net worth ratio through
    December 31, 1997 and for the debt service coverage ratio through March 31,
    1997. The debt service coverage ratio will next be measured on March 31,
    1997. The Company's interim operating results have approximated budgeted
    amounts through February 1997. Based upon the budgeted operations through
    March 31, 1997, and principally due to the retirement of certain debt and
    associated payments which were present at the last measurement date,
    management believes the Company will be in compliance with the debt service
    coverage ratio requirement at March 31, 1997.

                                      F-15
<PAGE>

    The scheduled maturities of debt are as follows:

    YEAR ENDING
    DECEMBER 31,
    ------------
       1997                                  $  667,258
       1998                                     324,936
       1999                                     361,267
       2000                                     401,661
       2001                                   3,208,386
       Thereafter                             1,994,405
                                             ----------

       Total                                 $6,957,913
                                             ==========

7.  STOCKHOLDERS' EQUITY

    As part of a public offering in August 1993, warrants to purchase shares of
    the Company's common stock were issued. The exercise price of the warrants
    and the number of shares issuable per warrant are based on a dilution
    agreement and, as of December 31, 1996, 778,534 warrants to purchase 925,988
    shares of common stock at $4.20 per share were exercisable through February
    10, 1997. The Company may redeem the warrants on not less than 30 days
    notice at $.05 per warrant provided the Company's stock trades at $5.04 per
    share for at least twenty consecutive days and there is an effective
    registration statement under the Securities Act of 1933, as amended,
    covering the warrants. In February 1997, 700 warrants were exercised for 831
    common shares of the Company, with net proceeds of $3,500. The remaining
    warrants expired on February 10, 1997.

    The Company also sold to the underwriters of the Company's public offering
    warrants at $.01 per warrant to acquire 80,000 units, each unit consisting
    of three shares of the Company's common stock and a warrant to purchase
    additional shares of the Company's common stock. The exercise price of
    warrants to purchase the units and the exercise price and number of shares
    issuable per warrant for the warrants issuable upon purchase of the unit are
    based upon a dilution agreement. As of December 31, 1996, warrants to
    purchase 22,500 units were exercisable at $13.17 per unit through August 9,
    1998 and 57,500 warrants to purchase 68,393 shares of common stock at $4.20
    per share were exercisable through February 10, 1997. The warrants included
    in the 22,500 units and the 57,500 warrants to purchase 68,393 shares
    expired on February 10, 1997.

    Additionally, options to purchase 150,000 shares of common stock at $3.69
    per share (market value on date of grant) were issued in 1994 to the
    Company's General Counsel. All these options were exercisable at December
    31, 1996.

    During the year ended December 31, 1995, the Company issued 15,061 shares of
    its common stock at an average price of $4.20 per share upon exercise of
    warrants for a total consideration of $63,259.

    During the year ended December 31, 1995, the Company issued 1,556,471 shares
    of restricted common stock to finance certain business acquisitions.  See
    Note 3.

    The Company's preferred stock may be converted, at the option of the holder,
    to common stock on a one-for-one basis, has a $.30 per share cumulative
    dividend rate, and has a liquidation preference equal to $3.00 per share
    plus all unpaid dividends. If the Company is in default in declaring or
    setting apart

                                      F-16
<PAGE>

    for payment of dividends on the preferred stock, it is restricted from
    paying any dividend, making any other distribution, or redeeming any stock
    ranking junior to the preferred stock. The stockholders' right to the $.30
    per share cumulative dividends on the preferred stock commenced as of June
    30, 1992 and totaled $945,000 at December 31, 1996. Through December 31,
    1996, no dividends have been declared or paid.

8.  INCOME TAXES

    The income tax benefit recognized in the consolidated financial statements
    consists of the following:

                                              1996            1995
                                           ----------     ------------
     Deferred benefit                      $        -     $ 1,944,710
                                           ==========     ============

    A reconciliation of the income tax benefit with amounts determined by
    applying the statutory U.S. Federal income tax rate to consolidated loss
    before income taxes is as follows:

                                                       1996         1995
                                                    ----------   ----------
    Tax benefit at U.S. statutory rate              $  266,000   $2,623,459
    Change in valuation allowance                      (87,000)    (457,237)
    Non-taxable/deductible items                      (179,000)    (221,512)
                                                    ----------   ----------
    Total                                           $        -   $1,944,710
                                                    ==========   ==========

