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, 1997

[ ]     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:
$8,298,789.

         The aggregate market value of registrant's voting $.0001 par value
common stock held by non-affiliates of the registrant, as of March 26, 1998,
was: $20,089,862.

         The number of shares outstanding of registrant's $.0001 par value
common stock, as of March 26, 1998, was 10,340,380 shares.


<PAGE>

                                     PART I

1.       DESCRIPTION OF BUSINESS.

         BACKGROUND

          Full House Resorts, Inc. ("Full House" or the "Company"), a developer
of destination resorts and entertainment, gaming and commercial centers, was
incorporated in the State of Delaware on January 5, 1987. 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 net proceeds of
$6,742,841. The Company extended the exercise period of the Warrants until
February 10, 1997.

          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 until March 5, 1998) enabled Full House
to repay the $2,500,000 note on March 14, 1994. The $1,250,000 note, which was
held by H. Joe Frazier, a director of Full House until January, 1996, was repaid
on May 31, 1995.

         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.

          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 Merger between LAI and FHS was consummated.
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 merger with Omega 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

                                       -2-

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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 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 May 1997, the Company's then Chairman and Chief Executive Officer,
Allen E. Paulson, presented to the Company for its consideration certain gaming
industry investments with which he was personally involved or was considering
becoming involved. Those included possible acquisition transactions relating to
Riviera Holdings Corporation and Elsinore Corporation (which owns the Four
Queens Casino in Las Vegas), a contingent interest in the Gold River Hotel and
Casino in Laughlin, Nevada, and a riverboat formerly operator as the Treasure
Bay Casino in Tunica, Mississippi. In October 1997, Mr. Paulson, personally
purchased all of the issued and outstanding stock of Gold River which was then
in a Chapter 11 bankruptcy proceeding.

         The Board of Directors of the Company formed a Special Committee of
directors other than Mr. Paulson to conduct the due diligence investigation
necessary in order for the Company to evaluate whether, and to what extent, it
might become involved in the potential investments and transactions presented by
Mr. Paulson. After a review of the due diligence investigation and of the advice
of independent consultants retained to evaluate the opportunities, the Special
Committee determined that it was not in the best interest of the Company to
become involved in the investments presented by Mr. Paulson, and that the
Company should waive any right it may have to participate in those investments
upon Mr. Paulson's reimbursement to the Company of certain expenses it has
incurred in conducting its evaluation of the opportunities.

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

         THEME HOTEL/CASINO--BILOXI, MISSISSIPPI

         On February 23, 1998, the Company completed the purchase of a portion
of a proposed gaming site in Biloxi, Mississippi. The Company acquired the site
for $4,155,000 and the payment of certain related costs. The Company utilized
cash on hand of $2,155,000 and obtained a $2 million bank loan in connection
with the purchase. The bank loan is due in one year and bears interest at 1%
above the prime rate of the bank. The loan can be renewed under certain
circumstances. Negotiations to develop a theme hotel/casino at the site, with
investment partners, remain underway. The completion of the proposed transaction
is subject to the approval of all required Mississippi gaming authorities as

                                       -3-

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well as completion of due diligence, approval by the Company's Board of
Directors, execution of definitive agreements with respect to acquisition and
development of the site, and receipt of financing for the project.

         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 agreed to guarantee one-half of the
obligations of the joint venture companies to GTECH under these loans and at
December 31, 1997 had guaranteed to GTECH one-half of a loan to the Oregon Tribe
with a balance of $2.0 million and one-half of a loan to the Delaware venture
with a balance of $3.55 million paid in full during February, 1998. GTECH 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. Although the loan was convertible
into 600,000 shares of Full House's Common Stock in January 1998, the loan
conversion clause expired without exercise. In addition, in 1996 Full House was
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.

         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, 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 (as
of 12/31/97, there were 350 video lottery terminals, 10 blackjack tables and
nine poker tables). 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 sublease
expires in 2002.

         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

                                       -4-

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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
1997, 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 seven Indian casinos presently operating in
Oregon. The closest competing casino is located approximately 90 miles from
North Bend and operates 700 devices, a card room, bingo and keno. The other
casinos are located approximately 140, 160, 200, 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 580 gaming devices and a 150-seat simulcast parlor. 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, 1997, $3.55 million of the development loan
remained outstanding. The development loan was paid in full in February, 1998.

         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 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.
During 1998, it is anticipated that the 150-seat simulcast parlor will be moved
to the Harrington Raceway Grandstand, the food and beverage operation in the
Grandstand will be improved and expanded, the number of gaming devices in the
facility will be increased by 122 and the number of seats in the facility's Las
Vegas-style buffet also will be increased. Harrington Raceway, Inc. secured a
bank loan to pay for these and other improvements and pay off the development
loan from the joint venture company.

         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. A joint venture company owned by
Full House and Dreamport has 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

                                       -5-

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the Tribe. A third party 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 not by the Senate . The bill was not
reintroduced during the 1997 session as the Tribe focused its attention upon a
settlement with the State of California under which it will also take
replacement lands in exchange for granting a right of way through its
reservation to accommodate the re-routing of a state highway.

         On March 6, 1998, California Governor Pete Wilson announced that he had
reached an agreement on a compact for gaming which is intended to be the
standard for gaming compacts with all Indian tribes in California. The Compact
would limit electronic gaming devices in Indian casinos to lottery-style devices
and limit the number of devices to 19,900 statewide, which would be allocated
equally among California's 100 federally recognized tribes. Tribes that do not
choose to operate their own casinos could lease their allotment of gaming
devices for up to $5,000 per device, per year. Tribal casinos would be limited
to 975 gaming devices each, including leased machines. Tribes have been given 60
days from the March 6 date to either negotiate a separate compact or agree to
the terms of the proposed standard Compact. The Torres-Martinez Tribe has not
determined which option to pursue; therefore, the Company cannot determine the
impact of this event on the future development of gaming operations with the
Tribe

         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 99-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-cart 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.

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         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. From the time of its acquisition through the
end of 1997, the Resort had a cumulative operating deficit of approximately
$3.48 million and the Company has recognized an impairment loss of $4.154
million through such date, including $3,220 in 1997. 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.

         On March 25, 1998, the Company announced that it has reached an
agreement for the sale of Deadwood Gulch Resort to a group of South Dakota
businessmen. The buyer has paid over a non-refundable deposit of $300,000 to
the Company and closing of the sale is scheduled to take place May 12, 1998.
Closing is subject to the approval of the South Dakota gaming authorities.


         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 57% of the operating revenues (net of promotional allowances) for
the year ended December 31, 1997 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.

