10-Q 1 elso2q02.txt ELSINORE CORPORATION 10Q FOR 2Q02 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 June 30, 2002 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.) 202 FREMONT STREET, LAS VEGAS, NEVADA 89101 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number (Including Area Code): 702/385-4011 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 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO 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 August 13, 2002 4,993,965 Elsinore Corporation and Subsidiaries Form 10-Q For the Quarter Ended June 30, 2002 INDEX PART I. FINANCIAL INFORMATION: PAGE Item 1. Unaudited Condensed Consolidated Financial Statements: Condensed Consolidated Balance Sheets as of 4 June 30, 2002 and December 31, 2001 Condensed Consolidated Statements of Operations 6 for the Three Months Ended June 30, 2002 and June 30, 2001 Condensed Consolidated Statements of Income 8 for the Six Months Ended June 30, 2002 and June 30, 2001 Condensed Consolidated Statement of Shareholders' 10 Equity for the Six Months Ended June 30, 2002 Condensed Consolidated Statements of Cash Flows for 11 the Six Months Ended June 30, 2002 and June 30, 2001 Notes to Condensed Consolidated Financial Statements 13 Item 2. Management's Discussion and Analysis of 18 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures 32 About Market Risk PART II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 33 SIGNATURES 35 PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements

Elsinore Corporation and Subsidiaries Condensed Consolidated Statements of Operations (continued) Unaudited Three Three Months Months Ended Ended June 30, 2002 June 30, 2001 ------------------- ------------------- Basic and diluted loss per share: Basic loss per share ($.06) ($.06) =================== =================== Weighted average number of common shares outstanding 4,993,965 4,993,965 =================== =================== Diluted loss per share ($.06) ($.06) =================== =================== Weighted average number of common and common equivalent shares outstanding 4,993,965 4,993,965 =================== =================== See accompanying notes to condensed consolidated financial statements.

Elsinore Corporation and Subsidiaries Condensed Consolidated Statements of Income (continued) Unaudited Six Six Months Months Ended Ended June 30, 2002 June 30, 2001 ------------------- ------------------- Basic and diluted income per share: Basic income per share $.05 $.05 =================== =================== Weighted average number of common shares outstanding 4,993,965 4,993,965 =================== =================== Diluted income per share $.01 $.01 =================== =================== Weighted average number of common and common equivalent shares outstanding 97,993,965 97,993,965 =================== =================== See accompanying notes to condensed consolidated financial statements.

Elsinore Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements June 30, 2002 (Unaudited) 1. Summary of Significant 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. Impairment Loss As discussed in Note 5, on March 14, 2002, Elsinore announced that its wholly owned subsidiary, Four Queens, Inc. ("Four Queens"), which operates the Four Queens Hotel & Casino ("Four Queens Casino") entered into a definitive asset purchase agreement (the "Purchase Agreement") for the sale of substantially all of Four Queens Casino's assets, including the hotel and casino, to SummerGate, Inc., a Nevada corporation, for a purchase price, subject to certain price adjustments, of approximately $22 million, plus the value of cash on hand and the assumption of certain liabilities. The assets of the Four Queens constitute substantially all of the assets of Elsinore. Subsequently, on April 5, 2002, Four Queens amended the Purchase Agreement to, among other things, extend the termination date to June 30, 2002, and reduce the $22 million purchase price to approximately $21.15 million (plus the value of cash on hand and the assumption of certain liabilities) if the sale of assets was consummated after May 7, 2002. In connection with the Purchase Agreement, the Company recognized a non-cash impairment loss of approximately $13.2 million during 2001. The Company 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 assets being purchased at March 31, 2002. As substantially all of the assets of the Four Queens are held for sale, no depreciation has been recorded on these assets for the six months ended June 30, 2002. On June 27, 2002, the Four Queens exercised its right to terminate the Agreement and sent written notice to SummerGate of such termination. Subsequently, Four Queens received a written termination notice from SummerGate. As such, assets held for sale as of June 30, 2002 will be depreciated effective July 1, 2002. 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 the 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, 2001. 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 June 30, 2002, the results of its operations for the six months ended June 30, 2002 and June 30, 2001, and the results of its cash flows for the six months ended June 30, 2002 and June 30, 2001. 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. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates used by the Company include the estimated useful lives for depreciable and amortizable assets, the estimated allowance for doubtful accounts receivable, the estimated valuation allowance for deferred tax assets, and estimated cash flows used in assessing the recoverability of long-lived assets. Actual results may differ from those estimates. Recently Issued Accounting Standards In June 2002, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standard No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No.146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. A fundamental conclusion reached by the FASB in this statement is that an entity's commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company believes that SFAS No. 146 will 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 a net loss for the three month periods ended June 30, 2002 and 2001, the effect of common stock equivalents was anti-dilutive. Therefore, basic and diluted per share amounts are the same for these periods.