    The Company's deferred tax items as of December 31, 1996 are as follows:

                                          CURRENT     NON-CURRENT      TOTAL
                                         ---------    -----------   -----------
    Deferred tax assets:
     Net operating loss carryforward     $       -    $ 1,339,000   $1,339,000
     Difference between book and tax
       basis of assets held for sale             -      1,086,000    1,086,000
     Accrued expenses                       56,000              -       56,000
                                         ---------    -----------   -----------
       Total deferred tax assets            56,000      2,425,000    2,481,000

   Deferred tax liabilities -
     Difference between book and tax
     basis of gaming rights                      -     (1,454,000)  (1,454,000)

   Valuation allowance                     (56,000)      (971,000)  (1,027,000)
                                         ---------    -----------   -----------

   Net deferred tax liability            $       -    $         -   $        -
                                         =========    ===========   ===========

    At December 31, 1996, the Company had net operating loss carryforwards for
    income tax purposes of approximately $3,825,000, which may be carried
    forward to offset future taxable income. The loss carryforwards expire in
    2007 through 2010. The availability of the loss carryfowards may be limited
    in the event of a significant change in ownership of the Company or its
    subsidiaries.

                                      F-17
<PAGE>

9.  RELATED PARTY TRANSACTIONS

    During 1995, the Company repaid a note payable to a stockholder in the
    amount of $1,244,981.

    Total interest expense and debt issue costs charged to operations in 1996
    and 1995 related to the note payable to a stockholder were $34,872 and
    $81,015.

    See Note 3 for a discussion of a business combination with a company owned
    30% by a director and stockholder of the Company.

    See Notes 5 and 12 for a discussion of transactions with joint ventures.

    See Note 7 for other issuances of the Company's common stock to and the
    purchase of common and preferred stock from related parties.

10. BENEFIT PLAN

    On January 1, 1994, the Company adopted a 401(k) plan that covers all
    eligible employees. Participants may contribute a percentage of eligible
    wages up to 15% of their annual salaries, with the Company matching up to a
    maximum of 50% of the first 4% of participant wages contributed. The
    Company's matching contributions were $22,447 and $19,415 for the years
    ended December 31, 1996 and 1995.

11. ABANDONED PROJECT COST

    On June 28, 1995, the Governor of the State of Michigan determined to
    prohibit off-reservation gaming in the State of Michigan. As a result,
    during 1995 the Company recognized a loss of $1,867,730 relating to the
    write-off of costs of the gaming agreement acquired in the acquisitions of
    LAI and Omega discussed in Note 3, and other costs.

12. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION

    Cash payments for interest for the years ended December 31, 1996 and 1995
    were $694,602 and $814,002, respectively.

    The following noncash investing and financing activities are not reflected
    in the consolidated statements of cash flows:

    During the year ended December 31, 1996, the Company increased its
    investment in the joint ventures by assigning and/or contributing gaming
    rights and gaming development costs of $4,429,583.

    During the year ended December 31, 1996 the Company recorded an increase in
    additional paid-in capital and an increase in debt discount of $439,727.

    During the year ended December 31, 1995, the Company increased its
    investments in joint ventures by $702,284 by contributing gaming development
    costs of $103,596 and recording capital contributions payable of $598,688.

                                      F-18
<PAGE>

    During the year ended December 31, 1995, the Company recorded a receivable
    from joint ventures of $10,211,703, which is net of capital contributions
    payable of $598,688. The receivable resulted from transfers of notes
    receivable of $10,169,079 and other costs of $42,624 to the joint ventures.

    During the year ended December 31, 1995, the Company recorded a receivable
    from GTECH of $896,377, and a reduction in gaming rights of $896,377. The
    receivable is a result of the joint venture agreement between the Company
    and GTECH.

13. LEGAL MATTERS

    The Company is party to legal proceedings arising in the normal conduct of
    business. Management believes that the final outcome of these matters, will
    not have a material adverse effect upon the Company's consolidated financial
    position, results of operations or cash flows.

    In October 1995, litigation was filed against Full House relating to
    ownership and access pertaining to a portion (approximately 1,200 square
    feet) of the Deadwood Gulch Resort hotel and parking lot property. That
    litigation has been settled by the Resort's purchase of the disputed
    encroachment of the parking lot onto neighboring property, and the
    acknowledgment of the unspecified easement to properties behind the hotel,
    and payment of nominal attorney's fees.