         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                              1996             1997
---------------------------------                 ----------        -------
         Casino                                       26%               25%
         Hotel/RV                                     27                30
         Retail                                       23                22
         Food and beverage                            11                12
         Gulches of Fun                               13                11
                                                     ----              ----
                                                     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, 1996 and 1997, 94% and 95%, 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, 1996
and 1997 were 72% and 71%, respectively, and the average daily hotel room rates
for such periods were $51.44 and $53.25, 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

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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, 1997 there were
95 licensed gaming establishments in Deadwood which operated approximately 2,395
slot machines and 61 table games, including poker and blackjack. The revenues
derived from the Resort's gaming operations accounted for approximately 3.3% and
2.9% of all gaming revenues in Deadwood, South Dakota for 1996 and 1997,
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.

         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 1,423 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, 2000 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 Amoco-branded retail
outlets.

                                       -8-

<PAGE>

         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 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 construction
costs; (iv) a ceiling on the repayment of such development and construction
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,

                                       -9-

<PAGE>

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.

         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

                                      -10-

<PAGE>

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 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,
1998. 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, 1998, the Company and its subsidiaries had
approximately 47 full-time employees, two of whom are executive officers of the
Company, and 29 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.

                                      -11-

<PAGE>

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 revenues of the
gaming facility. The lease is treated as a capital lease and payments commenced
on August 20, 1996. See "Description of Business - GTECH Relationship."

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

          Claimed easements over a portion of its RV Resort and Campground
property with respect to access to property at higher elevations have been
resolved without material financial expense or other material adverse impact on
Full House.

3.       LEGAL PROCEEDINGS.

         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 shortly. 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") as a result of the Company's
acquisition (through the merger of its wholly-owned subsidiary with LAI) of an
interest in certain property in Branson, Missouri. In October 1997, the lawsuit
was resolved at no cost to Full House or its subsidiaries.

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

         None.

                                      -12-

<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, 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

YEAR ENDED DECEMBER 31, 1997
----------------------------
First Quarter                                     $4-3/8           $2-3/4
Second Quarter                                     3-5/8            2-3/8
Third Quarter                                      2-7/8            1-3/8
Fourth Quarter                                     3-1/16           1-11/16

                  The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions. On
March 26, 1998, the last sale price of the Common Stock as reported by the
Nasdaq SmallCap Market was $3.47.

         (B)      HOLDERS

                  As of March 26, 1998, the Company had approximately 186
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 has not declared or
paid the accrued dividends on its Preferred Stock which were payable since
issuance, totaling $1,155,000 and, accordingly, is in default in regard thereto.

                   As 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.

                                      -13-

<PAGE>

                  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

                  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, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

         Revenues for the year ended December 31, 1997 increased $628,451 or
8.2% to $8,298,789 as compared with revenues of $7,670,338 for the year ended
December 31, 1996. The net income per share for the year ended December 31, 1997
increased $0.17 or 189% to $.08 as compared with a loss per share of $0.09 for
the year ended December 31, 1996.

         JOINT VENTURE INCOME

         Joint Venture income increased $1,000,832 or 47.5% for the year ended
December 31, 1997 as compared to 1996. This increase is due to inclusion of
income from the Delaware joint venture, which was not in operation until August
1996 for a full year in 1997, and to the improved operating results from the
Oregon joint venture. The revenues for 1996 include a one time gain of $834,370
relating to the formation of the four joint venture companies with GTECH.

         OREGON JOINT VENTURE. The Company's share of income from the Oregon
joint venture increased $172,324 or 20.8% year ended December 31, 1997, as
compared to 1996 as a result of improved marketing of and road access to the
casino.

         DELAWARE JOINT VENTURE. The Company's share of income from the Delaware
joint venture was $2,156,427 for the year ended December 31, 1997. Midway Slots
and Simulcast began operations in August of 1996. As reported by the Delaware
Lottery Board, Midway Slots & Simulcast had a net win of $58.2 million for the
year ended December 31, 1997. As a result of operating results exceeding initial
projections, Midway Slots and Simulcast has prepaid a portion of its obligation
to the Delaware joint venture. The joint venture, in turn, prepaid a portion of
the obligation to the Company. The outstanding principal balance of the
obligation to the Company was $544,911 at December 31, 1997, which was paid in
full in February, 1998.

         CALIFORNIA AND MICHIGAN JOINT VENTURES. As compared to 1996, the
Company's share of the loss from the California and Michigan joint ventures
declined by $25,563 during 1997. These joint venture companies are still in the
development stage and do not have operating revenues.

                                      -14-

<PAGE>

DEADWOOD GULCH RESORT

         The annual report of the South Dakota Commission on Gaming, which was
released during the second quarter of 1997, announced that gaming revenues in
Deadwood had declined by 6.4% in 1996 and that only 40% of the gaming businesses
were profitable in 1996 versus 58% in 1995. This trend has continued during the
first nine months of 1997 with a further decline in gaming revenues. The Company
believes that the decline is attributable in part to decreased attendance at
regional national parks (Mount Rushmore, Badlands National Park and Yellowstone
National Park).

         These factors have significantly impacted the operating results of
Deadwood Gulch Resort. However, as a result of management programs, Resort
income from operations for 1997 increased by $72,700 despite a decline in
revenues of $372,381.

         CASINO OPERATIONS. Revenues decreased 12.0% Or $173,909 to $1,271,413
for the year ended December 31, 1997 as compared to 1996. Although departmental
expenses decreased 13.9% in 1997, department profit decreased $25,783.
Management attributes the decline in revenues to the general decline in the
market area explained above and aggressive giveaways by other casinos.

         HOTEL/RV RESORT. Hotel/RV Resort revenues increased 3.7% or $56,918, to
$1,580,340 for the year ended December 31, 1997 as compared to 1996. Hotel/RV
Resort departmental profit increased $119,817 or 13.0%. Management attributes
the improvements to marketing and cost-reduction measures in both the Hotel and
RV Resort.

         RETAIL. For the year ended December 31, 1997, revenues decreased 7.8%
or $99,671 to $1,171,001 and departmental profits decreased 40.8% or $46,568 to
$67,600 as compared to the same period in 1996. Department profit was lower than
the prior year period due to a decline in sales as a result of lower tourism and
increased pricing competition.

         FOOD AND BEVERAGE. Revenues for the year ended December 31, 1997
decreased 1.4% or $10,821 to $755,621 (which includes $139,646 of promotional
allowances) as compared to $766,422 (which includes $132,292 of promotional
allowances). The departmental income after subtracting promotional allowances
increased $14,688 over the year ended December 31, 1996. Management attributes
the improvement to continued management of cost of sales and reduced
departmental expenses.

