SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 2003
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ___________________
to ___________________
Commission File Number 1-7831
ELSINORE CORPORATION
--------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0117544
------ ----------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
2330 PASEO DEL PRADO, SUITE C308, LAS VEGAS, NEVADA 89102
----------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
702/387-5115
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Registrant's Telephone Number (Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 ninety (90) days.
YES X NO
--- ---
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2).
YES NO X
--- ---
____________________________________________
Former Address, if changed since last report
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
TITLE OF STOCK NUMBER OF SHARES
CLASS DATE OUTSTANDING
-------------- ---------------- ----------------
Common November 5, 2003 4,993,965
Elsinore Corporation and Subsidiaries
Form 10-Q
For the Quarter Ended September 30, 2003
INDEX
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PART I. FINANCIAL INFORMATION: PAGE
- ------------------------------ ----
Item 1. Unaudited Condensed Consolidated Financial Statements:
Condensed Consolidated Statement of Net Assets in
Liquidation (liquidation basis) as of September 30,
2003 and Condensed Consolidated Balance Sheet
(going concern basis) as of December 31, 2003 3
Condensed Consolidated Statements of Operations
for the Three Months ended September 30, 2003
(liquidation basis) and September 30, 2002
(going concern basis) 4
Condensed Consolidated Statements of Operations
for the Nine Months ended September 30, 2003
(liquidation basis) and September 30, 2002
(going concern basis) 5
Condensed Consolidated Statement of Changes in
Net Assets for the Nine Months ended
September 30, 2003 (liquidation basis) 6
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2003 and
September 30, 2002 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 22
Item 4. Controls and Procedures 22
PART II. OTHER INFORMATION:
- --------------------------
Item 4. Submission of Matters to a Vote of Security
Holders 23
Item 6. Exhibits and Reports on Form 8-K 23
SIGNATURES 25
EXHIBITS 26
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statement of Net Assets in Liquidation (Liquidation
Basis) as of September 30, 2003 and Condensed Consolidated Balance Sheet
(Going Concern Basis) as of December 31, 2002
Unaudited
(Dollars in Thousands)
September 30, December 31,
2003 2002
(Liquidation Basis) (Going Concern Basis)
--------------------- -----------------------
Assets
Current Assets:
Cash and cash equivalents $9,195 $1,795
Accounts receivable, net 13 15
Prepaid expenses 104 61
Assets of discontinued operations
held for sale - 32,215
--------------------- -----------------------
Total current assets 9,312 34,086
Equipment 2 -
Other assets 1,051 10
--------------------- -----------------------
Total assets $10,365 $34,096
===================== =======================
Liabilities and Shareholders' Equity
Current liabilities:
Accrued interest $- $317
Accrued expenses 1,451 31
Current portion of long-term debt - 8
Liabilities of discontinued operations
held for sale - 7,353
--------------------- -----------------------
Total current liabilities 1,451 7,709
Long-term debt, less current portion - 7,104
--------------------- -----------------------
Total liabilities 1,451 14,813
--------------------- -----------------------
Commitments and contingencies
Shareholders' Equity:
6% cumulative convertible preferred stock, no par value.
Authorized, issued and
outstanding 50,000,000 shares. - 23,066
Common stock, $.001 par value per share.
Authorized 100,000,000 shares. Issued
and outstanding 4,993,965 shares at
September 30, 2003 and December 31, 2002,
respectively. - 5
Additional paid-in capital - 4,571
Accumulated deficit - (8,359)
--------------------- -----------------------
Total shareholders' equity - 19,283
--------------------- -----------------------
Total liabilities and shareholders'
equity $34,096
=======================
Net Assets in Liquidation $8,914
=====================
See accompanying notes to the condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
for the Three Months ended September 30, 2003 (Liquidation Basis)
and September 30, 2002 (Going Concern Basis)
Unaudited
(Dollars in Thousands, Except Per Share Amounts)
Three Three
Months Months
Ended Ended
September 30, 2003 September 30, 2002
(liquidation (going concern
basis) basis)
----------------------- ------------------------
Revenues:
Other, non-operating $15 $113
----------------------- ------------------------
Total revenues 15 113
----------------------- ------------------------
Costs and expenses:
Selling, general and
administrative 1,061 98
Interest 44 228
Merger and litigation costs, net - 14
----------------------- ------------------------
Total costs and expenses 1,105 340
----------------------- ------------------------
Loss from continuing operations (1,090) (227)
Income from discontinued
operations 249 149
----------------------- ------------------------
Net loss (841) (78)
Undeclared dividends on cumulative
convertible preferred stock 180 322
----------------------- ------------------------
Net loss applicable
to common shares ($1,021) ($400)
======================= ========================
Basic and diluted loss
per common share:
Basic and diluted loss per
share before discontinued operations ($.25) ($.11)
======================= ========================
Basic and diluted loss per share
after discontinued operations ($.20) ($.08)
======================= ========================
Weighted average number of
common shares outstanding 4,993,965 4,993,965
======================= ========================
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Operations
for the Nine Months ended September 30, 2003 (Liquidation Basis)
and September 30, 2002 (Going Concern Basis
Unaudited
(Dollars in Thousands, Except Per Share Amounts)
Nine Nine
Months Months
Ended Ended
September 30, 2003 September 30, 2002
(liquidation (going concern
basis) basis)
----------------------- ------------------------
Revenues:
Other, non-operating $15 $454
----------------------- ------------------------
Total revenues 15 454
----------------------- ------------------------
Costs and expenses:
Selling, general and
administrative 1,416 423
Interest 376 684
Merger and litigation costs, net - 1,003
----------------------- ------------------------
Total costs and expenses 1,792 2,110
----------------------- ------------------------
Loss from continuing operations (1,777) (1,656)
Income (loss) from discontinued
operations (2,731) 2,452
----------------------- ------------------------
Net income (loss) (4,508) 796
Undeclared dividends on cumulative
convertible preferred stock 862 965
----------------------- ------------------------
Net loss applicable
to common shares ($5,370) ($169)
======================= ========================
Basic and diluted loss
per common share:
Basic and diluted loss per
share before discontinued operations ($.53) ($.52)
======================= ========================
Basic and diluted loss per share
after discontinued operations ($1.08) ($.03)
======================= ========================
Weighted average number of
common shares outstanding 4,993,965 4,993,965
======================= ========================
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statement of Changes in Net Assets
for the Nine Months ended September 30, 2003 (Liquidation Basis)
Unaudited
(Dollars in thousands)
Net Assets, January 1, 2003 $19,283
Net Loss (4,508)
Preferred stock dividends paid (5,861)
----------------------
Net Assets, September 30, 2003 $8,914
======================
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
(Dollars in Thousands)
Nine Nine
Months Months
Ended Ended
September 30, 2003 September 30, 2002
(liquidation (going concern
basis) basis)
---------------------- -----------------------
Cash flows used in operating
activities ($1,756) ($1,585)
Cash flows provided by (used in) investing
activities -
Capital expenditures (2) -
Sale of Stock of Four Queens 20,500 -
Cash flows used in financing
activities -
Principal payments on
long-term debt (7,112) (3)
Payment of preferred stock dividend (5,861) -
Cash flows provided by (used in)
discontinued operations 1,631 2,202
---------------------- -----------------------
Net increase in cash and
cash equivalents 7,400 614
Cash and cash equivalents at beginning
of period 1,795 451
---------------------- -----------------------
Cash and cash equivalents at end
of period $9,195 $1,065
====================== =======================
Supplemental disclosure of cash activities:
Cash paid for interest $692 $911
====================== =======================
See accompanying notes to condensed consolidated financial statements.
Elsinore Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Liquidation Basis)
September 30, 2003
(Unaudited)
1. Summary of Significant Critical Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of Elsinore
Corporation ("Elsinore" or the "Company") and its wholly owned subsidiaries. All
material intercompany balances and transactions have been eliminated in
consolidation.
Basis of Presentation
The Company has prepared the accompanying unaudited condensed consolidated
financial statements, pursuant to rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations. It is suggested
that this report be read in conjunction with the Company's audited consolidated
financial statements included in the annual report for the year ended December
31, 2002. In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the Company's financial
position as of September 30, 2003, the results of its operations for the three
and nine months ended September 30, 2003 and September 30, 2002, and the results
of its cash flows for the nine months ended September 30, 2003 and September 30,
2002. The operating results and cash flows for these periods are not necessarily
indicative of the results that will be achieved for the full year or for future
periods.
