U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________________ TO
_____________________
Commission File No. 0-20630
FULL HOUSE RESORTS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 13-3391527
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Deadwood Gulch Resort
Highway 85 South
P.O. Box 643
Deadwood, South Dakota 57732
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(Address of principal executive offices) (zip code)
(605) 578-1294
-------------------------------
(Registrant's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
As of May 1, 1996, Registrant had 10,339,549 shares of its $.0001 par value
common stock outstanding.
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FULL HOUSE RESORTS, INC.
TABLE OF CONTENTS
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PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 3
Consolidated Statements of Operations for the three months ended March
31, 1996 and 1995 4
Consolidated Statements of Cash Flows for the three months ended March
31, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 13
Signature Page 14
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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MARCH 31, DECEMBER 31,
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 2,599,526 $ 356,754
Restricted cash 283,546 224,775
Accounts receivable 17,865 24,959
Receivables from GTECH 89,456 1,149,486
Receivables from joint ventures - 10,211,703
Inventories 96,922 90,730
Prepaid expenses 242,310 373,217
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Total current assets 3,329,625 12,431,624
GAMING RIGHTS 3,258,836 3,258,836
ASSETS HELD FOR SALE - net 6,308,785 6,560,333
INVESTMENTS IN JOINT VENTURES 1,029,812 862,508
GOODWILL - net 2,784,486 2,912,698
OTHER ASSETS 11,638 11,750
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TOTAL $16,723,182 $26,037,749
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 652,383 $11,042,260
Accounts payable 315,877 386,914
Accrued expenses 439,801 611,334
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Total current liabilities 1,408,061 12,040,508
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LONG-TERM DEBT, net of current portion 6,748,409 4,545,194
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Cumulative, convertible preferred stock,
par value $.0001, 5,000,000 shares authorized;
700,000 shares issued and outstanding;
aggregate liquiditation preference of
$2,887,500 and $2,835,000 70 70
Common stock, par value $.0001, 25,000,000
shares authorized; 10,339,549 shares issued
and outstanding 1,034 1,034
Additional paid in capital 16,413,315 16,413,315
Accumulated deficit (7,847,707) (6,962,372)
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Total stockholders' equity 8,566,712 9,452,047
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TOTAL $16,723,182 $26,037,749
=========== ===========
See notes to consolidated financial statements.
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
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THREE MONTHS ENDED
MARCH 31,
1996 1995
OPERATING REVENUES:
Casino $ 298,894 $ 278,879
Hotel/RV park 206,254 182,968
Retail 227,462 194,979
Food and beverage 178,626 119,507
Fun park 47,326 50,032
Joint ventures 172,168 -
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1,130,730 826,365
Less: promotional allowances (52,137) (39,433)
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Net operating revenues 1,078,593 786,932
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OPERATING COSTS AND EXPENSES:
Casino 258,959 283,723
Hotel/RV park 130,538 117,500
Retail 212,933 180,594
Food and beverage 131,800 106,582
Fun park 70,607 77,157
Sales and marketing 53,183 37,690
General and administrative 501,490 665,432
Depreciation and amortization 130,717 162,722
Impairment of long-lived assets 250,000 -
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Total operating costs and expenses 1,740,227 1,631,400
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LOSS FROM OPERATIONS (661,634) (844,468)
OTHER INCOME (EXPENSE):
Interest expense and debt issue costs (251,115) (87,790)
Interest and other income 27,414 6,145
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NET LOSS (885,335) (926,113)
Less, undeclared dividends
on cumulative preferred stock 52,500 52,500
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NET LOSS APPLICABLE TO
COMMON SHARES $ (937,835) $ (978,613)
=========== ==========
LOSS PER COMMON SHARE $ (0.09) $ (0.11)
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,339,549 8,893,017
=========== ==========
See notes to consolidated financial statements.
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
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THREE MONTHS ENDED
MARCH 31,
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (885,335) $ (926,113)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 130,717 162,722
Debt issue costs 9,312 2,904
Impairment of long-lived assets 250,000 -
Changes in assets and liabilities:
Increase in restricted cash (58,771) -
Decrease in accounts receivable 7,094 5,588
(Increase) decrease in inventories (6,192) 351
Decrease in prepaid expenses 130,907 79,489
Increase (decrease) in accounts payable
and accrued expenses (242,570) 166,904
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Net cash used in operating activities (664,838) (508,155)
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CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and equipment (10,157) (38,126)
Increase in investments in joint ventures (69,890) -
Decrease in receivables from GTECH and joint
ventures 11,174,319 -
Gaming development costs - (1,518,079)
Other - 9,122
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Net cash provided by (used in)
investing activities 11,094,272 (1,547,083)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 3,000,000 2,176,583
Repayment of debt (11,186,662) (36,883)
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Net cash provided by (used in)
financing activities (8,186,662) 2,139,700
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NET INCREASE IN CASH AND CASH EQUIVALENTS 2,242,772 84,462
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 356,754 384,670
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,599,526 $ 469,132
=========== ==========
See notes to consolidated financial statements
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS - The interim consolidated financial
statements of Full House Resorts, Inc. (the "Company") included herein
reflect all adjustments which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods
presented. All such adjustments are of a normal recurring nature. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission.