    In October 1994, Full House filed an action for declaratory relief in
    Mississippi, seeking a determination by the court that no relationship
    exists between it and Lone Star Casino Corporation regarding the potential
    acquisition of a riverboat casino on the Mississippi gulf coast (FULL HOUSE
    RESORTS, INC. V. LONE STAR CASINO CORPORATION V. ALLEN E. PAULSON, Second
    Judicial District of the Chancery Court of Harrison County, Mississippi).
    Lone Star filed a counterclaim alleging breaches of fiduciary duty, breach
    of contract, conspiracy to breach contract and to breach fiduciary duty and
    common law fraud. The trial court granted summary judgment in favor of all
    defendants on that counterclaim, and Lone Star's appeal of that judgment is
    currently pending in the Mississippi appellate court. A decision is expected
    by the end of 1997. Management is unable to determine the outcome of this
    litigation, but does not believe the outcome will have a material adverse
    effect on Full House's financial condition.

    In late 1995, Branson Hills Associates, L.P. (the "Plaintiff") filed a
    lawsuit in the Circuit Court of Taney County, Missouri, naming Lee Iacocca,
    William P. McComas, Ron Richey, and the Company and certain of its
    subsidiaries as defendants (collectively, the "Defendants"). The suit
    involves a claim that Messrs. Iacocca and McComas failed to use their best
    efforts to find a developer and financing for the Plaintiff in connection
    with the development of properties owned by the Plaintiff. The Plaintiff
    seeks rescission of the contract granting certain property rights to Iacocca
    and McComas in consideration of said best efforts, and futher seeks damages
    for fraud and breach of contract arising out of Mr. McComas' loaning of
    funds to Plaintiff when alternative financing could not be arranged. Mr.
    Richey and the Company are further named in a count of conspiracy. A portion
    of the property rights involved in the lawsuit were briefly held by the
    Company subsequent to the merger involving LAI as described above, and have
    since been returned to Mr. Iacocca. The Company no longer holds any interest
    in such property. All Defendants vigorously dispute the liability. The
    lawsuit is currently in the discovery phase, and no trial date has been set.
    Management is unable to determine the outcome of this litigation, but does
    not believe the outcome will have a material adverse effect on Full House's
    financial condition or results of operations.

                                      F-19
<PAGE>

14. STOCK-BASED COMPENSATION PLANS

    At December 31, 1996, the Company has two stock-based compensation plans
    which are described below. The Company applies APB Opinion No. 25 and
    related interpretations in accounting for these plans. Because options have
    been granted with exercise prices equal to market value on the grant date,
    no compensation cost has been recognized for options granted under the
    Nonemployee Director Stock Plan and Incentive Stock Plan (except as
    disclosed below related to options granted under the Incentive Stock Plan to
    a consultant/principal shareholder). Had compensation cost for options
    granted under the Company's two stock-based compensation plans been
    determined based on the fair value at the grant dates for awards under those
    plans consistent with the method of SFAS Statement 123, the Company's net
    loss and loss per common share would have been increased to the pro forma
    amounts indicated below:

                                                 1996               1995
                                              ----------        ----------
      Net loss                As reported     $  760,600        $5,550,888
                              Pro forma       $1,116,827        $5,550,888

      Loss per common share   As reported     $     0.09        $     0.59
                              Pro forma       $     0.13        $     0.59

    The Company has reserved 300,000 shares of its common stock for issuance
    under the Nonemployee Director Stock Plan. The Plan allows for options to be
    granted at prices not less than fair market value on the date of grant and
    are generally exercisable over a term of five years. No options have been
    issued under the Plan.

    The Company has reserved 1,000,000 shares of its common stock for issuance
    under the 1992 Incentive Plan. The Plan allows for the issuance of options
    and other forms of incentive awards, including qualified and non-qualified
    incentive stock options. Incentive stock options may be granted at prices
    not less than fair market value on the date of grant, while non-qualified
    incentive stock options may be granted at a price less than fair market
    value on the date of grant. The persons eligible for such plan include
    employees and officers of the Company (whether or not such officers are also
    directors of the Company) and consultants and advisors to the Company, who
    are largely responsible for the management, growth and protection of the
    business of the Company. Options issued under the Incentive Plan are
    generally exercisable over a term of ten years.