         GULCHES OF FUN FAMILY CENTER. Although revenues decreased 19.8% or
$139,250 to $564,958 for the year ended December 31, 1997, departmental profits
increased 13.8% or $27,517 to $226,734 as compared to 1996, due to a change in
staffing of the facility and other cost-reduction measures.

         SALES AND MARKETING EXPENSES. Sales and Marketing expenses increased
10.2% or $26,396 to $286,195 as compared to the same period in 1996. Management
attributes the increase to efforts to increase or maintain market share.

         GENERAL AND ADMINISTRATIVE EXPENSES - RESORT. For the year ended
December 31, 1997, expenses decreased 0.5% or $3,094 to $580,220 as compared to
1996.

DEPRECIATION AND AMORTIZATION

         Depreciation and amortization increased 2.4% or $12,465 to $524,049 for
the year ended December 31, 1997 as compared to 1996.

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.

                                      -15-

<PAGE>

Further analysis of the estimated realizable value of the Deadwood Gulch Resort
assets resulted in an additional impairment loss of $1,051,070 recorded during
the year ended December 31, 1996 and $3,220 for the year ended December 31,
1997. Pursuant to SFAS No. 121, the Company has suspended recording depreciation
of the assets of the Deadwood Gulch Resort.

GENERAL AND ADMINISTRATION EXPENSES

         Non-Resort expenses for the year ended December 31, 1997 totaled
$1,614,677, an increase of $95,577 over the prior year, reflecting savings
resulting from the consolidation of the Company's executive offices in 1996
offset by increases in 1997 expenditures 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.

INTEREST EXPENSE AND DEBT ISSUE COSTS

         For the year ended December 31, 1997, interest expense and debt issue
cost decreased by $122,813 as compared to 1996, as a result of reduced levels of
debt.

INTEREST AND OTHER INCOME

         Interest and other income decreased by $113,113 during the year ended
December 31, 1997 compared to 1996 due to a reduction of notes receivables from
the Delaware joint venture.

INCOME TAX EXPENSE

         Federal and state income tax expense was $275,641 for the year ended
December 31, 1997 and -0- for the same period in 1996. At December 31, 1997, the
Company had net operating loss carryforwards for federal income tax purposes of
approximately $2,620,000, which may be carried forward to offset future taxable
income. The loss carryforwards expire in 2007 through 2014. The availability of
the loss carryforwards may be limited in the event of a significant change in
ownership of the Company or its subsidiaries.

EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION

         Earnings before interest, taxes, depreciation and amortization
(EBITDA), for the year ended December 31, 1997 improved by $977,955 over 1996
after exclusion of the impairment of long-lived assets (sale of Deadwood Gulch
Resort) to $2,341,136 for the year ended December 31, 1997. EBITDA should not be
construed as an indication of the Company's operating performance, or as an
alternative to cash flows from operating activities as a measure of liquidity.
The Company has presented EBITDA solely as supplemental disclosure because the
Company believes that it enhances the understanding of the financial performance
of companies with substantial depreciation and amortization.

         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

                                      -16-

<PAGE>

Casino for a full year, reimbursement of prior year's expenses by Dreamport,
Inc. (the 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

                                      -17-

<PAGE>

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 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.

         LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 1997, cash of $2,116,766 was provided
by operating activities. Sources of cash included net income of $986,799 more
fully explained above, increased by distributions from joint ventures of
$3,445,000, depreciation and amortization of $524,049, debt issue costs and debt
discount of $257,112 and other net sources of cash of $13,671, but reduced by
equity in income of joint ventures of $3,109,865. Cash from investing activities
was used in the amount of $456,450, primarily as a result of a decrease in notes
receivable of $1,236,708, but reduced by an increase in receivables from GTECH
and joint ventures of $778,856, deposits on purchase option of $890,000, and a
net change of $24,302 for assets sold and purchased. Cash used by financing
activities was $286,615 which was the result of proceeds from the exercise of
warrants of $3,500, reduced by repayment of debt totaling $290,115. As a result
of the above factors, there was a net increase in cash and cash equivalents of
$1,373,701.

         During 1997, the Company's working capital surplus improved by
$2,034,396 or 210.6% to $3,000,646 as of December 31, 1997.

         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, 8.5%
at December 31, 1997, and such principal amount, together with all accrued
interest, is due and payable in full upon demand by the holder of this note.
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 is a party to a series of agreements with GTECH Corporation,
a leading supplier of computerized systems and services for
government-authorized lotteries, 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. 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 has guaranteed to GTECH one-half of a $2.0 million loan to
the North Bend, Oregon Indian Tribe. GTECH also provides 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 was convertible, until January 1998 into
600,000 shares of Full House Common Stock. The loan conversion clause expired
without exercise. In addition, Full House has been reimbursed by

                                      -18-

<PAGE>

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 parties are no longer required to present gaming opportunities to the
other for joint development.

         The Company advanced funds to the Delaware joint venture company
totaling $1,886,498, of which $544,911 was outstanding as of December 31, 1997.
Such amount bears interest at prime plus 1% (9.5% at December 31, 1997) and is
payable from available operating cash flow of the joint venture company. The
note is secured by a similar payable 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, 1997 reflects the payoff of
the obligation in February, 1998.

         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. No assurance can be
given that a sale will ultimately be consummated.

         On May 31, 1995, DGR borrowed $5 million, secured by its real property.
The note bears interest at prime plus 2-1/4%, which was 10.75% at December 31,
1997. 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. McComas and Paulson and a
former director of the Company. 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. DGR was not in compliance with the minimum
tangible net worth covenant of the loan agreement at December 31, 1997. DGR has
obtained a waiver of the tangible net worth covenant through December 31, 1998.

         On February 23, 1998, the Company completed the purchase of a portion
of a proposed gaming site in Biloxi, Mississippi. The Company acquired the site
for $4,155,000 and the payment of certain related costs. The Company utilized
cash on hand of $2,155,000 and obtained a $2 million bank loan in connection
with the purchase. The bank loan is due in one year and bears interest at 1%
above the prime rate of the bank. The loan can be renewed under certain
circumstances. Negotiations to develop a theme hotel/casino at the site, with
investment partners, remain underway. The completion of the proposed transaction
is subject to the approval of all required Mississippi gaming authorities as
well as completion of due diligence, approval by the Company's Board of
Directors, execution of definitive agreements with respect to acquisition and
development of the site, and receipt of financing for the project.

         As of December 31, 1997, Full House had cumulative undeclared and
unpaid dividends in the amount of $1,155,000 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.

         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.