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in Full
House Resorts, Inc.'s Annual Report on Form 10-KSB for the year ended
December 31, 1995.
The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1996.
CONSOLIDATION - The consolidated financial statements include the accounts
of the Company and all its majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
2. RECENTLY ISSUED ACCOUNTING STANDARDS ADOPTED
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "ACCOUNTING FOR
STOCK-BASED COMPENSATION," which was adopted by the Company during the
first quarter of 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but
does not require) compensation cost to be measured based on the fair value
of the equity instrument awarded. Companies are permitted, however, to
continue to apply APB Opinion No. 25, which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The Company
will continue to apply APB Opinion No. 25 to its stock-based compensation
awards to employees and will disclose the required pro forma effect on net
income and earnings per shares.
3. GTECH LOAN
On January 26, 1996, GTECH loaned the Company $3 million, which loan is
convertible, subject to regulatory approval, into 600,000 shares of the
Company's common stock. The loan is non-interest bearing through January
25, 1998, at which time the note begins to accrue interest at the prime
rate. Monthly interest only payments commence on February 1, 1998, with
the total principal and any unpaid interest due on January 25, 2001.
4. LETTER OF INTENT
On April 9, 1996, the Company signed a non-binding letter of intent for
the sale of Deadwood Gulch Resort ("DGR"). Subsequently, during May 1996,
negotiations with the purchaser under the letter of intent terminated.
The Company will continue its efforts to sell DGR.
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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.
Further analysis of the estimated realizable value of the assets held for
sale resulted in an additional impairment loss of $250,000 recorded in the
quarter ended March 31, 1996.
******
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RECENT DEVELOPMENTS
Effective December 29, 1995, Full House entered into a series of
agreements with GTECH Corporation. Pursuant to the agreements, limited liability
joint venture companies were formed which are equally owned by GTECH and Full
House. The rights of Full House to agreements with various Indian tribes and the
Delaware State Fair were contributed to the joint ventures. See "Results of
Operations" and "Liquidity."
On April 9, 1996, the Company signed a non-binding letter of intent for
the purchase of the Deadwood Gulch Resort by RGB Deadwood Gulch L.L.C. Although
negotiations for the sale of the resort to RGB Deadwood Gulch L.L.C. terminated
on May 15, 1996, the Company is still actively marketing the Resort for sale.
The Company determined that continued ownership of the Resort is not
consistent with its future plans which anticipate focusing on gaming
facilities in areas of higher population density and locations at which
applicable regulations permit high stakes and expanded types of gaming. Any
sale will be subject to approval by the Company's stockholders and a finding by
the South Dakota Commission on Gaming that the purchaser is suitable to obtain
a gaming license in South Dakota. There can be no assurance that a sale will
ultimately be consummated.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
Revenues for the three months ended March 31, 1996 increased $304,365
to $1,130,730, as compared with revenues of $826,365 for the three months ended
March 31, 1995. The increase was due to income from joint ventures of $172,168
and Resort revenues of $132,197.
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 three of its present gaming ventures. Excluded
were the Deadwood Gulch Resort and an additional venture where assignment was
not completed pending further discussions with the tribe and with the holder of
a 15% interest in that gaming contract. If assignment is not completed, Full
House will assign its rights to revenues and GTECH will bear an appropriate
portion of the expenses. 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 $172,168 for the three months ended March 31, 1996.
CASINO OPERATIONS. Revenues increased $20,015 or 7.2% for the three
months ended March 31, 1996 over the same period in 1995. Departmental expenses
decreased $24,764 or 8.7% for the three months ended March 31, 1996 from 1995.
As a result of the increase in revenues and decrease in expenses, departmental
profit increased by $44,779 as compared to the same period in 1995. Management
attributes the improvements to an aggressive promotion of tour bus business.
HOTEL/RV RESORT. Hotel occupancy increased 30.1% for the three months
ended March 31, 1996, and the average daily rate decreased by 13.0% to $35.77.
