U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
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.
----------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3391527
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 W. SAHARA AVE.
SUITE 450, BOX 23
LAS VEGAS, NEVADA 89102
- ------------------------------------ --------
(Address of principal executive offices) (zip code)
(702) 221-7800
-------------------------------
(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 9, 2000, Registrant had 10,340,380 shares of its $.0001 par value
common stock outstanding.
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FULL HOUSE RESORTS, INC
TABLE OF CONTENTS
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PAGE
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PART I. Financial Information
Item 1. Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets
as of March 31, 2000 and December 31, 1999 3
Unaudited Condensed Consolidated Statements of Operations
for the three months ended March 31, 2000 and 1999 4
Unaudited Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. Other Information 11
Signatures 11
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 285,450 $ 438,800
Income tax refund receivable -- 34,057
Prepaid expenses 94,818 87,590
------------ ------------
Total current assets 380,268 560,447
LAND HELD FOR DEVELOPMENT 4,621,670 4,621,670
FIXTURES AND EQUIPMENT - net 63,161 69,413
GOODWILL - net 759,414 885,981
NOTE RECEIVABLE - JOINT VENTURE 928,070 839,580
INVESTMENTS IN JOINT VENTURES 3,758,961 3,672,175
DEFERRED TAX ASSET 567,427 614,083
DEPOSITS AND OTHER ASSETS 2,656,345 2,620,487
------------ ------------
TOTAL $ 13,735,316 $ 13,883,836
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,155 $ 19,238
Payable to joint ventures 121,910 60,077
Accrued expenses 125,591 190,332
------------ ------------
Total current liabilities 259,656 269,647
------------ ------------
LONG-TERM DEBT 3,600,000 3,750,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Cumulative, preferred stock, par value $.0001, 5,000,000
shares authorized; 700,000 shares issued and outstanding;
aggregate liquidation preference of $3,727,500 and $3,675,000 70 70
Common stock, par value $.0001, 25,000,000 shares authorized;
10,340,380 shares issued and outstanding 1,034 1,034
Additional paid in capital 17,388,309 17,374,449
Accumulated deficit (7,513,753) (7,511,364)
------------ ------------
Total stockholders' equity 9,875,660 9,864,189
------------ ------------
TOTAL $ 13,735,316 $ 13,883,836
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
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<S> <C> <C>
OPERATING REVENUES:
Joint ventures $ 865,600 $ 864,079
OPERATING COSTS AND EXPENSES:
Joint venture pre-opening costs 136,627 25,106
General and administrative 432,016 560,241
Depreciation and amortization 132,818 130,507
------------ ------------
Total operating costs and expenses 701,461 715,854
------------ ------------
INCOME FROM OPERATIONS 164,139 148,225
Interest expense and debt issue costs (82,278) (66,663)
Interest and other income 3,406 15,776
------------ ------------
Income before income taxes and cumulative effect
of change in accounting principle 85,267 97,338
INCOME TAX PROVISION (87,656) (65,151)
------------ ------------
Net income (loss) before cumulative effect of change in accounting principle (2,389) 32,187
Cumulative effect of change in accounting principle, net of tax -- (543,870)
------------ ------------
NET LOSS (2,389) (511,683)
Less, undeclared dividends on cumulative preferred stock 52,500 52,500
------------ ------------
NET LOSS APPLICABLE TO COMMON SHARES $ (54,889) $ (564,183)
============ ============
Loss per common share before cumulative effect of change in
accounting principle, Basic and Diluted $ (0.01) $ (0.00)
Change in accounting principle, Basic and Diluted -- (0.05)
------------ ------------
NET LOSS PER COMMON SHARE, Basic and Diluted $ (0.01) $ (0.05)
============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 10,340,380 10,340,380
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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<PAGE>
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,389) $ (511,683)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 132,818 130,507
Amortization of deferred compensation expense 13,860 39,096
Cumulative effect of change in accounting principle -- 543,870
Equity in income of joint ventures (728,973) (838,973)
Distributions from joint ventures 642,187 778,279
Changes in assets and liabilities:
Receivables 34,057 35,871
Prepaid expenses (7,228) 27,343
Other assets (10,858) --
Deferred taxes 46,656 --
Accounts payable and accrued expenses (71,823) (42,562)
----------- -----------
Net cash provided by operating activities 48,307 161,750
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment -- (24,532)
Deposits on purchase options (25,000) (1,025,000)
Receivables from joint ventures (26,657) 111,033
----------- -----------
Net cash used in investing activities (51,657) (938,499)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit -- 1,000,000
Repayment of line of credit (150,000) (1,000,000)
----------- -----------
Net cash used in financing activities (150,000) --
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (153,350) (776,749)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 438,800 1,092,178
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 285,450 $ 315,429
=========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
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<PAGE>
FULL HOUSE RESORTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM CONDENSED FINANCIAL STATEMENTS - The interim condensed
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 fairly the financial
position and results of operations 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 accounting principles generally
accepted in the United States of America have been omitted pursuant to
the rules and regulations of the Securities and Exchange Commission.
These unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1999. The results of operations for the
period ended March 31, 2000 are not necessarily indicative of the
results to be expected for the year ending December 31, 2000.
CONSOLIDATION - The unaudited condensed consolidated financial
statements include the accounts of the Company and all its
majority-owned subsidiaries. All material intercompany accounts and
transactions have been eliminated.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified
to conform with the current year presentation.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Investments and Hedging Activities."
This statement establishes accounting and reporting standards for
derivative investments, including certain derivative investments
embedded in other contracts, and hedging activities. It requires that
an entity recognize all derivatives either as assets or liabilities in
the statement of financial position, and measure those instruments at
fair value, and is effective for all fiscal quarters of the fiscal
years beginning June 15, 2000. This is a complex accounting standard;
however, the Company does not expect the adoption of this statement to
have a material impact on the consolidated financial statements of the
Company.
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3. SEGMENT INFORMATION
The Company has two primary business segments. The Joint Venture
segment includes the ventures with GTECH Corporation, and the Corporate
segment reflects the administrative and development expenses of the
business.
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2000 JOINT
VENTURES CORPORATE CONSOLIDATED
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<S> <C> <C> <C>
Revenues $ 865,600 $ -- $ 865,600
Pre-opening costs 136,627 -- 136,627
Income (loss) from operations 587,406 (423,267) 164,139
Net income (loss) $ 434,305 $(436,694) $ (2,389)
<CAPTION>
1999 JOINT
VENTURES CORPORATE CONSOLIDATED
--------- --------- -------------
<S> <C> <C> <C>
Revenues $ 864,079 $ -- $ 864,079
Pre-opening costs 25,106 -- 25,106
Income (loss) from operations 712,406 (564,181) 148,225
Net income before cumulative
effect of change in accounting principle 590,079 (557,892) 32,187
Accounting change, net (543,870) -- (543,870)
Net income (loss) $ 46,209 $(557,892) $(511,683)
</TABLE>
4. JOINT VENTURE INVESTMENTS
<TABLE>
<CAPTION>
2000 DELAWARE OREGON MICHIGAN CALIFORNIA
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<S> <C> <C> <C> <C>
Revenues $ 3,142,527 $ 555,872 $ -- $ --
Income (loss) from operations 1,175,329 555,872 (259,598) (13,656)
Net income $ 1,175,329 $ 555,872 $ (259,598) $ (13,656)
<CAPTION>
1999 DELAWARE OREGON MICHIGAN CALIFORNIA
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 3,020,230 $ 544,012 $ -- $ --
Income (loss) from operations 1,199,312 528,846 (36,138) (14,073)
Cumulative effect of change
in accounting principle (9,157) (137,351) (1,260,818) (240,765)
Net income $ 1,190,154 $ 391,496 $(1,296,956) $ (254,838)
</TABLE>
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
FIRST QUARTER ENDED MARCH 31, 2000 COMPARED TO FIRST QUARTER ENDED MARCH 31,
1999
JOINT VENTURES. Joint Venture income increased by $1,529 for the first
quarter ended March 31, 2000 as compared to the same period in 1999. This
increase reflects improved operating results from the Oregon venture, offset by
a weather related decline in income from the Delaware venture. Pre-opening costs
were significantly higher as the Company continues its efforts in Michigan and
California.