YEAR 2000 ISSUES

         The Company has implemented a Year 2000 program to ensure that its
computer systems and applications will function properly beyond 1999. The
Company believes that it has allocated adequate resources for this purpose and
expects its Year 2000 date conversion program to be completed successfully on a
timely basis. Although the ability of third parties with whom the Company
transacts business to address their Year 2000 issues is outside the Company's
control, the Company is discussing with its joint venture partners, significant
vendors and customers the possibility of any interface difficulties which may
affect the Company. The Company currently does not expect the costs necessary
to address this matter to be material to its financial condition or results of
operations.

7.       FINANCIAL STATEMENTS.

         The following financial statements are filed as part of this Report

         /bullet/  Independent Auditors' Report

         /bullet/  Consolidated Balance Sheet as of December 31, 1997

                                      -19-

<PAGE>

        /bullet/  Consolidated Statements of Operations for the years ended
                  December 31, 1997 and 1996

        /bullet/  Consolidated Statements of Stockholders' Equity for the Years
                  Ended December 31, 1997 and 1996

        /bullet/  Consolidated Statements of Cash Flows for the Years Ended
                  December 31, 1997 and 1996

        /bullet/  Notes to Consolidated Financial Statements

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

        None.

                                      -20-

<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 1998 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, 1998 are as follows:

          NAME           AGE                     POSITIONS
   ------------------    ---    ------------------------------------------
   William P. McComas     72    Chairman, Chief Executive Officer and President

   William R. Jackson     48    Executive Vice President-Corporate Finance

   Megan G. McIntosh      42    Secretary

         WILLIAM P. MCCOMAS became Chairman of the Board and Chief Executive
Officer on March 5, 1998 and became Chief Operating Officer and President of the
Company on October 10, 1997. Mr. McComas has been a Director of Full House since
November, 1992. Mr. McComas has been President of McComas Properties, Inc., a
California real estate development company since January 1984. Mr. McComas and
companies controlled by im have developed several hotels and resorts, including
Marina Bay Resort, Fort Lauderdale, Florida; Ocean Colony Hotel and Resort, Half
Moon Bay, California; Residence Inn by Marriott, Somers Point, New Jersey; and
five Holiday Inns located in Des Moines, Iowa; San Angelo, Texas; Suffern, New
York; Niagara Falls, New York; and Fort Myers, Florida.

         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 1998
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 1998
Annual Meeting of Stockholders of the Company.

                                      -21-

<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 1998
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.

                                      -22-

<PAGE>

         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)

                  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 Kober 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)

                                      -23-

<PAGE>

                  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)

                  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)

                                      -24-

<PAGE>

                  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)

                  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 Keweenah 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)

                                      -25-

<PAGE>

                  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 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 (Incorporated by reference to the
         Company's Annual Report on Form 10-KSB for the fiscal year ended
         December 31, 1996.)

                  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 (Incorporated by reference to the
         Company's Annual Report on Form 10-KSB for the fiscal year ended
         December 31, 1996.)

                  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 (Incorporated by reference to the
         Company's Annual Report on Form 10-KSB for the fiscal year ended
         December 31, 1996.)

                  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 (Incorporated by
         reference to the Company's Annual Report on Form 10-KSB for the fiscal
         year ended December 31, 1996.)

                  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. (Incorporated by reference
         to the Company's Annual Report on Form 10-KSB for the fiscal year ended
         December 31, 1996.)

                  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.

                                      -26-

<PAGE>

         (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.

Date:  March 31, 1998                By: /s/ WILLIAM P. MCCOMAS
                                         ---------------------------------------
                                         William P. McComas, CEO and 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/ WILLIAM P. MCCOMAS                                         March 31, 1998
------------------------------------------------------
William P. McComas, Chairman of the Board,
Chief Executive Officer and President

/s/ ALLEN E. PAULSON                                            March 31, 1998
------------------------------------------------------
Allen E. Paulson, Director

/s/ RONALD K. RICHEY                                            March 31, 1998
------------------------------------------------------
Ronald K. Richey, Director

/s/ ROBERT L. BROCK                                             March 31, 1998
------------------------------------------------------
Robert L. Brock, Director

/s/ JAMES C. GILSTRAP                                           March 31, 1998
------------------------------------------------------
James C. Gilstrap, Director

/s/ WILLIAM R. JACKSON                                          March 31, 1998
------------------------------------------------------
William R. Jackson, Executive Vice-President-Corporate
Finance (Principal Financial and Accounting Officer)

                                      -28-

<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, 1997, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended December 31, 1997 and 1996. 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, 1997, and the results of their operations and
their cash flows for the years ended December 31, 1997 and 1996 in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Reno, Nevada
March 25, 1998

                                      F-1

<PAGE>
<TABLE>
<CAPTION>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997

ASSETS

<S>                                                                             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                     $     2,422,884
  Note receivable - joint venture, current-portion                                      544,911
  Restricted cash                                                                       530,881
  Accounts receivable                                                                    10,210
  Receivable from director                                                              106,760
  Inventories                                                                            89,437
  Receivable from joint ventures                                                        343,200
  Prepaid expenses                                                                      286,126
                                                                                ---------------
    Total current assets                                                              4,334,409

ASSETS HELD FOR SALE - net                                                            5,542,078

INVESTMENTS IN JOINT VENTURES                                                         5,025,379

GOODWILL - net                                                                        1,898,517

NOTE RECEIVABLE - JOINT VENTURE                                                          23,748

OTHER ASSETS                                                                            922,612
                                                                                ---------------
TOTAL                                                                           $    17,746,743
                                                                                ===============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                             $       697,100
  Accounts payable                                                                       93,504
  Federal income taxes payable                                                           16,862
  Accrued expenses                                                                      526,297
                                                                                ---------------
    Total current liabilities                                                         1,333,763
                                                                                ---------------
LONG-TERM DEBT, net of current portion                                                6,190,562
                                                                                ---------------

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 $3,255,000                                           70
  Common stock, par value $.0001, 25,000,000 shares authorized;
    10,340,380 shares issued and outstanding                                              1,034
  Additional paid in capital                                                         16,957,487
  Accumulated deficit                                                                (6,736,173)
                                                                                ---------------
    Total stockholders' equity                                                       10,222,418
                                                                                ---------------
TOTAL                                                                           $    17,746,743
                                                                                ===============

</TABLE>
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, 1997 AND 1996

                                                          1997            1996
<S>                                                   <C>             <C>
OPERATING REVENUES:
  Casino                                              $   1,271,413   $   1,445,322
  Hotel/RV park                                           1,580,340       1,523,422
  Retail                                                  1,171,001       1,270,672
  Food and beverage                                         755,621         766,442
  Fun park                                                  564,958         704,208
  Joint ventures                                          3,109,865       2,109,033
                                                      -------------   -------------
                                                          8,453,198       7,819,099
  Less:  promotional allowances                            (154,409)       (148,761)
                                                      -------------   -------------
      Net operating revenues                              8,298,789       7,670,338
                                                      -------------   -------------