    The fair value of each option grant for the pro forma disclosure was
    estimated on the date of grant using the Black-Scholes option-pricing model
    with the following weighted-average assumptions used for grants in 1996:
    expected volatility of 80 percent, risk-free interest rate of 6.1 percent,
    and expected life of 2.5 years. There were no grants during 1995. For
    purposes of this calculation, the 210,000 options for which the exercise
    price was changed to $3.31 during April 1996, were treated as if granted
    during 1996 for vested options. Nonvested options were treated similarly,
    however, only the incremental increase in fair value was included in the
    fair value calculation.

    On December 20, 1996, a consultant, who is also a principal shareholder, was
    granted an option to purchase 250,000 common shares at $3.69 in return for
    consulting services to be provided over an approximate three year period.
    The options vested immediately. The fair value of $302,826 for the options
    was estimated on the date of grant using the Black-Scholes option-pricing
    model with the following assumptions: expected volatility of 80 percent,
    risk-free interest rate of 6.0 percent, and

                                      F-20
<PAGE>

    expected life of 2.0 years. As the options were granted to a nonemployee in
    return for services, consulting expense will be recognized ratably over the
    three year service period commencing in 1997. These options have not been
    included in the disclosures related to stock-based compensation. The total
    options outstanding under the Incentive Plan including the consulting
    options at December 31, 1996 and 1995 was 510,000 and 210,000, respectively.

    A summary of the status of the Company's incentive stock option plan
    (excluding options mentioned above which were issued to a
    consultant/principal shareholder) as of December 31, 1996 and 1995, and
    changes during the years ending on those dates is presented below:

<TABLE>
<CAPTION>

                                                   1996                    1995
                                        ----------------------------------------------------
                                                     WEIGHTED -                WEIGHTED -
                                                      AVERAGE                   AVERAGE
                                        SHARES    EXERCISE PRICE   SHARES    EXERCISE PRICE
                                        -------   --------------  --------   --------------
<S>                                    <C>        <C>             <C>        <C>
Outstanding at beginning of year        210,000      $ 6.35       235,000        $ 6.24

Granted                                  50,000      $ 3.31             -

Exercised                                     -                         -

Forfeited                                     -                   (25,000)       $ 5.34
                                        -------                   -------

Outstanding at end of year              260,000      $ 3.31       210,000        $ 6.35
                                        =======                   =======

Options exercisable at year-end         190,000      $ 3.31        70,000        $ 6.35

Weighted-average fair value of
  options granted during the year       $  2.02                        -
</TABLE>

    As of December 31, 1996, the 260,000 incentive options outstanding under the
    Incentive option plan all have an exercise price of $3.31 and a
    weighted-average remaining contractual life of 7.9 years. Effective April 9,
    1996 the exercise price of the 210,000 options which had been outstanding at
    December 31, 1995 was decreased from a weighted-average of $6.35 to $3.31,
    the market price of the stock at that date.

                                     ******

                                      F-21

<PAGE>

                               INDEX TO EXHIBITS
<TABLE>
<CAPTION>

                                                                               SEQUENTIALLY
EXHIBIT                                                                          NUMBERED
NUMBER      DESCRIPTION                                                            PAGE
------      -----------                                                        ------------
<S>         <C>                                                                <C>
10.47       Subordination and Participation Agreement dated as of October
              8, 1996 between Gaming Entertainment L.L.C. and Miller &
              Schroeder Investments Corporation*

10.48       First Amended and Restated Participating Lease dated as of
              October 8, 1996 between Gaming Entertainment L.L.C. and
              Coquille Economic Development Corporation*

10.49       First Amended and Restated Master Lease dated as of October 8,
              1996 between Gaming Entertainment L.L.C. and Coquille
              Economic Development Corporation*

10.50       Agreement dated as of November 18, 1996 by and among Green
              Acres Casino Management Company, GTECH Corporation, Gaming
              Entertainment (Michigan) L.L.C. and the Company

10.51       Amended and Restated Class III Management Agreement dated
              November 18, 1996 among Nottawaseppi Huron Band of
              Potawatomi and Gaming Entertainment (Michigan) L.L.C.

21          List of Subsidiaries of Full House Resorts, Inc.*

23.1        Consent of Deloitte & Touche LLP, Certified Public Accountants*

27.1        Financial Data Schedule
</TABLE>