As a result, revenues for the period increased $23,286 or 12.7% for the Hotel.
Hotel/RV Resort departmental profit increased $10,248 or 15.7%. Management
attributes the improvements to an aggressive promotion of tour bus business.
RETAIL. Revenues increased by $32,483 or 16.7% for the three months
ended March 31, 1996 from 1995. Departmental profit of $14,529 for the
three months ended March 31, 1996 from 1995 was only slightly higher than
the prior year period based upon the fact that the increased sales were
primarily of low margin goods.
FOOD AND BEVERAGE. Revenues for the three months ended March 31, 1996
were $178,626 (which includes $48,808 of promotional allowances), an increase of
$59,119 or 49.5% from 1995 revenues of $119,507 (which included $36,548 of
promotional allowances for the three months ended March 31, 1995). The
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departmental loss after subtracting promotional allowances decreased $21,641
over 1995. Management attributes the improvement to better cost of sales
management and the development of a new menu, repositioning the restaurant in
the market.
GULCHES OF FUN FAMILY CENTER. Revenues for the three months ended March
31, 1996 decreased $2,706 from 1995 and departmental loss decreased $3,844 from
the comparable period in 1995.
SALES AND MARKETING EXPENSES. Sales and Marketing expenses increased
$15,493 for the three months ended March 31, 1996 as compared to the prior year
period due to an aggressive tour bus program.
GENERAL AND ADMINISTRATIVE EXPENSES - RESORT. Expenses decreased
$32,168 for the three months ended March 31, 1996 from the comparable period in
1995.
NON-RESORT GENERAL AND ADMINISTRATION EXPENSES. Non-Resort expenses for
the three months ended March 31, 1996 totaled $362,342, a decrease of $131,774
over the prior year period. 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 $32,005 for the
three months ended March 31, 1996 over the comparable period in 1995. This
decrease is due to suspension of depreciation of the Resort offset by the
amortization of goodwill.
IMPAIRMENT OF LONG LIVED ASSETS. In January, 1996, the Company
announced its intent to dispose of the Deadwood Gulch Resort. The Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, during the fourth
quarter of the year ended December 31, 1995. Under SFAS No. 121, the Company
reviews the carrying values of its long-lived 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 additional loss may be incurred upon disposition,
the Company further reduced the carrying value of the Deadwood Gulch Resort in
1996 by $250,000. Pursuant to SFAS No. 121, the Company has suspended recording
depreciation of the assets of the Deadwood Gulch Resort.
INTEREST EXPENSE AND DEBT ISSUE COSTS. Interest expense and debt issue
costs increased by $163,325 during the three months ended March 31, 1996
primarily due to refinancing the first mortgage on the Deadwood Gulch Resort.
INTEREST AND OTHER INCOME. Interest and other income increased to
$27,414 during the three months ended March 31, 1996 as compared to the
comparable period in 1995 due to interest earned on cash deposits as a result of
payments received as a result of the transactions with GTECH.
LIQUIDITY AND CAPITAL RESOURCES
For the three-month period ending March 31, 1996, cash flow used in
operating activities was $664,838. Cash flow from investing activities was
$11,094,272. The major item impacting this positive flow of cash from investing
activities was the receipt by the Company from GTECH and the joint venture
companies of approximately $11,174,000. Cash flow used in financing activities
was $8,186,662. The repayment of debt of $11,186,662 was offset by the
$3,000,000 proceeds from the issuance of a convertible note to GTECH. As a
result of the above, the Company's net cash and cash equivalents increased by
$2,242,772 to $2,599,526.
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On March 24, 1994, Allen E. Paulson purchased 1,000,000 shares of Full
House's common stock for $800,000. Full House also issued 500,000 shares of its
Common Stock to Mr. Paulson in exchange for his agreement to individually
provide or to take such actions as were required for a financial institution to
provide a commercial line of credit to Full House in the minimum amount of $8
million. Full House valued the shares of stock at $.80 per share based upon the
size of the transaction, the fact that the shares were not registered and are
not subject to registration rights. In addition, a large block of shares was
repurchased by the Company from a then principal stockholder at at a price per
share and time sequence reasonably close to the transaction with Mr. Paulson.
The 500,000 shares issued to Mr. Paulson as compensation for securing the $8
million financing were charged as a period cost in Full House's results of
operation for 1994. On June 7, 1994, Bank of America, as a result of the joint
and several guarantees of the full amount of the loan by Mr. Paulson and the
other directors of Full House, provided Full House with a line of credit in the
amount of $8 million at the "reference rate" of Bank of America, N.A. Amounts
outstanding under this line of credit bear interest at the bank's "reference
rate" and are due and payable upon demand or, if no demand is made, on July 1,
1996. Full House believes that it would have been unable to obtain this line of
credit without the actions of Mr. Paulson, as its financial condition would not
have supported such an extension of credit.