On April 29, 2003, the Company announced that it entered into a definitive
stock purchase agreement (the "Stock Purchase Agreement") for the sale of all
the capital stock of Four Queens, Inc. ("Four Queens") and its interest in the
Fremont Street Experience, LLC, to TLC Casino Enterprises, Inc. ("TLC") for a
purchase price of approximately $20.5 million.
In connection with the execution of the Stock Purchase Agreement, the
Company recognized a non-cash impairment loss of approximately $5 million, which
was necessary as the carrying values of the assets to be sold as of June 30,
2003 were greater than the fair market value of the assets. Depreciation expense
on the assets owned by Four Queens ceased as of April 29, 2003, the date the
Four Queens' assets were classified as held for sale.
The assets and liabilities of Four Queens have been presented in the
December 31, 2002 balance sheet as assets held for sale. In addition, the
results of operations of Four Queens for the three and nine month periods ended
September 30, 2003 and 2002 have been presented as discontinued operations.
Discontinued operations were also presented to include a subsequent adjustment
to the write-down of the investment in the capital stock of Four Queens relating
to the results of operations during the quarter ended September 30, 2003 in the
amount of $104,000.
The sale of Four Queens was consummated on July 31, 2003.
The board of directors has approved a plan of liquidation and dissolution.
As a result, the Company's financial statements as of September 2003 and for the
period then ended have been prepared on the liquidation basis of accounting.
There was no adjustment necessary to present the net assets of the Company at
liquidation value.
Plan of Liquidation and Dissolution
After the plan of liquidation and dissolution is approved by shareholders,
the Company will file a certificate of dissolution with the Nevada Secretary of
State and will no longer engage in any business activities except to the extent
necessary or appropriate to preserve the value of its assets, wind up its
business affairs, distribute its assets in accordance with the plan and take
such other actions permitted or required under Nevada law for dissolved
corporations. The Company expects that its principal activities will consist of
liquidating and distributing its assets in order to satisfy (or establish a
reserve for) its obligations and liabilities, and distributing the remainder to
its shareholders.
In connection with the distribution to shareholders, the holders of the
Company's Series A Preferred Stock ("Preferred Stock") have expressed their
intent to authorize and request the Company to make a special distribution of
$0.10 per share to holders of the Company's common stock ("Common Stock") out of
the assets that would otherwise be distributable to holders of Preferred Stock.
Absent such action by the holders of Preferred Stock (or conversion of their
Preferred Stock to Common Stock, which they have expressed an intent not to do),
the liquidation preference of the Preferred Stock would entitle the holders of
Preferred Stock to the entire distribution to shareholders.
Recently Issued Accounting Standard
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). This Statement is effective
for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company adopted this standard on July 1, 2003, and the
adoption did not have a material impact on its financial position and results of
operations.
Net Income Per Common Share
Basic per share amounts are computed by dividing net income by average
shares outstanding during the year. Diluted per share amounts are computed by
dividing net income by average shares outstanding plus the dilutive effect of
common share equivalents. Since the Company incurred net losses for the three
and nine month periods ended September 30, 2003 and the three and nine month
periods ended September 30, 2002, the effect of common stock equivalents was
anti-dilutive. Therefore, basic and diluted per share amounts are the same for
this period.
2. Discontinued Operations
The following is a summary of the assets and liabilities of Four Queens,
which have been included in the balance sheet as assets and liabilities of
discontinued operations held for sale (in thousands):
December 31,
2002
---------------------
Cash and cash equivalents $4,538
Accounts receivable 401
Other current assets 1,803
Property and equipment, net 23,515
Other assets 1,958
---------------------
Assets of discontinued operations
held for sale $32,215
=====================
Accounts payable $848
Accrued expenses 4,577
Long-term debt and other obligations 1,928
---------------------
Liabilities of discontinued operations
held for sale $7,353
=====================
The following is a summary of the results of operations of Four Queens,
which have been included in the statement of operations for the three and nine
month periods ended September 30, 2003 and 2002 as net income (loss) from
discontinued operations (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------ -------------- -------------
Total revenues, net $4,608 $13,022 32,902 $39,806
Total costs and expenses 4,463 12,873 30,727 37,030
------------- ------------ -------------- -------------
Income from discontinued
operations 145 149 2,175 2,776
Impairment loss on assets
held for sale (104) - 4,906 324
------------- ------------ -------------- -------------
Income (loss) from
discontinued operations $249 $149 ($2,731) $2,452
============= ============ ============== =============
The income from discontinued operations increases the Company's investment
in Four Queens, but is eliminated upon consolidation. However, since the Company
sold all of the capital stock it held in Four Queens on July 31, 2003, which
constituted substantially all of assets of the Company, for a fixed sales price
of $20.5 million, the Company recorded an impairment adjustment during the three
months ended September 30, 2003 equal to the amount of net income from
discontinued operations of Four Queens less $298,000 of cash transferred from
Four Queens to the Company during the period.
3. Income Taxes
Due to the Company's regular tax and alternative minimum tax net operating
losses, the Company is not expected to pay federal income taxes for the year
ended December 31, 2003. Accordingly, the Company has not recorded a provision
for income taxes in the accompanying Condensed Consolidated Financial
Statements.
4. Commitments and Contingencies
Philip W. Madow (the former President) and Gina L. Contner Mastromarino
(the former Executive Director of Finance) of Four Queens had employment
agreements with Four Queens which became effective on January 1, 2003. In the
event of a change of ownership or control, Mr. Madow and Ms. Mastromarino had
the option to elect to be employed with the entity or person having acquired
such control or terminate their respective employment agreement. If the
executives elected to terminate their respective employment agreements upon a
change of ownership or control, Four Queens would pay an amount equal to one
year's base salary and COBRA benefits. "Change of ownership or control" meant
that all or substantially all of the assets of Four Queens are directly, or
through transfer of equity interests, transferred or otherwise disposed of in
one or a series of related transactions after (1) the Four Queens ceased to own
directly or indirectly substantially all equity interests in the Four Queens
Hotel & Casino; (2) Four Queens sold 51% or more of the assets of the Four
Queens Hotel & Casino; or (3) the Company ceased to own directly or indirectly
at least 51% of all outstanding shares of Four Queens. The President's annual
compensation pursuant to his employment agreement was $255,000 and the Executive
Director of Finance's annual compensation under her employment agreement was
$145,000. These employment agreements were required to be terminated pursuant to
the Stock Purchase Agreement, prior to consummation of the sale of Four Queens.
On July 31, 2003 the employment agreements were terminated and the sale of Four
Queens was consummated. The Company has assumed the liability under the
employment agreements.
In order to ensure retention of key individuals required to complete an
orderly dissolution, the Company has entered into compensation and retention
arrangements with Joann McNiff (the sole director and executive officer), Gina
L. Contner Mastromarino (the principal accounting officer) and Philip W. Madow
(the former President and now a consultant). The retention arrangements for Mr.
Madow and Ms. Mastromarino provide for, among other things, payment of $75,000
to each of them for up to a 15-month period following the July 31, 2003 closing
of the Stock Purchase Agreement for remaining in their present roles until the
Company completes the dissolution process. Ms. McNiff's arrangement provides for
compensation of $3,000 per month for serving as the Company's director and
executive officer for the period from August 1, 2003 through the completion of
the dissolution process.
The Company is a party to claims and lawsuits that arose in the ordinary
course of business. Management believes that such matters are either covered by
insurance, or if not insured, will not have a material adverse effect on the
financial statements of the Company taken as a whole.
5. Impairment Losses
On March 14, 2002, the Company entered into the Purchase Agreement with
SummerGate pursuant to which Four Queens proposed to sell substantially all of
its assets to SummerGate, the Company recognized a non-cash impairment loss of
approximately $13.2 million during 2001 and an impairment loss of approximately
$324,000, in the first quarter of 2002, due to the amendment of the Purchase
Agreement.
On June 27, 2002, Four Queens terminated the Purchase Agreement.