2. 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, 2002. Accordingly, the Company has not recorded a provision for income taxes on the accompanying Condensed Consolidated Financial Statements. 3. Commitments and Contingencies The Company is a party to litigation involving a proposed merger with R&E Gaming Corp. as discussed in Note 4 below. The Company is a party to other claims and lawsuits which 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. 4. Paulson Litigation In the first half of 1997, Elsinore and Mr. Allen E. Paulson ("Paulson") commenced discussions which culminated in an Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 15, 1997, between Elsinore and entities controlled by Paulson, namely R&E Gaming Corp. ("R&E") and Elsinore Acquisition Sub, Inc. ("EAS"), to acquire by merger (the "Merger") the outstanding common stock ("Common Stock") of Elsinore for $3.16 per share in cash plus an amount of additional consideration in cash equal to the daily portion of the accrual on $3.16 at 9.43% compounded annually, from June 1, 1997 to the date immediately preceding the date such acquisition is consummated. The Merger Agreement provided for EAS to merge into Elsinore, and Elsinore to become a wholly owned subsidiary of R&E. Contemporaneously with the Merger Agreement, R&E executed an Option and Voting Agreement (the "Option Agreement") with Morgens, Waterfall, Vintiadis and Company, Inc. ("MWV"), on behalf of certain investment accounts ("MWV Accounts") which owned 94.3% of the outstanding Common Stock prior to the Recapitalization. Under certain conditions and circumstances, the Option Agreement provided for, among other things: (i) the grant by the MWV Accounts to R&E of an option to purchase all of their Common Stock; (ii) an obligation by R&E to purchase all of the MWV Accounts' Common Stock; and (iii) the MWV Accounts to vote their Common Stock in favor of the Merger Agreement. Elsinore's shareholders approved the Merger Agreement at a special meeting of shareholders held on February 4, 1999. Paulson also entered into discussions with Riviera to acquire a controlling interest in that company as well. Riviera owns and operates the Riviera Hotel and Casino in Las Vegas and is the parent corporation of Riviera Gaming Management-Elsinore, Inc. ("RGME"). On September 16, 1997, R&E and Riviera Acquisition Sub, Inc. ("RAS") (another entity controlled by Paulson) entered into an Agreement and Plan of Merger with Riviera, which provided for the merger of RAS into Riviera (the "Riviera Merger"), and for Riviera to become a wholly owned subsidiary of R&E. R&E also entered into an Option and Voting Agreement with certain Riviera shareholders, including MWV acting on behalf of the MWV Accounts, containing terms similar to those described above with respect to the Option Agreement. The Merger Agreement contained conditions precedent to consummation of the Merger, including: (i) the Option Agreement being in full force and effect and MWV having complied in all respects with the terms thereof; (ii) all necessary approvals from gaming authorities; and (iii) consummation of the Riviera Merger. On March 20, 1998, Elsinore was notified by R&E, through Paulson, that it was R&E's position that the Merger Agreement was void and unenforceable against R&E and EAS, or alternatively, R&E and EAS intended to terminate the Merger Agreement. R&E alleged, among other things, violations by Elsinore of the Merger Agreement, violations of law and misrepresentations by MWV in connection with the Option and Voting Agreement and the non-satisfaction of certain conditions precedent to completing the merger. The Company denied the allegations and asked that R&E complete the merger. Thereafter, in April 1998, Paulson, R&E, EAS and certain other entities filed a lawsuit against eleven defendants, including Elsinore and MWV (Paulson, et al. v Jeffries & Company et al.). On January 25, 2000, the Court granted Plaintiffs' motion for leave to file a Fourth Amended Complaint. Plaintiffs' allegations in the Fourth Amended Complaint against the Company include breach of the Merger Agreement by Elsinore, as well as fraud and various violations of the federal securities laws in connection with the proposed merger. Plaintiffs were seeking: (i) unspecified actual damages in excess of $20 million; (ii) $20 million in exemplary damages; and (iii) rescission of the Merger Agreement and other relief. The lawsuit was filed in the United States District Court for the Central District of California. Pursuant to a settlement agreement dated as of April 3, 2002, this lawsuit has now been resolved. A Settlement Bar Order and Final Judgment was entered by the Court on July 1, 2002. Pursuant to the settlement agreement, Elsinore agreed to pay the sum of $1,100,000, which was paid on June 1, 2002. Total litigation and settlement costs (including the settlement payment) incurred during the quarter ended June 30, 2002, were approximately $1,312,000. A receivable due from the Company's directors and officers' insurance carrier related to this matter partially offset this expense by $514,000. 