OPERATING COSTS AND EXPENSES:

  Casino                                                    916,783       1,064,909
  Hotel/ RV park                                            539,031         601,930
  Retail                                                  1,103,401       1,156,504
  Food and beverage                                         579,122         611,985
  Fun park                                                  338,224         504,991
  Sales and marketing                                       286,195         259,799
  General and administrative                              2,194,897       2,102,414
  Depreciation and amortization                             524,049         511,584
  Impairment of long-lived assets                             3,220       1,051,070
  Other                                                           -           4,625
                                                      -------------   -------------
           Total operating costs and expenses             6,484,922       7,869,811
                                                      -------------   -------------

INCOME (LOSS) FROM OPERATIONS                             1,813,867        (199,473)

OTHER INCOME (EXPENSE):
  Interest expense and debt issue costs
    (including $31,567 and $34,872 to related parties)     (696,052)       (818,865)
  Interest and other income                                 144,625         257,738
                                                      -------------   -------------

INCOME (LOSS) BEFORE INCOME TAXES                         1,262,440        (760,600)

INCOME TAX PROVISION                                       (275,641)              -
                                                      -------------   -------------

NET INCOME (LOSS)                                           986,799        (760,600)

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

NET INCOME (LOSS) APPLICABLE TO
  COMMON SHARES                                      $      776,799   $    (970,600)
                                                      =============   =============

INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTED    $         0.08   $       (0.09)
                                                      =============   =============

WEIGHTED AVERAGE NUMBER OF
    COMMON SHARES OUTSTANDING                            10,340,284      10,339,549
                                                      =============   =============
</TABLE>

See notes to consolidated financial statements.

                                      F-3
<PAGE>
<TABLE>
<CAPTION>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996


                                                                        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, 1996                 700,000    $  70    10,339,549  $1,034  $16,413,315   $(6,962,372)   $ 9,452,047

Net loss                            -         -            -       -            -         (760,600)      (760,600)

Issuance of stock options, net
  of deferred compensation
  expense                           -         -            -       -            -             -              -

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

BALANCE
  DECEMBER 31, 1996             700,000        70    10,339,549   1,034   16,853,042    (7,722,972)     9,131,174

Net income                          -          -           -        -           -          986,799        986,799

Amortization of deferred
  compensation expense              -          -           -        -        100,945          -           100,945

Proceeds from exercise
  of warrants                       -          -            831     -          3,500          -             3,500
                                 -------    -----    ----------  ------  -----------   -----------    -----------

BALANCE
  DECEMBER 31, 1997             700,000     $ 70     10,340,380  $1,034  $16,957,487   $(6,736,173)   $10,222,418
                               ========     ====     ==========  ======  ===========   ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                      F-4
<PAGE>
<TABLE>
<CAPTION>
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

                                                              1997         1996
<S>                                                         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                         $   986,799  $  (760,600)
  Adjustments to reconcile net income (loss) to net
    cash provided by operating activities:
    Depreciation and amortization                               524,049      511,584
    Debt issue costs and debt discount                          257,112      238,790
    Amortization of deferred compensation expense               100,945         -
    Impairment of long-lived assets                               3,220    1,051,070
    (Gain) loss on disposition of assets                           (274)       4,625
    Equity in earnings of joint ventures                     (3,109,865)  (1,274,663)
    Distributions from joint ventures                         3,445,000    1,383,298
    Investments in joint ventures                              (177,060)    (274,370)
    Changes in assets and liabilities:
      (Increase) decrease in restricted cash                     55,053     (361,159)
      (Increase) decrease in accounts receivable                (96,481)       4,470
      (Increase) decrease in inventories                          3,141       (1,848)
      Decrease in prepaid expenses                               31,598       55,495
      Increase in other assets                                   (1,479)     (24,305)
      Increase in federal income taxes payable                   16,862         -
      Increase in accounts payable
        and accrued expenses                                     78,146       60,189
                                                            -----------  -----------
        Net cash provided by operating activities             2,116,766      612,576
                                                            -----------  -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of assets held for sale                             (67,962)    (107,110)
  Proceeds from disposal of assets held for sale                 43,660         -
  (Increase) decrease in notes receivable                     1,236,708   (1,736,498)
  (Increase) decrease in receivables from
    GTECH and joint ventures                                   (778,856)  10,314,817
  Deposits on purchase option                                  (890,000         -
                                                            -----------  -----------
        Net cash (used in) provided by investing activitie     (456,450)   8,471,209
                                                            -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of debt                                   -       3,000,000
  Repayment of debt                                            (290,115) (11,391,356)
  Proceeds from exercise of warrants                              3,500         -
                                                            -----------  -----------
        Net cash used in financing activities                  (286,615)  (8,391,356)
                                                            -----------  -----------
</TABLE>
                                                                    (Continued)


<PAGE>
<TABLE>
<CAPTION>

FULL HOUSE RESORTS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996

                                                                1997        1996

<S>                                                           <C>         <C>

NET INCREASE IN CASH AND
  CASH EQUIVALENTS                                            1,373,701     692,429

CASH AND CASH EQUIVALENTS,
  BEGINNING OF YEAR                                           1,049,183     356,754
                                                            -----------  ----------

CASH AND CASH EQUIVALENTS,
  END OF YEAR                                                $2,422,884  $1,049,183
                                                            ===========  ==========

</TABLE>

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
    on January 5, 1987. FHRI is currently pursuing various gaming opportunities
    throughout North America.

    Through its subsidiary, Deadwood Gulch Resort and Gaming Corp. ("DGR"), FHRI
    currently operates a 99-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 3 and Note 13).

    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 5) which restrict the uses of
    substantially all of DGR's cash to operations and debt service of DGR.

    CONCENTRATIONS OF CREDIT RISK - The Company's financial instruments that are
    exposed to concentrations of credit risk consist primarily of cash
    equivalents. The Company's cash equivalents are in high quality securities
    placed with major banks and financial institutions.

    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. 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 1997 and 1996 totaled $506,268 and $507,914,
    respectively.

    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 $41,807 and $40,916 for the years ended December 31, 1997
    and 1996, respectively.

    IMPAIRMENT OF LONG-LIVED ASSETS - The Company has adopted 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." SFAS No. 121 establishes 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 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 and accounts
    payable, 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, 1997.

    INCOME TAXES - The Company accounts for income taxes in accordance with 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.