On April 29, 2003, the Company announced that it entered into the Stock
Purchase Agreement for the sale of all the capital stock of Four Queens and its
interest in the Fremont Street Experience, LLC, to TLC for a purchase price of
$20.5 million.
On July 31, 2003, the sale of Four Queens was consummated. Four Queens was
Elsinore's sole operating asset and the capital stock of Four Queens was
substantially all of Elsinore's assets. Elsinore's board of directors
anticipates winding up and dissolving Elsinore. Elsinore used a portion of the
proceeds from the sale to pay off Elsinore's outstanding 12.83% Mortgage Notes
("Notes"), and to pay all accrued and unpaid dividends on the Preferred Stock
through July 31, 2003. At August 1, 2003, immediately before the payments were
made, Elsinore had $5,380,489 in principal amount and accrued but unpaid
interest outstanding on the Notes and had outstanding 50,000,000 shares of
Preferred Stock, with accrued and unpaid dividends of $5,860,815.
In connection with the Stock Purchase Agreement, the Company recognized a
non-cash impairment loss of approximately $4.9 million during the first nine
months of 2003. An impairment loss was necessary under Statement of Financial
Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long
Lived Assets" ("SFAS No. 144"), as the carrying value of the net assets to be
sold as of September 30, 2003 ($24.9 million) was greater than the fair market
value of the net assets ($20.5 million). In accordance with SFAS No. 144, the
Company ceased depreciation of these assets on April 29, 2003.
The assets and liabilities of Four Queens have been presented in the
December 31, 2002 balance sheet as assets held for sale. In addition, the
results of operations of Four Queens for the three and nine month periods ended
September 30, 2003 and 2002 have been presented as discontinued operations.
Discontinued operations were also presented to include a subsequent adjustment
of $104,000 to the write-down of the investment in the capital stock of Four
Queens relating to the results of operations during the quarter ended September
30, 2003.
6. Preferred Stock
On September 29, 1998, as part of a recapitalization, the Company issued to
certain investment accounts managed by Morgens, Waterfall, Vintiadis & Company,
Inc. ("the MWV Accounts") 50,000,000 shares of Preferred Stock in exchange for
the surrender to the Company of $18,000,000 original principal amount of certain
second mortgage notes held by the MWV Accounts. The holders of Preferred Stock
have (i) the right to receive cumulative dividends at the rate of 6% per year;
(ii) the right to receive the amount of $.36 per share, plus all accrued or
declared but unpaid dividends on any shares then held, upon any liquidation,
dissolution or winding-up of the Company for an aggregate liquidation preference
of $18,000,000; (iii) voting rights equal to the number of shares of Common
Stock into which the shares of Preferred Stock may be converted, and (iv) the
right to convert the shares of Preferred Stock into 92,999,225 shares of Common
Stock.
Elsinore used a portion of the proceeds from the sale of Four Queens to pay
all accrued and unpaid dividends on its Preferred Stock through July 31, 2003.
At August 1, 2003, immediately before the payments were made, Elsinore had
outstanding 50,000,000 shares of Preferred Stock, with accrued and unpaid
dividends of $5,860,815.
7. Long-term Debt
The sale of Four Queens was consummated on July 31, 2003. Elsinore used a
portion of the proceeds from the sale to pay off the Notes. At August 1, 2003,
immediately before the payments were made, Elsinore had $5,380,489 in principal
amount and accrued but unpaid interest outstanding on the Notes.
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion and analysis should be read in conjunction with the
Condensed Consolidated Financial Statements of Elsinore Corporation ("Elsinore"
or the "Company") and notes thereto set forth elsewhere herein.
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Certain information included
herein and in other materials filed with the Securities and Exchange Commission
("SEC") (as well as information included in oral statements or other written
statements made or to be made by the Company) contains statements that are
forward looking, such as statements relating to the anticipated dissolution of
Elsinore, the establishment of a hold-back for the anticipated costs of wind-up
of Elsinore's affairs, the expectation that Elsinore will have funds remaining
to distribute to its stockholders from the proceeds of the sale of the capital
stock of Four Queens, Inc. ("Four Queens") and the Company's expectations,
beliefs and future plans now that it has sold Four Queens. These statements may
also include information about the Company's adoption of certain accounting
standards and their anticipated effects on business, financing, revenue,
operations, regulations, management's belief regarding the sufficiency of cash
flow and compliance with applicable laws. Such forward-looking statements
involve important known and unknown risks and uncertainties that could cause
actual results and liquidity to differ materially from those expressed or
anticipated in any forward-looking statements. Such risks and uncertainties
include, but are not limited to, general economic conditions; expenses incurred
in connection with the transaction; liabilities and indemnification obligations
which may be incurred by the Company; the amount of funds that Elsinore must
hold-back for liabilities in anticipation of the wind-up of its business;
actions taken or omitted to be taken by third parties; and other factors
described from time to time in the Company's reports filed with the SEC.
Accordingly, actual results may differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company. Any
forward-looking statements are made pursuant to the Private Securities
Litigation Reform Act of 1995, and, as such, speak only as of the date made. The
Company undertakes no obligation to revise publicly these forward-looking
statements to reflect subsequent events or circumstances.
The following tables sets forth certain continuing and discontinued
operating information for the Company for the three and nine months ended
September 30, 2003 and 2002. Revenues and promotional allowances are shown as a
percentage of net revenues. Departmental costs are shown as a percentage of
departmental revenues. All other percentages are based on net revenues.
Beginning August 1, 2003, the results of operations of Four Queens have
been excluded from the Company's financial statements. The period(s) presented
in the current year are not comparable to the same period(s) in the prior year.
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
----------------------------------------- ---------------------------------------
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
----------------- ------------------ -------------------- --------------
(dollars in thousands)
Corporate Operations:
Revenues, net:
Other $15 $113 $15 $454
----------------- ------------------ -------------------- --------------
Net revenues 15 113 15 454
----------------- ------------------ -------------------- --------------
Costs and expenses:
Selling, general and
administrative 1,061 98 1,416 423
Interest 44 228 376 684
Merger and litigation
costs, net - 14 - 1,003
----------------- ------------------ -------------------- --------------
Total costs and
expenses 1,105 340 1,792 2,110
----------------- ------------------ -------------------- --------------
Net loss from
continuing operations (1,090) (227) (1,777) (1,656)
----------------- ------------------ -------------------- --------------
Discontinued Operations:
Revenues, net:
Casino 3,475 10,128 23,969 29,801
Hotel 652 1,935 5,001 6,189
Food and beverage 930 2,633 6,812 8,349
Other 119 320 945 972
----------------- ------------------ -------------------- --------------
Total revenue 5,176 15,016 36,727 45,311
Promotional allowances (568) (1,994) (3,825) (5,505)
----------------- ------------------ -------------------- --------------
Net revenues 4,608 13,022 32,902 39,806
----------------- ------------------ -------------------- --------------
Costs and expenses:
Casino 1,183 3,648 8,102 10,212
Hotel 885 2,456 5,820 7,072
Food and beverage 771 1,752 4,601 5,572
Taxes and licenses 478 1,515 3,577 4,445
Selling, general and
administrative 760 1,732 4,891 5,580
Rents 366 1,022 2,552 3,236
Depreciation and
amortization 1 (1) 678 1,039 678
Impairment (104) - 4,906 324
Interest 19 70 145 235
----------------- ------------------ -------------------- -------------
Total costs and
expenses 4,359 12,873 35,633 37,354
----------------- ------------------ -------------------- -------------
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2002
----------------------------------------- ---------------------------------------
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
----------------- ------------------ -------------------- --------------
(dollars in thousands)
Income (loss) from
discontinued
operations 249 149 (2,731) 2,452
----------------- ------------------ ------------------- -------------
Undeclared dividends on
cumulative convertible
preferred stock
180 322 862 965
----------------- ------------------ ------------------- -------------
Net loss
applicable to common
shares ($1,021) ($400) ($5,370) ($169)
================= ================== =================== =============
(1) In connection with the Stock Purchase Agreement and Standard of Financial
Accounting Standards ("SFAS") No. 144, the Company ceased depreciation of Four
Queens' assets on April 29, 2003.