OREGON JOINT VENTURE. The Company's share of income from the Oregon
joint venture was $277,936, an increase of $13,513, or 5.1%, as compared to the
prior year period. This increase was achieved despite the reduction in the
venture's fee structure from 13% of revenue to 12% in accordance with the
management agreement. The continued growth in the market contributed to a 10.5%
revenue increase at the facility that more than offset the fee percentage
reduction.
DELAWARE JOINT VENTURE. The Company's share of income from the Delaware
joint venture was $587,664 for the first quarter ended March 31, 2000, compared
to $599,656 in the prior year. A severe snowstorm in January forced the closure
of the facility for one day and significantly impacted customer volumes for
several days thereafter, resulting in an 18% decline in management fees for
January. During February and March, management fee income increased 4% and 3%,
respectively.
CALIFORNIA AND MICHIGAN JOINT VENTURES. The Company's share of
pre-opening costs from the California and Michigan joint ventures increased by
$111,521 during the first quarter of 2000. The majority of the increase was due
to increased activities related to the Michigan venture with the Huron
Potawatomi Tribe in Battle Creek. These costs were primarily for legal and
consulting fees to assist the Tribe in obtaining suitable land and complying
with the requirements of the Indian Gaming Regulatory Act. These joint venture
companies are still in the development stage and do not have operating revenues.
GENERAL AND ADMINISTRATIVE EXPENSES. Expenses for the three months
ended March 31, 2000 decreased $128,225 as compared to the comparable period in
1999. This decrease is primarily due to reduced legal expenses associated with
the Company's efforts to develop the Biloxi, Mississippi project.
INTEREST EXPENSE. Interest expense increased by $15,615 primarily due
to an increase in outstanding indebtedness under the bank line, coupled with an
increase in interest rates.
INTEREST AND OTHER INCOME. Interest and other income decreased by
$12,370 in 2000 as compared to 1999 due primarily to a reduction in invested
cash balances.
INCOME TAX PROVISION. Income tax expense increased by $22,505 primarily
due to a change in deferred tax balances. The effective tax rate reflects a
combination of state taxes on the joint venture earnings combined with the tax
effect of non-deductible amortization expenses. For federal tax purposes the
Company has net operating loss carryforwards of approximately $4,314,000, which
may be carried forward to offset future taxable income. The loss carryforwards
expire in 2009 through 2019. The availability of the loss carryforwards may be
limited in the event of a significant change in ownership of the Company or its
subsidiaries.
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<PAGE>
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. In April 1998, The
Accounting Standards Executive Committee of the American Institute of Public
Accounting issued Statement of Position 98-5, "Reporting on the Costs of Start -
Up Activities." It requires that the costs of start-up activities that had been
previously capitalized, be expensed as incurred. Accordingly, during the first
quarter of 1999, the Company recognized $824,045 of such costs that had been
previously incurred by its joint venture investments, net of the related tax
benefit of $280,175.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash and cash equivalents of
$285,450. For the three months ended March 31, 2000, cash of $48,307 was
provided by operating activities, as compared to $161,750 in the prior year
period. The decline is a result of increased pre-opening and interest costs
partially offset by decreased general and administrative expense, combined with
changes in operating assets and liabilities. Net cash used in investing
activities was $51,657, primarily for options related to the Biloxi project and
joint venture advances, compared to $938,499 in the prior year primarily for the
same purposes. Financing activities used $150,000 during the current quarter to
reduce the bank borrowings compared to an advance and repayment in equal amounts
in the comparable prior period. As a result of the above factors, there was a
net decrease in cash and cash equivalents of $153,350 during the first quarter
of 2000.
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 end, 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. The note bears interest at prime. Interest is paid monthly and
the unpaid principal and interest are due on January 25, 2001. In addition, Full
House has been reimbursed by one of the joint venture companies for certain
advances and expenditures made by Full House relating to the gaming development
agreements. As part of this transaction, Allen E. Paulson, William P. McComas
and Lee Iacocca have granted to GTECH an option to purchase their shares should
they propose to transfer the same. The parties are no longer required to present
gaming opportunities to the other for joint development.