    EARNINGS (LOSS) PER COMMON SHARE - Statement of Financial Accounting
    Standards No. 128 (SFAS 128), "Earnings Per Share", was issued by the
    Financial Accounting Standards Board ("FASB") in February 1997, and
    establishes standards for computing and presenting earnings per share
    ("EPS") to make them comparable to international EPS standards. It replaces
    the presentation of primary EPS with a presentation of basic EPS and
    requires dual presentation of basic and diluted EPS for entities with
    complex capital structures. The Company adopted the provisions of SFAS No.
    128 during the fourth quarter of the year ended December 31, 1997. Earnings
    (loss) per common share is computed based upon the weighted average number
    of common and common equivalent shares outstanding during the year. The
    adoption of SFAS No. 128 had no effect on the prior year's disclosure of
    loss per common share. The common equivalent shares resulting from all stock
    options, warrants, convertible debt, and convertible preferred stock have
    not been included in the computations of dilutive earnings(loss) per share
    since their inclusion would have an anti-dilutive effect.

                                      F-8

<PAGE>

    AWARDS OF STOCK-BASED COMPENSATION - The Company has adopted SFAS No. 123,
    "ACCOUNTING FOR AWARDS OF STOCK-BASED COMPENSATION," which 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 continues to apply
    APB Opinion No. 25 to its stock based compensation awards to employees and
    discloses the required pro forma effect on net income (loss) and net income
    (loss) per common share (see Note 12).

    RECENTLY ISSUED ACCOUNTING STANDARDS - On June 30, 1997, the FASB issued
    SFAS No. 130, "REPORTING COMPREHENSIVE INCOME." This statement requires
    companies to classify items of other comprehensive income by their nature in
    a financial statement and display the accumulated balance of other
    comprehensive income separately from retained earnings and additional
    paid-in capital in the equity section of a statement of financial position,
    and is effective for the Company's fiscal year ending December 31, 1998.
    Management of the Company does not believe this new SFAS will have a
    material effect on the Company's consolidated financial statements.

    The FASB has issued SFAS No. 131, "DISCLOSURE ABOUT SEGMENTS OF AN
    ENTERPRISE AND RELATED INFORMATION," which establishes new standards for
    determining a reportable segment and for disclosing information regarding
    each such segment. A reportable segment is an operating segment: (a) that
    engages in business activities from which it earns revenues and incurs
    expenses, (b) whose operating results are regularly reviewed by the
    enterprise's chief operating decision maker in deciding how to allocate
    resources and in assessing performance, (c) for which discrete financial
    information is available, and (d) that exceeds specific quantitative
    thresholds. SFAS No. 131 will be effective for the Company beginning
    December 1, 1998. On adoption, and to the extent practicable, segment
    information for earlier comparative years will be restated. The Company
    anticipates, with the adoption of SFAS No. 131, it will expand its segment
    disclosures relative to its Oregon, Delaware, Michigan, California, South
    Dakota and Mississippi operations. The Company believes the segment
    information required to be disclosed under SFAS 131 will have no effect on
    the Company's consolidated results of operations, financial position or cash
    flows, but will be more comprehensive than previously provided, including
    expanded disclosure of income statement and balance sheet items for each of
    its reportable operating segments.

    RECLASSIFICATIONS - Certain 1996 amounts have been reclassified to conform
    to the current year presentation.

    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.

                                      F-9

<PAGE>

3.  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 and has therefore recorded an allowance for
    impairment as of December 31, 1997 of $4,154,290. The allowance was
    calculated using 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, 1997 and 1996, DGR reported net income
    before taxes of $421,597 and net loss of $769,479, respectively, including
    the impairment losses of $3,220 and $1,051,070, respectively.

4.  INVESTMENTS IN JOINT VENTURES

    GTECH RELATIONSHIP

    The Company entered into a series of agreements with GTECH in 1995 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").

    The Company contributed to the capital of the joint ventures its rights to
    agreements with the Coquilla Indian Tribe to finance and develop a gaming
    and entertainment facility in North Bend, Oregon and the rights to develop
    the Torres Martinez, Nottawaseppi Huron Band of Potawatomi and Delaware
    State Fair gaming projects. In payment for its interest in the joint
    ventures, GTECH contributed cash and other intangible assets 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, 1997, the Company had guaranteed one-half of a $3.55
    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 a stockholder 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.

                                      F-10

<PAGE>

    GELLC

    GELLC leases approximately 12.5 acres of Tribal Trust Lands from an entity
    owned by the Coquilla 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, and in
    1997 contributed to capital an additional $12,500 cash.

    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, 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

    GEDLLC developed, constructed and equipped a gaming entertainment center at
    Harrington Raceway in Harrington, Delaware, 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, 1997 and 1996, the Company has advanced funds to GEDLLC
    totaling $544,890 and $1,886,498, respectively, evidenced by a note which
    bears interest at prime plus 1% (9. 5% at December 31, 1997) 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, 1997 is based upon cash
    payments received through March 1998.

    GEMLLC

    In late 1996, GEMLLC renegotiated its management contract with the
    Nottawaseppi Huron Band of Potawatomi 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 by the Company to GEMLLC was
    approved by the tribe, and gaming development costs of $4,372,446 were
    contributed to capital of GEMLLC by the Company.

    During 1997, the Company contributed additional gaming development costs of
    $160,962 and cash of $12,500 to capital of GEMLLC. GEMLLC is a development
    stage company as of December 31, 1997.

    GECLLC

    GECLLC, pursuant to an agreement with the Torres Martinez Desert Cahuilla
    Indians, has certain rights to develop, manage and operate gaming activities
    for the tribe. During 1997, gaming development costs of $16,098 and cash of
    $12,500 were contributed to capital of GECLLC by the Company. During

                                      F-11

<PAGE>

    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, 1997.