THREE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED
TO THREE MONTHS ENDED SEPTEMBER 30, 2002
RECENT DEVELOPMENTS
On July 31, 2003, Elsinore completed the sale of all of the capital stock
of its wholly-owned subsidiary, Four Queens, to TLC Casino Enterprises, Inc.
("TLC") for $20.5 million. Four Queens was Elsinore's sole operating asset and
the capital stock of Four Queens was substantially all of Elsinore's assets.
Elsinore is preparing to wind up and dissolve. Elsinore used a portion of
the proceeds from the sale to pay off the outstanding 12.83% Mortgage Notes (the
"Notes"), and to pay all accrued and unpaid dividends on Elsinore's Series A
Preferred Stock ("Preferred Stock") through July 31, 2003. At August 1, 2003,
immediately before the payments were made, Elsinore had $5,380,489 in principal
amount and accrued but unpaid interest outstanding on the Notes and had
outstanding 50,000,000 shares of Preferred Stock, with accumulated accrued and
unpaid dividends of $5,860,815. After the dissolution process begins and
Elsinore establishes an adequate hold-back for the anticipated costs of winding
up Elsinore's affairs, a portion of the remaining funds is expected to be paid
to the holders of Elsinore's common stock ("Common Stock") as a one-time
distribution, and all other distributions will be made to holders of Preferred
Stock.
The board of directors has approved a plan of liquidation and dissolution.
As a result, the Company's financial statements as of September 30, 2003 and for
the period then ended have been prepared on the liquidation basis of accounting.
There was no adjustment necessary to present the net assets of the Company at
liquidation value. Also, the results of operations of Four Queens for the three
month periods ended September 30, 2003 and 2002 have been presented as
"discontinued operations." Beginning August 1, 2003, the results of operations
of Four Queens have been excluded from the Company's financial statements. The
period(s) presented in the current year are not comparable to the same period(s)
in the prior year.
CORPORATE OPERATIONS
OTHER NON-OPERATING REVENUES
Other non-operating revenues decreased by approximately $98,000, or 86.7%,
from $113,000 during the 2002 period to $15,000 during the 2003 period. This
decrease was primarily due to payments received during 2002 of approximately
$113,000 under a settlement agreement between the Company through its wholly
owned subsidiary, Olympia Gaming Corporation, and the Jamestown S'Klallam Tribe
and JKT Gaming, Inc.
COSTS AND EXPENSES
Selling, general and administrative expenses increased $963,000, or 982.7%,
from $98,000 during the 2002 period to $1,061,000 during the 2003 period. The
increase in expense was primarily due to increased corporate expenses, severance
expense and general legal fees associated with the sale of Four Queens.
Interest expense decreased by approximately $184,000, or 80.7% from
$228,000 during the 2002 period to $44,000 for the 2003 period. The reduction in
interest expense was primarily due to a reduction in the principal balance of
the Notes as a result of a principal payment by the Company in January 2003 and
repayment of the remaining balance due on the Notes on August 1, 2003.
During the quarter ended September 30, 2002, the Company incurred
approximately $14,000, net, in merger and litigation costs as a result of
litigation and settlement costs related to its Agreement and Plan of Merger with
Allen E. Paulson. A Settlement Bar Order and Final Judgment was entered by the
court on July 1, 2002. Pursuant to the settlement agreement, Elsinore paid the
sum of $1,100,000 on June 1, 2002.
LOSS FROM CONTINUING OPERATIONS
As a result of the factors discussed above, the Company experienced a net
loss from continuing operations in the 2003 period of $1,090,000 compared to
$227,000 in the 2002 period.
DISCONTINUED OPERATIONS
REVENUES
The sale of Four Queens was consummated on July 31, 2003. The Company had
no revenues from operations between August 1, 2003 and September 30, 2003. Net
revenues were approximately $4,608,000 during the period from July 1, 2003 to
August 1, 2003.
COSTS AND EXPENSES
Total costs and expenses decreased by approximately $8,410,000, or 65.3%,
from $12,873,000 for the 2002 period to $4,359,000 for the period from July 1,
2003 to August 1, 2003 due primarily to the sale of Four Queens on July 31,
2003.
On March 14, 2002, the Company entered into a Purchase Agreement for the
sale of substantially all of the assets of Four Queens to SummerGate, Inc. In
connection with the Purchase Agreement, the Company recognized a non-cash
impairment loss of approximately $13.2 million during 2001 and subsequently
recorded an additional impairment loss of approximately $324,000 in the first
quarter of 2002, due to the amendment of the Purchase Agreement and an increase
in the carrying value of Four Queens' assets that were to be sold at September
30, 2002.
On June 27, 2002, Four Queens terminated the Purchase Agreement and began
depreciating the fixed assets on July 1, 2002.
On April 29, 2003, the Company announced that it entered into a Stock
Purchase Agreement for the sale of all the capital stock of Four Queens and its
interest in the Fremont Street Experience, LLC, to TLC for a price of $20.5
million.
In connection with the Stock Purchase Agreement, the Company recognized an
adjustment to non-cash impairment loss of approximately ($104,000) during the
third quarter of 2003. The adjustment to the impairment loss was necessary in
order to adjust the Company's investment in Four Queens to the purchase price of
$20.5 million. The sale of Four Queens was consummated on July 31, 2003. See
Note 1 and Note 5 to the Condensed Consolidated Financial Statements.
NET INCOME FROM DISCONTINUED OPERATIONS
As a result of the factors discussed above, the Company experienced net
income from discontinued operations in the period from July 1, 2003 to August 1,
2003 of $249,000 compared to $149,000 in the quarter ended September 30, 2002.
NINE MONTHS ENDED SEPTEMBER 30, 2003 COMPARED
TO NINE MONTHS ENDED SEPTEMBER 30, 2002
- --------------------------------------------------------------------------------
The results of operations of Four Queens for the nine month periods ended
September 30, 2003 and 2002 have been presented as "discontinued operations."
Beginning August 1, 2003, the results of operations of Four Queens have been
excluded from the Company's financial statements. The period(s) presented in the
current year are not comparable to the same period(s) in the prior year.
CORPORATE OPERATIONS
OTHER NON-OPERATING REVENUES
Other non-operating revenues decreased by approximately $439,000, or 96.7%,
from $454,000 during the nine months ended September 30, 2002 to $15,000 during
the period from January 1, 2003 to August 1, 2003. This decrease was primarily
due to payments received during the nine months ended September 30, 2002 of
approximately $450,000 under a settlement agreement between the Company through
its wholly owned subsidiary, Olympia Gaming Corporation, and the Jamestown
S'Klallam Tribe and JKT Gaming, Inc.
COSTS AND EXPENSES
Selling, general and administrative expenses increased $993,000, or 234.8%,
from $423,000 during the nine months ended September 30, 2002 to $1,416,000
during the period from January 1, 2003 to August 1, 2003. The increase in
expenses was primarily due to increased corporate expenses, severance expense
and legal fees associated with the sale of Four Queens.
Interest expense decreased by approximately $308,000, or 45.0% from
$684,000 during the 2002 period to $376,000 for the 2003 period. The reduction
in interest expense was primarily due to a reduction in the principal balance of
the Notes as a result of a principal payment by the Company in January 2003 and
repayment of the remaining balance due on the Notes on August 1, 2003.
During the nine months ended September 30, 2002, the Company incurred
approximately $1,003,000, net, in merger and litigation costs as a result of
litigation and settlement costs related to its Agreement and Plan of Merger with
Allen E. Paulson.
LOSS FROM CONTINUING OPERATIONS
As a result of the factors discussed above, the Company experienced a net
loss from continuing operations in the period from January 1, 2003 to August 1,
2003 of $1,777,000 compared to $1,656,000 in the nine months ended September 30,
2002.
DISCONTINUED OPERATIONS
REVENUES
The sale of Four Queens was consummated on July 31, 2003. The Company had
no revenues from operations between August 1, 2003 and September 30, 2003. Net
revenues decreased by approximately $6,904,000, or 17.3%, from $39,806,000
during the nine months ended September 30, 2002, to $32,902,000 for the period
from January 1, 2003 to August 1, 2003. This decrease was due, in large part, to
the sale of Four Queens on July 31, 2003.