On March 23, 1995, LAI Associates, Inc., a corporation wholly-owned by
Lee Iacocca, merged with a subsidiary of Full House and became a wholly-owned
subsidiary of Full House. The Company issued 1,250,000 shares of Common Stock to
Mr. Iacocca. In exchange, the Company received LAI's interest in its agreements
with the Organized Tribes (55%), Nottawaseppi Huron Band of Potawatomi (55%),
Torres Martinez Desert Cahuilla Indians (50%) and Delaware State Fair (50%)
projects. The remainder of the interests in these projects was acquired through
the Omega merger described below. Subsequently, Full House returned to Mr.
Iacocca a 25% interest in a total of 21 acres of land in Branson, Missouri, and
a 50% interest in certain royalties receivable. In exchange, Mr. Iacocca
returned 193,529 shares of Common Stock to Full House in March, 1996.
On November 20, 1995, Full House merged a wholly-owned subsidiary into
Omega Properties Inc. (30% owned by William P. McComas, a director/stockholder
of the Company). In exchange, the shareholders of Omega received an aggregate of
500,000 shares of Full House Common Stock and a promissory note of Full House in
the principal amount of $375,000. The principal amount of this promissory note
accrues interest, payable quarterly, at a rate equal to the "prime" rate and
such principal amount, together with all accrued interest, is due and payable in
full upon demand by the holder(s) of this note, but in no event before August
31, 1996. William P. McComas received the note and Mr. Fugazy, the other
stockholder of Omega, received the shares in exchange for their interests as
shareholders of Omega. 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.
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
certain other specified projects) 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 corporations 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 and Delaware State Fair Projects
to the joint venture companies. Full House has agreed, subject to further
discussion with the Nottawaseppi Huron Band of Potawatomi and with the holder of
a 15% interest in that gaming contract, to assign to a joint venture company its
rights to develop a project with such Tribe. If the assignment is not completed,
Full House will assign its rights to revenues and GTECH will bear an appropriate
portion of the expenses related thereto.
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 entities up to $16.4 million to complete the North Bend,
Oregon and Delaware facilities. Full House has agreed to guarantee one-half of
the obligations of the joint venture companies to GTECH under these loans and at
March 31, 1996 had guaranteed to GTECH one-half of $10.4 million of such loans
to the North Bend, Oregon joint venture company. Upon completion of the Delaware
project, currently anticipated in August 1996, Full House will execute a
guarantee to GTECH of one-half of the amounts loaned to the joint venture
company by GTECH. The amount of the guarantee is currently estimated to be
approximately $4.5 million. The guarantees provide for full subrogation of Full
House to GTECH's rights and prohibit acceleration of the underlying indebtedness
so long as Full House makes the defaulted payments. The terms of the loans vary
by project, but in those instances in which the joint venture companies loan
funds to others involved in the project (e.g., North Bend, Oregon), the loans
to the joint venture companies are intended to be a mirror image of the loans
between the joint ventures and the third parties.
GTECH will also provide project management, technology and other
expertise to analyze and develop/manage the implementation of
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opportunities developed by the joint venture entities. GTECH has also loaned
Full House $3 million, which loan is convertible, subject to regulatory approval
into 600,000 shares of Full House's Common Stock. In addition, Full House has
been reimbursed by one of the joint venture companies for certain advances and
expenditures made by Full House relating to the gaming development agreements.
As part of this transaction, the directors of Full House and Lee Iacocca have
granted to GTECH an option to purchase their shares should they propose to
transfer the same.
The agreement between Full House and GTECH provides that the joint
venture partners will provide funds needed to finance the development of the
joint venture projects. While the amounts necessary to finance the development
of the projects are subject to regulatory approval and adjustment as the
projects are more fully developed, the Company estimates that the amount to be
provided by the joint venture companies will be approximately $70 million during
the next three years. Although the agreement between Full House and GTECH
establishes a preference for obtaining non-recourse financing for the projects
undertaken in the joint venture companies, it may not be possible to obtain
needed funds in this manner. In the event that Full House is unable to obtain
the required funds on more favorable terms, GTECH has agreed to lend to Full
House its required portion of the financing at GTECH's cost of financing plus
22.5% of Full House's share of the "Profits" from the venture until the later of
repayment of the loan or one year after the project begins to receive revenues
from patrons of the facilities comprising the project. In the event that GTECH
loans funds to a joint venture entity, Full House has agreed to guarantee
one-half of the obligations of the joint venture company to GTECH.