As a result of its agreements with GTECH, receipt by Full House of
revenues from the operations of joint venture projects is governed by the terms
of the related 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, the Company's continuing cash flow is
dependent on the operating performance of its joint ventures, and the ability to
receive monthly distributions.
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<PAGE>
The Company has a $2 million line of credit with Coast Community bank
in Mississippi. The line bears interest at prime plus 1/2%, with interest
payable monthly. Any outstanding principal is due at maturity in February 2001.
At March 31, 2000, there was $600,000 outstanding at a rate of 9%.
In November 1998, the Company executed a series of agreements with Hard
Rock Cafe International related to the proposed development project in Biloxi,
Mississippi. Pursuant to a licensing agreement, the Company has the right to
develop and operate a Hard Rock Casino in Biloxi. The Company has paid a
territory fee of $2,000,000.
In September 1998, the Company and Allen E. Paulson formed a limited
liability company, equally owned, for the purpose of developing this project.
Mr. Paulson agreed to contribute a gaming vessel (the former Treasure Bay barge
in Tunica, MS.), and the Company agreed to contribute its rights to the Hard
Rock agreements. This entity plans to develop the Hard Rock - Biloxi and is
currently exploring various financing alternatives. The project, as currently
envisioned, is expected to cost between $250 and $300 million. Substantial
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, or at all.
As of March 31, 2000, Full House had cumulative undeclared and unpaid
dividends in the amount of $1,627,500 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.
YEAR 2000 ISSUES
The Company implemented a Year 2000 program to ensure that its computer
systems and applications would function properly beyond 1999. The Company's Year
2000 date conversion program was completed on a timely basis at a cost of
approximately $10,000. The Company did not experience any disruptions as a
result of the rollover to the year 2000, and continues to monitor performance
for any latent problems.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Allen E. Paulson, a major stockholder of the Company and its former
Chief Executive Officer and Board Chairman, sued Jefferies & Co., Inc.
and Morgans Waterfall, et al, in the Federal Court for the Central
District of California Western Division, for various claims arising
from his individual attempt to purchase Riviera Holdings Corp. and
other gaming properties during 1996-1997. On May 5, 2000, Jefferies
filed counterclaims in that lawsuit against Mr. Paulson and companies
owned by him individually, as well as a Third Party Complaint against
the Company. Jefferies alleges that the Company is responsible to it
for the payment of fees and expenses, which it claims it is owed as a
result of several engagement letters it executed with Mr. Paulson. Mr.
Paulson's signature line does not reflect that he executed any of these
engagement letters on behalf of the Company, but Jefferies claims that
his individual signature also bound his "affiliates". The Company
vigorously contests any liabilities whatsoever to Jefferies, and
intends to move for dismissal of Jefferies' claim on the grounds its
assertions are insufficient as a matter of law.
On April 13, 2000 LS Capital (formerly Lone Star Casino Corp.) filed a
notice of appeal in the Lone Star Casino Corp vs. Full House Resorts,
Inc. litigation. On April 4, 2000 the Circuit Court of Harrison County,
Mississippi had dismissed all remaining counts for lack of prosecution.
The Company continues to vigorously defend this action.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of March 31, 2000, cumulative dividends were $1,627,500, 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
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K;
None
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<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: May 11, 2000
By /S/ GREGG R GIUFFRIA
-----------------------
Gregg R. Giuffria, President and Principal
Operating Officer
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
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27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 285,450
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 380,268
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,735,316
<CURRENT-LIABILITIES> 259,656
<BONDS> 0
0
70
<COMMON> 1,034
<OTHER-SE> 9,874,556
<TOTAL-LIABILITY-AND-EQUITY> 13,735,316
<SALES> 865,600
<TOTAL-REVENUES> 865,600
<CGS> 0
<TOTAL-COSTS> 701,461
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,278
<INCOME-PRETAX> 85,267
<INCOME-TAX> 87,656
<INCOME-CONTINUING> (2,389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,389)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