COSTS AND EXPENSES
Total costs and expenses decreased by approximately $1,721,000, or 4.6%,
from $37,354,000 for the nine months ended September 30, 2002 to $35,633,000 for
the period from January 1, 2003 to August 1, 2003 due primarily to the sale of
Four Queens on July 31, 2003.
On March 14, 2002, the Company entered into a Purchase Agreement for the
sale of substantially all of the assets of Four Queens to SummerGate, Inc. In
connection with the Purchase Agreement, the Company recognized a non-cash
impairment loss of approximately $13.2 million during 2001 and subsequently
recorded an additional impairment loss of approximately $324,000 in the first
quarter of 2002 due to the amendment of the Purchase Agreement and an increase
in the carrying value of Four Queens' assets that were to be purchased at
September 30, 2002.
On June 27, 2002, Four Queens terminated the Purchase Agreement and began
depreciating the fixed assets on July 1, 2002.
On April 29, 2003, the Company announced that it entered into a Stock
Purchase Agreement for the sale of all the capital stock of Four Queens and its
interest in the Fremont Street Experience, LLC, to TLC for a purchase price of
$20.5 million.
In connection with the Stock Purchase Agreement, the Company recognized a
non-cash impairment loss of approximately $5 million during the first nine
months of 2003. The impairment loss was necessary in order to adjust the
Company's investment in Four Queens to the purchase price of $20.5 million. The
sale of Four Queens was consummated on July 31, 2003. For more information, see
Note 1 and Note 5 to the Condensed Consolidated Financial Statements.
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS
As a result of the factors discussed above, the Company experienced a net
loss from discontinued operations in the period from January 1, 2003 to August
1, 2003 of $2,731,000 compared to net income from discontinued operations of
2,452,000 in the nine months ended September 30, 2002.
LIQUIDITY AND CAPITAL RESOURCES
On July 31, 2003, Elsinore completed the sale of all of the capital stock
of Four Queens to TLC for $20.5 million. Four Queens was Elsinore's sole
operating asset and the capital stock of Four Queens was substantially all of
Elsinore's assets.
Elsinore used a portion of the proceeds from the sale to pay off the
outstanding Notes, and to pay all accrued and unpaid dividends on the Preferred
Stock through July 31, 2003. At August 1, 2003, immediately before the payments
were made, Elsinore had $5,380,489 in principal amount, including accrued and
unpaid interest, of the Notes outstanding and had outstanding 50,000,000 shares
of Preferred Stock, with accumulated accrued and unpaid dividends of $5,860,815.
Elsinore is preparing to wind up and dissolve. After establishing an
adequate hold-back for the anticipated costs of winding up Elsinore's affairs, a
portion of the remaining funds is expected to be paid to the holders of Common
Stock as a one-time distribution, and all other distributions will be made to
holders of Preferred Stock.
As a result of the sale of Four Queens, beginning August 1, 2003, the
Company had no revenues from operations.
At September 30, 2003, after consummation of the sale, the Company had cash
and cash equivalents of approximately $9.2 million, as compared to approximately
$1.8 million at December 31, 2002.
During the first nine months of 2003, the Company's net cash used in
operating activities was $1.8 million compared to $1.6 million in the first nine
months of 2002. As a result of consummation of the sale of Four Queens on July
31, 2003, the Company no longer has an operating asset.
Certain investment accounts managed by Morgens, Waterfall, Vintiadis &
Company, Inc. (the "MWV Accounts") own 93% of the outstanding Common Stock and
all of the 50,000,000 outstanding shares of Preferred Stock. Based on SEC rules
concerning beneficial ownership of stock and the convertibility of the Preferred
Stock into Common Stock, the MWV Accounts are deemed to own beneficially, in the
aggregate, 99.6% of the Common Stock. Elsinore's stock held by the MWV Accounts
is deemed beneficially owned by John C. "Bruce" Waterfall, Elsinore's former
Chairman of the Board. The remaining .4% of the Common Stock is widely dispersed
among numerous shareholders. Mr. Waterfall is the only individual who exercises
voting and investment authority over Elsinore's stock on behalf of any of the
MWV Accounts.
Based upon its cessation of operations on July 31, 2003, the Company
believes that it has sufficient operating capital to fund its limited operations
for the next twelve months or until completion of the wind-up and liquidation of
the Company.
RECENTLY ISSUED ACCOUNTING STANDARDS
In May 2003, the Financial Accounting Standards Board issued SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The Company adopted SFAS
No. 150 on July 1, 2003, and the adoption did not have a material impact on its
financial position and results of operations.
CRITICAL ACCOUNTING POLICIES
The preparation of the Company's consolidated financial statements requires
the Company's management to adopt accounting policies and to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
expenses and provision for income taxes. Management periodically evaluates these
policies, estimates and assumptions. While it owned Four Queens, the Company
operated in a highly regulated industry and was subject to regulations that
described and regulated operating and internal control procedures. The majority
of casino revenue was in the form of cash, personal checks or gaming chips and
tokens, which by their nature do not require complex estimations. We estimate
certain liabilities with payment periods that extend for longer than several
months. We believe that these estimates are reasonable based upon our past
experience with the business and based upon our assumptions related to possible
outcomes in the future. Future actual results will likely differ from these
estimates.
Deferred Income Tax Assets
We utilize estimates related to cash flow projections for the application
of SFAS No. 109 to the realization of deferred tax assets. Our estimates are
based upon recent operating results and budgets for future operating results.
These estimates are made using assumptions about the economic, social and
regulatory environments in which we operate. These estimates could be negatively
impacted by numerous unforeseen events including changes to regulations
affecting how we operate our business, changes in the labor market or economic
downturns in the areas where we operate.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Market risk is the risk of loss arising from adverse changes in market
rates and prices, such as interest rates, foreign currency exchange rates and
commodity prices. The Company's primary financial instrument is cash. It is the
Company's policy not to enter into derivative financial instruments. The Company
does not currently have any significant foreign currency exposure since it does
not transact business in foreign currencies. Due to the extinguishment of debt
in connection with the sale of Four Queens, the Company does not have
significant overall market risk exposure at September 30, 2003.
Item 4. Controls and Procedures
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our President
and our principal financial officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. Based on this evaluation,
our President and principal financial officer concluded that our disclosure
controls and procedures are effective in timely alerting them to material
information required to be included in our periodic SEC filings.
There has been no change in our internal control over financial reporting
that occurred during our most recent fiscal quarter that has materially affected
or is reasonably likely to materially affect our internal control over financial
reporting.
Elsinore Corporation and Subsidiaries
Other Information
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
By written consent dated August 1, 2003, shareholders approved an
amendment of the Company's articles of incorporation to reduce the
minimum number of authorized directors from four to one. The
shareholders who voted on the amendment were the holders of the
50,000,000 outstanding shares of Preferred Stock, which are
convertible into 93,999,225 shares of Common Stock and are voted on an
as-converted basis. All holders of Preferred Stock voted for the
amendment.
By written consent dated May 30, 2003, shareholders approved the
Company's sale of capital stock of Four Queens, as described elsewhere
in this report. The shareholders who voted on the sale were the
holders of all of the outstanding shares of Preferred Stock, which
were voted in the manner described above. All holders of Preferred
Stock voted for the sale.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2 Plan of Liquidation and Dissolution
3 Articles of Incorporation (1)
31.1 Certification of the Principal Executive Officer of the
Registrant pursuant to Exchange Act Rule 13a-14(a).
31.2 Certification of the Principal Financial Officer of the
Registrant pursuant to Exchange Act Rule 13a-14(a).
32.1 Certification of the Principal Executive Officer of the
Registrant pursuant to 18 U.S.C. section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Principal Financial Officer of the
Registrant pursuant to 18 U.S.C. section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(1) In addition to the amended articles of incorporation included
herein, the Certificate of Designations, Preferences and Rights of
Elsinore Corporation Series A Preferred Stock is incorporated herein
by reference to Exhibit 3.3 of the Company's report on Form 8-K filed
on October 13, 1998.