Full House borrowed $4 million from GTECH during 1995. Such amounts
were repaid on January 26, 1996 with funds received as a part of the agreement
with GTECH. Interest expense on this indebtedness was $270,517.
As a result of its agreements with GTECH, receipt by Full House of
revenues from the operations of projects (other than the Deadwood Gulch Resort)
is governed by the terms of the joint venture agreements applicable to such
projects. These contracts provide that net cash flow (after certain deductions)
is to be distributed monthly to Full House and GTECH. While Full House does not
believe that this arrangement will adversely impact its liquidity, no assurances
of the same can be given based upon the lack of operating experience with this
structure.
On July 19, 1995, an addendum to the agreement with the Coquille Indian
Tribe was executed. Pending regulatory approval, the addendum will reduce the
obligation of the Full House-GTECH joint venture company to provide financing to
$10.4 million, extend the date when repayments begin and modify the method of
computing participating rents (from net revenues to modified gross revenues) and
loan repayments. Lease and debt payments commenced on August 19, 1995, and
September 19, 1995, respectively. As of March 31, 1996, the Full House-GTECH
joint venture company had advanced approximately $10.7 million for the project
of which approximately $.5 million had been repaid.
On May 31, 1995, DGR borrowed $5 million, secured by its real property.
The proceeds from the loan were used to repay its obligation to H. Joe Frazier,
a stockholder and a then director of the Company, and to repay a portion of the
revolving note payable to Bank of America. The note bears interest at 10.25%
through May, 1996, and at prime plus 2-1/4% for the period June 1, 1996 through
May 1, 2002. Payments are due in monthly installments of principal and interest
based on a ten-year amortization with the remaining balance due on May 31, 2002.
A portion of the loan has been guaranteed by Messrs. Frazier, McComas and
Paulson. The agreement restricts substantially all of DGR's cash to pay
operating expenses and debt service of DGR. Cash from operations is placed into
a series of restricted accounts to pay obligations in the following priority:
(1) operating expenses of DGR for the current month; (2) a reserve for operating
expenses for off-season months; (3) a reserve for debt service (over and above
scheduled payments); and (4) an asset replacement reserve. Because of these
restrictions, no DGR cash has been available for dividends or distribution to
the Company for expansion purposes. The agreements also include financial
covenants which require maintenance of minimum tangible net worth and debt
service coverage ratios. The Company was not in compliance with these covenants
at December 31, 1995. However, the lender has waived these defaults through the
year ended December 31, 1996. The Company prepaid $751,827 of this indebtedness
in March, 1996.
The 800,000 Warrants and 80,000 units (the "Representative's Units")
issued to the representative of the underwriters in Full House's 1993 public
offering became exercisable on August 10, 1994. Each Warrant may be exercised
for 1.1894 shares of Common Stock at a price of $4.20 per share. As of May 6,
1996, 778,534 Warrants to purchase 925,988 shares were outstanding. Full House
may, in accordance with the Warrant
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Agreement, call the Warrants. Each Representative's Unit (each consisting of
three shares of Common Stock and the right to buy one additional share) may be
exercised at a price of $13.17 per Unit. The Warrants can be exercised until
February 10, 1997. As of March 15, 1996, a total of 57,500 Representative's
Units had been exercised, leaving a balance of 22,500 which may be exercised. As
a result of such exercises, 57,500 warrants, which were included in the
Representative's Units, are now outstanding.
As of March 31, 1996, Full House had cumulative undeclared and unpaid
dividends in the amount of $787,500 on the 700,000 outstanding shares of its
1992-1 Preferred Stock. Such dividends are cumulative whether or not declared,
and are currently in arrears.
Full House had working capital of $1,921,564 as of March 31, 1996.
Additional financing will be required for the Company to effect its
business strategy and no assurance can be given that such financing will be
available upon commercially reasonable terms.
-12-
<PAGE>
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of March 31, 1996, cumulative dividends were $787,500,
which were undeclared, unpaid and were in arrears, with
respect to the Company's Series 1992-1 Preferred Stock, which
class ranks prior to the Company's Common Stock with regard to
dividend and liquidation rights.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FULL HOUSE RESORTS, INC.
Date: July ____, 1996 By /s/ William R. Jackson
--------------------------------------
William R. Jackson, Executive Vice President -
Corporate Finance and Principal Financial
Officer
-14-
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<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
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