    The following is a summary of condensed financial information for the joint
    ventures as of December 31, 1997 and 1996 and for the years then ended:

    1997
    CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                            GELLC        GEMLLC      GEDLLC      GECLLC      TOTAL

<S>                       <C>          <C>         <C>          <C>       <C>
    Current assets        $   385,998  $   25,165  $ 1,075,274  $ 25,146  $ 1,511,583
    Noncurrent assets         175,681   5,463,529    3,328,272   240,765    9,208,247
                          -----------  ----------  -----------  --------  -----------

    Total                 $   561,679  $5,488,694  $ 4,403,546  $265,911  $10,719,830
                          ===========  ==========  ===========  ========  ===========

    Current liabilities   $   195,985  $  170,549  $   967,487  $139,347  $ 1,473,368
    Members' capital          365,694   5,270,646      132,643   126,564    5,895,547
                          -----------  ----------  -----------  --------  -----------

    Total                 $   561,679  $5,488,694  $ 4,403,546  $265,911  $10,719,830
                          ===========  ==========  ===========  ========  ===========

    Company's equity
     in net assets        $   182,847  $4,712,928  $    66,322  $ 63,282  $ 5,025,379
                          ===========  ==========  ===========  ========  ===========

    1997
    CONDENSED STATEMENTS OF OPERATIONS

    Revenues              $ 2,062,212  $     -     $11,242,145  $   -     $13,304,357
                          ===========  ==========  ===========  ========  ===========

    Net income (loss)     $ 2,000,145  $  (19,424) $ 4,312,854  $(73,843) $ 6,219,732
                          ===========  ==========  ===========  ========  ===========

    Company's equity
     in net income
     (loss)               $ 1,000,073  $   (9,712) $ 2,156,426  $(36,922) $ 3,109,865
                          ===========  ==========  ===========  ========  ===========

</TABLE>

                                      F-12

<PAGE>
    1996
    CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>

                            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) $   519,112  $(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>

5.  DEBT

    Debt consists of the following at December 31, 1997:

<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 (10.75% at December 31, 1997); principal
      and interest due in monthly installments of $57,597 through May 31, 2002,
      at which time all unpaid principal and interest will be due.                $ 3,530,983

     Convertible, unsecured note payable to GTECH Corporation; original
      principal amount of $3,000,000, no payments or accrued interest until
      January 25, 1998 when interest began to 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 will be due. The note was convertible,
      subject to regulatory approval, at the holder's 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, recorded net of unamortized discount at December 31, 1997
      of $18,321 based on imputed interest rate of 8.25%. On January 25, 1998
      the conversion option expired.                                                2,981,679

     Note payable to stockholder; interest at prime (8.50%
      at December 31, 1997) payable quarterly commencing on
      January 31, 1996; principal payable on demand.                                  375,000
                                                                                  -----------
                                                                                    6,887,662
     Total
     Less current portion                                                             697,100
                                                                                  -----------
     Long-term portion                                                            $ 6,190,562
                                                                                  ===========
</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 as of December 31, 1997. However, DGR has obtained a
    waiver of the tangible net worth ratio requirement through December 31,
    1998.
                                      F-14

<PAGE>

    The scheduled maturities of debt are as follows:

        YEAR ENDING
        DECEMBER 31,

            1998                                                $  697,100
            1999                                                   359,013
            2000                                                   400,157
            2001                                                 3,427,695
            2002                                                 2,003,697
                                                                ----------
            Total                                               $6,887,662
                                                                ==========

6.  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 were based on a
      dilution agreement and, as of January 1, 1997, 778,534 warrants to
      purchase 925,988 shares of common stock at $4.20 per share were
      exercisable through February 10, 1997. 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 January 1, 1997, 57,500
      warrants to purchase 68,393 shares of common stock at $4.20 per share were
      exercisable through, and expired on February 10, 1997. As of December 31,
      1997, warrants to purchase 22,500 units were exercisable at $13.17 per
      unit through August 9, 1998.

      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 of which were exercisable at December 31, 1997.

      During 1997 options to purchase 750,000 shares of common stock at $3.375
      per share were issued to the directors of the Company, of which 250,000
      were exercisable at December 31, 1997.

      Additionally, one director was granted options to purchase 10,000 shares
      of common stock at $3.46 per share under the 1992 Nonemployee Director
      Stock Plan, all of which were exercisable at December 31, 1997.

      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 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
      $1,155,000 at December 31, 1997. Through December 31, 1997, no dividends
      have been declared or paid.

                                      F-15


<PAGE>

7.    INCOME TAXES

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

                                                  1997            1996

         Current federal provision             $  (16,862)     $      -
         Current state provision                 (258,779)            -
                                               ----------      --------
         Total current provision               $ (275,641)     $      -
                                               ==========      ========

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

                                                           1997        1996

        Tax (provision) benefit at U.S. statutory rate  $(429,230)  $ 266,000
        State taxes                                      (170,794)       -
        Change in valuation allowance                     493,249     (87,000)
        Goodwill amortization                            (172,131)   (177,000)
        Other                                               3,265      (2,000)
                                                        ---------   ---------
        Total                                           $(275,641)  $     -
                                                        =========   =========

      The Company's deferred tax items as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>

                                                     CURRENT  NON-CURRENT    TOTAL

<S>                                                 <C>       <C>         <C>
       Deferred tax assets:
        Net operating loss carryforward             $   -     $  890,765  $  890,765
        Tax credit carryforwards                        -         24,414      24,414
        Difference between book and tax basis
         of assets held for sale                        -      1,380,700   1,380,700
        Accrued expenses                             22,123         -         22,123
                                                    -------   ----------  ----------
        Total deferred tax assets                    22,123    2,295,879   2,318,002

       Deferred tax liabilities:
        Difference between book and tax basis of
         gaming rights                                  -     (2,008,915) (2,008,915)
        Other                                        (2,025)        -         (2,025)
                                                    -------   ----------  ----------
         Total deferred tax liabilities              (2,025)  (2,008,915) (2,010,940)

       Valuation allowance                          (20,098)    (286,964)   (307,062)
                                                    -------   ----------  ----------

       Net                                          $   -     $     -     $     -
                                                    =======   ==========  ==========
</TABLE>

      At December 31, 1997, the Company had net operating loss carryforwards for
      income tax purposes of approximately $2,620,000, which may be carried
      forward to offset future taxable income. The loss carryforwards expire in
      2007 through 2014. 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-16


<PAGE>

8.    RELATED PARTY TRANSACTIONS

      At December 31, 1997, the Company held a note receivable of $106,760 from
      a director of the Company.

      Total interest expense and debt issue costs charged to operations in 1997
      and 1996 related to the note payable to a stockholder were $31,567 and
      $34,872, respectively.

      See Notes 4 and 10 for discussion of transactions with joint ventures.

      See Note 5 for a discussion of a note payable to stockholder.

9. 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 $20,492 and $22,447 for the years
      ended December 31, 1997 and 1996, respectively.

10. SUPPLEMENTAL STATEMENT OF CASH FLOWS INFORMATION

      Cash payments for interest for the years ended December 31, 1997 and 1996
      were $440,612 and $694,602, respectively.

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

      During the year ended December 31, 1997, the Company purchased property
      with a fair value of $24,047, in exchange for property with a net book
      value of $11,005 which approximated its fair value, and cash payment of
      $13,042.

      During the year ended December 31, 1997, the Company transferred computer
      equipment with a net book value of $16,530 from assets held for sale to
      other assets.