(b) Forms 8-K filed during this quarter
(1) Current report on Form 8-K (Item 2) was filed on August 13, 2003,
announcing the sale of the capital stock of Four Queens. An unaudited
pro forma consolidated balance sheet as of March 31, 2003, giving pro
forma effect to the capital stock sale, was included in the filing.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ELSINORE CORPORATION
--------------------
(Registrant)
By: /s/ Joann McNiff
----------------
JOANN MCNIFF, President
By: /s/ Gina L. Mastromarino
------------------------
GINA L. MASTROMARINO, Principal
Financial & Accounting Officer
Dated: November 6, 2003
EXHIBIT 2
AMENDED AND RESTATED PLAN OF COMPLETE
LIQUIDATION AND DISSOLUTION OF ELSINORE CORPORATION
This Amended and Restated Plan of Complete Liquidation and Dissolution
(this "Plan") is intended to accomplish the complete liquidation and
dissolution of Elsinore Corporation, a Nevada corporation (the "Company"),
in accordance with Chapter 78 of the Nevada Revised Statutes ("Chapter 78")
and Sections 331 and 336 of the Internal Revenue Code of 1986, as amended,
as follows:
1. The Board of Directors of the Company (the "Board of Directors")
has adopted this Plan and is recommending that the Company's stockholders
approve this Plan. If holders of a majority of the Company's outstanding
stock entitled to vote on this matter vote to approve this Plan, this Plan
shall be deemed adopted by the Company as of the date of such approval by
the stockholders (the "Adoption Date").
2. Following the date that the Company files its certificate of
dissolution with the Secretary of State of the State of Nevada (the "Filing
Date"), the Company will not engage in any business activities except to
the extent necessary or appropriate to preserve the value of its assets,
wind up its business affairs, distribute its assets in accordance with this
Plan and take such other actions permitted or required under Chapter 78 for
dissolved corporations.
3. From and after the Filing Date, (i) the Company will liquidate and
distribute its remaining assets in accordance with the provisions of
Chapter 78 and the Distribution Consent (as defined in Section 4), if any,
and (ii) the Board of Directors may, at its option, instruct the officers
of the Company to: (A) give notice of the dissolution to persons having a
claim against the Company and provide for the rejection of any such claims,
if appropriate; (B) offer to any claimant on a contract whose claim is
contingent, conditional or unmatured, security in an amount sufficient to
provide compensation to the claimant if the claim matures, and petition an
appropriate court of the State of Nevada having jurisdiction ("Court") to
determine the amount and form of security sufficient to provide
compensation to any such claimant who rejects such offer; (C) petition a
Court to determine the amount and form of security which is reasonably
likely to be sufficient to provide compensation for any claims that are the
subject of pending litigation against the Company and any claims that have
not been made known to the Company at the time of dissolution but are
likely to arise or become known within three years thereafter (or longer in
the discretion of the Court); (D) pay, or make adequate provision for
payment of, all claims made against the Company and not rejected, and all
expenses associated with the sale of assets and the liquidation,
dissolution and distributions provided for by this Plan; and (E) post all
security offered and not rejected and all security ordered by a Court.
4. If and to the extent that the holders of the Company's Series A
Preferred Stock, $0.001 par value per share ("Preferred Stock"), execute
and deliver in a timely manner to the Board of Directors a written consent
that is satisfactory in all respects to the Board of Directors
("Distribution Consent"), authorizing and requesting the Company to
distribute to holders of the Company's common stock, par value $0.001 per
share ("Common Stock"), cash or other assets of the Company that would
otherwise be distributable to holders of Preferred Stock pursuant to the
dissolution, then the Company shall make such distribution (a "Special
Distribution") to the holders of Common Stock. Except to the extent (if
any) of a Special Distribution, distributions to holders of Preferred Stock
and Common Stock, respectively, pursuant to the dissolution shall be made
as provided in the Certificate of Designations, Preferences and Rights of
Elsinore Corporation Series A Preferred Stock, dated September 29, 1998 (as
may hereafter be amended).
5. The distributions to stockholders pursuant to the dissolution and
this Plan shall be in complete redemption and cancellation of all of the
Company's stock. As a condition to any such distribution to the Company's
stockholders, the Board of Directors or the Trustees (as defined below), in
their absolute discretion, may require stockholders to (i) surrender their
stock certificates to the Company or its agent for recording such
distributions thereon or (ii) furnish the Company with evidence
satisfactory to the Board of Directors or the Trustees for such purpose.
The Company will finally close its stock transfer books and discontinue
recording transfers of stock as soon as practicable after the Filing Date,
and thereafter certificates evidencing Company stock will not be assignable
or transferable on the books of the Company except by will, intestate
succession or operation of law.
6. Except for any Special Distribution, if a distribution to a
stockholder cannot be made, whether because the stockholder cannot be
located, has not surrendered its stock certificate as may be required
hereunder or for any other reason, the distribution to which such
stockholder is entitled (unless transferred to the Trust established
pursuant to Section 7 hereof) shall be transferred, at such time as the
final liquidating distribution is made by the Company, to the official of
such state or other jurisdiction authorized by applicable law to receive
the proceeds of such distribution. The proceeds of such distribution shall
thereafter be held solely for the benefit of, and for ultimate distribution
to, such stockholder as the sole equitable owner thereof but shall, to the
extent provided by applicable law, be treated as abandoned property and
escheat to the applicable state or other jurisdiction. If any Special
Distribution to a holder of Common Stock cannot be made and the
Distribution Consent contains provisions deemed adequate by the Board of
Directors, in its absolute discretion, for the disposition or disbursement
of the proceeds thereof (which provisions may direct a re-allocation and
distribution of those proceeds to the holders of Preferred Stock), then
such proceeds shall be disposed of or disbursed (as the case may be) in
accordance with such provisions of the Distribution Consent.
7. If deemed necessary, appropriate or desirable by the Board of
Directors in its absolute discretion, in furtherance of the liquidation and
distribution of the Company's assets to the stockholders, as a final
liquidating distribution or from time to time, the Company may transfer to
one or more liquidating trustees, for the benefit of the Company's
stockholders (the "Trustees"), under a liquidating trust (the "Trust"), any
assets of the Company which are (i) not reasonably susceptible to
distribution to the stockholders, including noncash assets and assets held
on behalf of stockholders (A) who cannot be located or who do not tender
their stock certificates to the Company or its agent, if so required, or
(B) to whom distributions may not be made based on contractual, statutory
or other legal restrictions, or (ii) held as a contingency reserve. The
Board of Directors may appoint one or more individuals, corporations,
partnerships or other persons, or any combination thereof, including any
officers, directors, employees, agents or other representatives of the
Company, to act as Trustees for the benefit of the stockholders and to
receive any assets of the Company. Any Trustees appointed as provided in
the preceding sentence shall succeed to all right, title and interest of
the Company of any kind and character with respect to such transferred
assets and, to the extent of the assets so transferred and solely in their
capacity as Trustees, shall assume all of the liabilities and obligations
of the Company, including any unsatisfied claims and unascertained or
contingent liabilities. Further, any conveyance of assets to the Trustees
shall be deemed a distribution of property and assets by the Company to the
stockholders for the purposes of this Plan. Any such conveyance to the
Trustees shall be in trust for the stockholders of the Company. The
Company, subject to this Section and as authorized by the Board of
Directors, in its absolute discretion, may enter into a liquidating trust
agreement with the Trustees on such terms and conditions as the Board of
Directors, in its absolute discretion, deems necessary, appropriate or
desirable.
8. After the Adoption Date, the officers of the Company shall, at such
time as the Board of Directors in its absolute discretion deems necessary,
appropriate or desirable, obtain any certificates required from tax
authorities to accomplish the dissolution. As soon as legally permissible
and practicable after the Adoption Date, the Company shall file with the
Secretary of State of the State of Nevada a certificate of dissolution in
accordance with Chapter 78.
9. Under this Plan the Board of Directors may approve the sale,
exchange or other disposition in liquidation of all of the property and
assets of the Company, including any such sale, exchange or other
disposition in liquidation to affiliates of the Company, whether the sale,
exchange or other disposition occurs in one transaction or a series of
transactions.
10. In connection with and for the purposes of implementing and
assuring completion of this Plan, the Company may, in the absolute
discretion of the Board of Directors, pay any brokerage, agency,
professional, legal, accounting, consulting and other fees and expenses of
persons rendering services to or on behalf of the Company in connection
with the implementation of this Plan and the collection, sale, exchange or
other disposition of the Company's property and assets.
11. In connection with and for the purpose of implementing and
assuring completion of this Plan, the Company may, in the absolute
discretion of the Board of Directors, pay any or all of the Company's
officers, directors, employees, consultants, agents and representatives
compensation or additional compensation above their regular compensation,
in cash or other property, as severance, bonus or in any other form, in
recognition of the extraordinary efforts they will be required to
undertake, or actually undertake, in connection with the implementation of
this Plan.
12. The Company shall continue to indemnify its officers, directors,
employees, agents and representatives in accordance with its articles of
incorporation and bylaws and any contractual arrangements, for the actions
taken in connection with this Plan and the winding up of the affairs of the
Company. The Company's obligation to indemnify such persons may also be
satisfied out of assets of the Trust. The Board of Directors and the
Trustees, in their absolute discretion, are authorized to obtain and
maintain insurance as may be necessary or appropriate to cover the
Company's obligation hereunder, including seeking an extension in time and
coverage of the Company's insurance policies currently in effect.
13. Notwithstanding approval of this Plan and the transactions
contemplated hereby by the Company's stockholders, the Board of Directors
may modify, amend or abandon this Plan and the transactions contemplated
hereby without further action by the stockholders to the extent permitted
by Chapter 78.
14. The Board of Directors is authorized, without further action by
the Company's stockholders, to do and perform or cause the officers of the
Company, subject to approval of the Board of Directors, to do and perform,
any and all acts, and to make, execute, deliver or adopt any and all
agreements, resolutions, conveyances, certificates and other documents of
any kind which are deemed necessary, appropriate or desirable, in the
absolute discretion of the Board of Directors, to implement this Plan and
the transactions contemplated hereby and to wind up the Company's affairs,
including all filings or acts required by any state or federal law or
regulation.
EXHIBIT 3
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF
ELSINORE CORPORATION,
a Nevada corporation
I, the undersigned President, Secretary and Treasurer of Elsinore
Corporation, a Nevada corporation (the "Corporation"), certify that:
1. The Board of Directors of the Corporation, at a duly held meeting on
July 2, 2003, adopted a resolution to (i) amend the Amended and Restated
Articles of Incorporation of the Corporation (the "Articles"), originally filed
with the Secretary of State of the State of Nevada on March 4, 1997, as such
amendment is set forth in paragraph 2 below (the "Amendment"), and (ii) present
the Amendment to the stockholders of the Corporation for their approval pursuant
to Chapter 78 of the Nevada Revised Statutes.
2. The last sentence of Article V, Section 1 of the Articles is amended and
restated in its entirety to read as follows:
The number of directors may be fixed and changed from time to time in
such manner as shall be provided in the bylaws of the corporation;
provided, however, the number of directors shall be not less than one
(1).
3. The number of shares of the Corporation outstanding and entitled to vote
on the Amendment consists of (i) 4,993,965 shares of Common Stock and (ii)
50,000,000 shares of Preferred Stock that in the aggregate are convertible into
92,999,225 shares of Common Stock and that vote on the Amendment together with
the Common Stock on an as-converted basis, resulting in an aggregate of
97,993,190 votes that could be cast with respect to the Amendment, and the
Amendment has been approved by a vote of the stockholders holding at least a
majority of such stock outstanding and entitled to vote thereon.
IN WITNESS WHEREOF, the undersigned, as President, Secretary and Treasurer
of the Corporation, has executed this Certificate as of September 15, 2003.
/s/Joann McNiff
---------------
Joann McNiff
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
ELSINORE CORPORATION
The undersigned hereby certifies under penalty of perjury as follows:
1. The United States Bankruptcy Court for the District of Nevada (the
"Court") in Case Nos. 95-24685 RCJ, 95-24686 RCJ, 95-24687 RCJ, 95-24688 RCJ,
95-24689 RCJ, and 95-24839 RCJ, has confirmed a plan of reorganization (the
"Plan") for Elsinore Corporation, a Nevada corporation (the "Corporation"),
pursuant to Chapter 11 of Title 11 of the United States Code.
2. A certified copy of the Plan is being filed with the Secretary of State
of the State of Nevada (the "Secretary") together with this Certificate.
3. Pursuant to the Plan and this filing of a certified copy of the Plan
with the Secretary, the Corporation's Articles of Incorporation are amended and
restated to read as follows:
ARTICLE I: NAME
The name of the corporation shall be ELSINORE CORPORATION.
ARTICLE II: REGISTERED OFFICE
The name of the resident agent and the street address of the registered
office in the State of Nevada where process may be served upon the
corporation is Cynthia A. Fremont, 202 Fremont Street, Las Vegas, Nevada
89101. The corporation may, from time to time, in the manner provided by
law, change the resident agent and the registered office within the State
of Nevada. The corporation may also maintain an office or offices for the
conduct of its business, either within or without the State of Nevada.
Corporate business of every kind and nature may be conducted, and meetings
of directors and stockholders held, outside the State of Nevada, the same
as in the State of Nevada.
ARTICLE III: CORPORATE PURPOSES
The nature of the business and object and purposes proposed to be
transacted, promoted, or carried on by the corporation are: (a) to engage
in any lawful activity; and (b) to conduct gaming in the State of Nevada in
accordance with the laws of the State of Nevada and the United States of
America.
ARTICLE IV: CAPITAL STOCK
Section 1. Authorized Shares. The corporation is authorized to issue
two (2) classes of shares of stock. One class of shares shall be designated
"Common Stock," with $0.001 par value per share. The total number of shares
of Common Stock which this Corporation is authorized to issue is one
hundred million (100,000,000). Common Stock may be issued by the
Corporation from time to time by resolution of the Board of Directors,
except as otherwise provided in this Section. The shares of authorized
Common Stock shall be identical in all respects and shall have equal rights
and privileges and shall be entitled to one (1) vote each on all matters
submitted to a vote of the stockholders.
The other class of shares which the corporation is authorized to issue
shall be designated "Preferred Stock," with $0.001 par value per share. The
total number of shares of Preferred Stock which the corporation is
authorized to issue fifty million (50,000,000). Preferred Stock may be
issued by the corporation from time to time by resolution of the Board of
Directors in one or more series with such voting powers, distinguishing
designations, preferences, limitations, restrictions and relative rights as
the Board of Directors determines by resolution, except as otherwise
provided in this Section.
If the Board of Directors determines by resolution that the Preferred
Stock shall have a preference over any other class of equity securities
with respect to dividends, such resolution shall also make adequate
provisions for the election of directors representing the holders of such
Preferred Stock in the event of default in the payment of such dividends.
The corporation shall not issue nonvoting equity securities.
The corporation shall not issue any stock or other securities except
in accordance with the provisions of the Nevada Gaming Control Act and the
regulations thereunder. The issuance of any stock or other securities in
violation thereof shall be ineffective and such stock or other securities
shall be deemed not to be issued and outstanding until (i) the corporation
shall cease to be subject to the jurisdiction of the Nevada Gaming
Commission ("Commission"), or (ii) the Commission shall, by affirmative
action, validate said issuance or waive any defect in issuance.
No stock or other securities issued by the corporation and no
interest, claim or charge therein or thereto shall be transferred in any
manner whatsoever except in accordance with the provisions of the Nevada
Gaming Control Act and the regulations thereunder. Any transfer in
violation thereof shall be ineffective until (i) the corporation shall
cease to be subject to the jurisdiction of the Commission, or (ii) the
Commission shall, by affirmative action, validate said transfer or waive
any defect in said transfer.
If the Commission at any time determines that a holder of stock or
other securities of this corporation is unsuitable to hold such securities,
then until such securities are owned by persons found by the Commission to
be suitable to own them, (a) the corporation shall not be required or
permitted to pay any dividend or interest with regard to the securities,
(b) the holder of such securities shall not be entitled to vote on any
matter as the holder of the securities and such securities shall not for
any purposes be included in the securities of the corporation entitled to
vote, and (c) the corporation shall not pay any remuneration in any form to
the holder of the securities.
Section 2. Consideration for Shares. The capital stock authorized by
Section 1 of this Article shall be issued for such consideration as shall
be fixed, from time to time, by the Board of Directors.