      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, 1996 additional paid-in capital
      increased by $302,826 as a result of granting nonemployee stock options.
      This increase was offset by a decrease in additional paid-in capital
      resulting from the recording of deferred compensation expense for the same
      amount.

11.   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.

                                      F-17


<PAGE>

      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 shortly. Management is unable to
      determine the outcome of this litigation, but does not believe the outcome
      will have a material adverse effect on the Company'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"), as a
      result of the Company's acquisition (through the merger of its
      wholly-owned subsidiary with LAI) of an interest in certain property in
      Branson, Missouri. In October 1997, the Company resolved this lawsuit at
      no cost to Full House or its subsidiaries.

12.  STOCK-BASED COMPENSATION PLANS

      At December 31, 1997, the Company had three 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, Incentive Stock Plan (except as
      disclosed below related to options granted under the Incentive Stock Plan
      to a consultant/principal shareholder) and an informal director stock
      plan. Had compensation cost for options granted under the Company's three
      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 income (loss) and income (loss) per
      common share would have been restated to the pro forma amounts indicated
      below:
<TABLE>
<CAPTION>

                                                                              1997        1996

        <S>                                                                  <C>        <C>
        Net income (loss)                                   As reported     $ 986,799   $  (760,600)
                                                            Pro forma       $ 113,181   $(1,111,682)


        Income (loss) per common share, basic and diluted   As reported     $    0.08   $     (0.09)
                                                            Pro forma       $   (0.01)  $     (0.13)
</TABLE>

      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. The Company
      issued 10,000 options under the Plan during 1997.

      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

                                      F-18


<PAGE>

      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.

      On March 3, 1997 ("the Grant Date"), the Board of Directors approved a
      grant of an option ("Option") to each of the Company's three directors, to
      purchase 250,000 shares of common stock at an exercise price per share of
      $3.375, the closing price of the common stock on the business day of the
      Grant Date. The Options were granted in consideration of the fact that
      services to the Company by such directors have exceeded and are expected
      to continue to exceed the duties of a typical corporate director. On May
      12, 1997, at the Company's annual meeting, the stockholders ratified the
      Options. The Options become exercisable in 50,000 share increments
      commencing April 9, 1997 and on each anniversary thereafter. In addition,
      the Options for two of the directors provide that a 50,000 share increment
      became exercisable on the Grant Date.

      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
      1997 and 1996: expected volatility of 80 percent, risk-free interest rate
      of 6.2 percent and 6.1 percent, and expected life of 3.5 years and 2.5
      years. 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 stockholder,
      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 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 1992 Incentive Plan including the
      consulting options at December 31, 1997 and 1996 were 510,000. The total
      options outstanding under the Nonemployee Director Stock Plan and Director
      Stock Plan at December 31, 1997 was 10,000 and 750,000, respectively.
      There were no options outstanding under these plans at December 31, 1996.

      A summary of the status of the Company's incentive stock option plans
      (excluding options mentioned above which were issued to a
      consultant/principal stockholder) as of December 31, 1997 and 1996, and
      changes during the years then ended is presented below:

                                      F-19

<PAGE>
<TABLE>
<CAPTION>

                                                 1997                     1996
                                      ------------------------  -----------------------
                                                    WEIGHTED -                WEIGHTED -
                                                    AVERAGE                   AVERAGE
                                        SHARES   EXERCISE PRICE   SHARES   EXERCISE PRICE
                                      ---------  --------------   -------  --------------
<S>                                   <C>        <C>              <C>      <C>
Outstanding at beginning of year        260,000     $   3.31      210,000   $   6.35

Granted                                 760,000     $   3.38       50,000   $   3.31

Exercised                                  --                        --

Forfeited                                  --                        --
                                      ---------                ----------
Outstanding at end of year            1,020,000     $   3.36      260,000   $   3.31
                                      =========                ==========
Options exercisable at year-end         490,000     $   3.35      190,000   $   3.31

Weighted-average fair value of
  options granted during the year     $    1.97                 $    2.02
</TABLE>


      As of December 31, 1997, the 260,000 incentive options outstanding under
      the 1992 Incentive option plan all have an exercise price of $3.31 and a
      weighted-average remaining contractual life of 6.9 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. On January 9,
      1998, 150,000 of the 260,000 incentive options outstanding under the
      Incentive option plan were forfeited.

13.   SUBSEQUENT EVENTS


      On February 23, 1998, the Company completed the purchase of a portion of a
      proposed gaming site in Biloxi, Mississippi. The Company acquired the site
      for $4,155,000 and the payment of certain related costs. The Company
      utilized cash on hand of $2,155,000 and obtained a $2 million bank loan in
      connection with the purchase. The bank loan is due in one year and bears
      interest at 1% above the prime rate of the bank. The loan can be renewed
      under certain circumstances. Negotiations to develop a theme hotel/casino
      at the site, with investment partners, are underway. The completion of the
      proposed transaction is subject to the approval of all required
      Mississippi gaming authorities as well as completion of due diligence,
      approval by the Company's Board of Directors, execution of definitive
      agreements with respect to acquisition and development at the site, and
      receipt of financing for the project.

      On March 6, 1998, California Governor Pete Wilson announced that he had
      reached an agreement on a compact for gaming which is intended to be the
      standard for gaming compacts with all Indian tribes in California. The
      compact would limit electronic gaming devices in Indian casinos to
      lottery-style devices and limit the number of devices to 19,900 statewide,
      which would be allocated equally among California's 100 federally
      recognized tribes. Tribes that do not choose to operate their own casinos
      could lease their allotment of gaming devices for up to $5,000 per device,
      per year. Tribal casinos would be limited to 975 gaming devices each,
      including leased machines. Tribes have been given 60 days from the March
      6, 1998 date to either negotiate a separate compact or agree to the terms
      of the proposed standard compact. The Torres-Martinez Tribe has not
      determined which option to pursue; therefore, the Company cannot determine
      the impact of this event on the future development of gaming operations
      with the tribe by GECLLC.

      On March 25, 1998, the Company announced that it has reached an agreement
      for the sale of Deadwood Gulch Resort to a group of South Dakota
      businessmen. The buyer has paid over a non-refundable deposit of $300,000
      to the Company and closing of the sale is scheduled to take place May 12,
      1998. Closing is subject to the approval of the South Dakota gaming
      authorities.

                                      F-20

<PAGE>



                                 EXHIBIT INDEX

EXHIBIT                      DESCRIPTION
-------                      -----------
  21      List of Subsidiaries of Full House Resorts, Inc.*

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

  27.1    Financial Data Schedule*