Section 3. Assessment of Stock. The capital stock of the corporation,
after the amount of the subscription price has been fully paid in, shall
not be assessable for any purpose, and no stock issued as fully paid shall
ever be assessable or assessed. No stockholder of the corporation is
individually liable for the debts or liabilities of the corporation.
Section 4. Cumulative Voting For Directors. At all elections of
directors of the corporation, each holder of stock possessing voting power
is entitled to as many votes as equal the number of his or her shares of
stock multiplied by the number of directors to be elected, and he or she
may cast all of his or her votes for a single director or may distribute
them among the number to be voted for or any two or more of them, as he or
she sees fit.
Section 5. Preemptive Rights. No stockholder of the corporation shall
have any preemptive rights.
ARTICLE V: DIRECTORS AND OFFICERS
Section 1. Number of Directors. The members of the governing board of
the corporation are styled as directors. The number of directors may be
fixed and changed from time to time in such manner as shall be provided in
the bylaws of the corporation; provided, however, the number of directors
shall be not less than three (3).
Section 2. Current Directors. The names and post office addresses of
the current Board of Directors, which consists of five (5) members, are:
NAME ADDRESS
---- -------
Edward M. Nigro 4545 Spring Mountain Road
#105
Las Vegas, NV 89102
Jeffrey T. Leeds 200 Park Avenue
58th Floor
New York, NY 10166
John C. "Bruce" Waterfall 10 East 50th Street
26th Floor
New York, NY 10020
Harry C. Hagerty, III Deutsche, Morgan, Grenfell
31 W. 52nd Street
25th Floor
New York, NY 10019
S. Barton Jacka 14660 South Quiet Meadow Drive
Reno, NV 89511
Vacancies on the Board of Directors shall be filled, and elections of
directors shall be held, in accordance with the Bylaws.
Section 3. Limitation of Personal Liability. No director or officer of
the corporation shall be liable to the corporation or its stockholders for
damages for breach of fiduciary duty as a director or officer. This
provision shall not eliminate or limit the liability of a director or
officer for acts or omissions which involve intentional misconduct, fraud,
a knowing violation of law, or the payment of distributions in violation of
Nevada Revised Statutes section 78.300. If the Nevada Revised Statutes are
hereafter amended or interpreted to eliminate or limit further the personal
liability of directors or officers, then the liability of all directors and
officers shall be eliminated or limited to the full extent then so
permitted.
Section 4. Payment of Expenses. All expenses incurred by officers or
directors in defending a civil or criminal action, suit, or proceeding must
be paid by the corporation as they are incurred in advance of a final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of a director or officer to repay the amount if
it is ultimately determined by a court of competent jurisdiction that (i)
he or she did not act in good faith, and in the manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation
or (ii) with respect to any criminal action or proceedings, he or she had
reasonable cause to believe his or her conduct was unlawful.
Section 5. Repeal and Conflicts. Any repeal or amendments of Section 3
or 4 of this Article or the adoption of any provision of these Articles of
Incorporation inconsistent with Section 3 or 4 of this Article shall be
prospective only and shall not eliminate or reduce the effect of Sections 3
or 4 of this Article in respect of any act or omission that occurred prior
to such repeal, amendment or adoption of an inconsistent provision. In the
event of any conflict between Sections 3 or 4 of this Article and any other
Article of the corporation's Articles of Incorporation, the terms and
provisions of Section 3 or 4 of this Article, as the case may be, shall
control.
Section 6. Compliance with Gaming Control Act. All of the directors of
the corporation shall be subject to, and the composition of the Board of
Directors shall be in compliance with, the requirements and qualifications
imposed by the Nevada Gaming Control Act (Nevada Revised Statutes section
463.010 et seq., as amended from time to time), or any successor provision
of Nevada law, and the regulations promulgated thereunder, and the rules
and regulations of any governmental agency responsible for the licensing
and regulation of gaming operations, including without limitation, the
Nevada State Gaming Control Board, the Nevada State Gaming Commission and
the Clark County Liquor and Gaming Licensing Board.
ARTICLE VI: PERPETUAL EXISTENCE
The corporation shall have perpetual existence.
ARTICLE VII: MISCELLANEOUS
The corporation shall not be governed by the provisions of Nevada
Revised Statutes Sections 78.378 to 78.3793, inclusive, or Sections 78.411
to 78.444, inclusive.
ARTICLE VIII: AMENDMENT OF ARTICLES OF INCORPORATION
Section 1. General. Except as provided in Section 2. of this ARTICLE
VIII., these Articles of Incorporation may be amended, modified, altered or
repealed only with the affirmative vote of the holders of a majority of the
voting power of all the shares of stock of the corporation entitled to vote
generally in the election of directors, voting together as a single class.
Section 2. Amendment of Certain Provisions. Notwithstanding anything
contained in these Articles of Incorporation to the contrary, ARTICLE VII.
hereof shall not be altered, amended or repealed and no provision
inconsistent therewith shall be adopted without the affirmative vote of the
holders of at least eighty percent (80%) of the voting power of all the
shares of stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class. Notwithstanding
anything contained in these Articles of Incorporation to the contrary, the
affirmative vote of the holders of at least eighty percent (80%) of the
voting power of all the shares of stock of the corporation entitled to vote
generally in the election of directors, voting together as a single class,
shall be required to amend or adopt any provision inconsistent with, or to
alter or repeal this Section 2 of ARTICLE VIII.
4. The undersigned has been authorized by the Court to file this
Certificate with the Secretary in accordance with the Court's order of
reorganization pursuant to the Plan.
Executed this 27 day of Feb., 1997.
/s/Jeffrey T. Leeds
Jeffrey T. Leeds
STATE OF NY )
) ss.
COUNTY OF NY )
This instrument was acknowledged before me on 2-27,
1997 by Jeffrey T. Leeds, as President of Elsinore Corporation.
/s/Joseph J. Nelson
Notary Public
Joseph H. Nelson
Notary Public, State of New York
No. 43-4934758
Qualified in Richmond County
Commission Expires April 8, 1998
EXHIBIT 31.1
CERTIFICATIONS
I, Joann McNiff, certify that:
I have reviewed this quarterly report on Form 10-Q of Elsinore Corporation;
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 6, 2003
-----------------
/s/ Joann McNiff
- ------------------
Joann McNiff
President
EXHIBIT 31.2
CERTIFICATIONS
I, Gina L. Mastromarino, certify that:
I have reviewed this quarterly report on Form 10-Q of Elsinore Corporation;
Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and
for, the periods presented in this report;
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: November 6, 2003
-----------------
/s/ Gina L. Mastromarino
- ---------------------------
Gina L. Mastromarino
Principal Financial and Accounting Officer
EXHIBIT 32.1
ELSINORE CORPORATION
CERTIFICATION
In connection with the periodic report of Elsinore Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2003 as filed with the
Securities and Exchange Commission (the "Report"), I, Joann McNiff, President of
the Company, hereby certify as of the date hereof, solely for purposes of Title
18, Chapter 63, Section 1350 of the United States Code, that to the best of my
knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company at the dates and for the periods indicated.
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Elsinore Corporation and will be
retained by Elsinore Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.
This Certification has not been, and shall not be deemed, "filed" with the
Securities and Exchange Commission.
Date: November 6, 2003 /s/ Joann McNiff
---------------- --------------------
Joann McNiff, President
EXHIBIT 32.2
ELSINORE CORPORATION
CERTIFICATION
In connection with the periodic report of Elsinore Corporation (the "Company")
on Form 10-Q for the period ended September 30, 2003 as filed with the
Securities and Exchange Commission (the "Report"), I, Gina L. Mastromarino,
Principal Financial and Accounting Officer, hereby certify as of the date
hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United
States Code, that to the best of my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or
15(d), as applicable, of the Securities Exchange Act of 1934, and
(2) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company at the dates and for the periods indicated.
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to Elsinore Corporation and will be
retained by Elsinore Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.
This Certification has not been, and shall not be deemed, "filed" with the
Securities and Exchange Commission.
Date: November 6, 2003 /s/ Gina L. Mastromarino
---------------- -------------------------
Gina L. Mastromarino
Principal Financial and Accounting Officer