5. Impairment Loss Prior to December 31, 2001, the Company entered into a sales agency contract in which the sales agency would provide assistance in locating potential buyers of the Company or Four Queens. On March 14, 2002, the Company announced that Four Queens entered into a Purchase Agreement for the sale of substantially all of Four Queens Casino's assets, including the hotel and casino, to SummerGate, Inc., a Nevada corporation, for a purchase price, subject to certain adjustments, of approximately $22 million, plus the value of cash on hand and the assumption of certain liabilities. In addition, pursuant to the terms of the Purchase Agreement, SummerGate, Inc. would offer employment to all Four Queens employees. The assets of Four Queens constitute substantially all of the assets of Elsinore. Upon the consummation of the sale of the assets of Four Queens, Elsinore would not have an operating asset. The Board of Directors of both Elsinore and Four Queens anticipated that, following the sale of the assets of Four Queens, they would have adopted a plan of dissolution and begun the process of winding-up and dissolving both the Four Queens and Elsinore. Elsinore anticipated that the proceeds from the sale would have been used solely to pay the debts of Four Queens and Elsinore, as well as to pay any accrued and unpaid dividends on Elsinore's outstanding 6% cumulative convertible preferred stock (the "Preferred Stock"), plus the liquidation preference on the Preferred Stock, if Elsinore is dissolved. At March 31, 2002, total liabilities of Elsinore were approximately $7.8 million, and total liabilities of the Four Queens were approximately $8.1 million (of which SummerGate, Inc. would have assumed approximately $4.1 million pursuant to the terms of the Purchase Agreement. In addition, as of March 31, 2002, Elsinore had outstanding approximately 50,000,000 shares of Preferred Stock, with a liquidation preference of approximately $22.1 million, including accumulated dividends, and approximately 4,993,965 shares of Common Stock. In the event the Four Queens and Elsinore were dissolved, based upon the total assets of the Four Queens and Elsinore as of May 14, 2002 and assuming the consummation of the sale, after the payment of the Four Queens' and Elsinore's debt and the payment of the Preferred Stock's liquidation preference, including accumulated dividends, there would not be any remaining assets available for distribution to the holders of the Common Stock. The beneficial owner of a majority of Elsinore's capital stock, who exercises voting and investment authority over 100% of the Preferred Stock and approximately 99.6% of the Common Stock (on an as-converted basis), delivered a written consent on May 2, 2002 approving the sale of the assets of Four Queens. In connection with the Purchase Agreement, the Company recognized a non-cash impairment loss of approximately $13.2 million during 2001. An impairment loss was necessary as net proceeds resulting from the sale of the assets of Four Queens, under the Purchase Agreement, would be less than the carrying value of the assets to be sold as of December 31, 2001. Approximately $12.9 million of the impairment loss was related to buildings and equipment and the remainder was related to the impairment of reorganization value in excess of amounts allocable to identifiable assets. On April 5, 2002, Four Queens amended the Purchase Agreement to, among other things, extend the termination date to June 30, 2002, and reduce the $22 million purchase price to approximately $21.15 million (plus the value of cash on hand and the assumption of certain liabilities) if the sale of assets was consummated after May 7, 2002. The Company recorded an adjustment to the 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 assets being purchased at March 31, 2002. On June 27, 2002, the Four Queens exercised its right to terminate the Agreement and sent written notice to SummerGate of such termination. Subsequently, Four Queens received a written termination notice from SummerGate. 6. Olympia Gaming Corporation Elsinore Corporation ("Elsinore"), through its wholly-owned subsidiary, Olympia Gaming Corporation (collectively, with Elsinore, the "Company"), entered into a Gaming Project Development and Management Agreement (the "Contract") dated as of September 28, 1993 with the Jamestown S'Klallam Tribe (the "JST") and JKT Gaming, Inc. ("JKT") to operate the 7 Cedars Casino (the "7 Cedars"), which is located on the Olympic Peninsula in the State of Washington and is owned by JST. Pursuant to a Loan Agreement dated November 12, 1993 between the Company, JST and JKT, as amended, and the documents related thereto (collectively, the "Loan Documents"), the Company loaned $9,000,000 (the "7 Cedars Note") to JST for the construction of 7 Cedars. During 1995, the contract was terminated by 7 Cedars. As a result, the Company recorded a reserve on the 7 Cedars Note and wrote off unamortized casino development costs in the amount of $242,000 and all accrued interest. During 1997, the Company wrote off the 7 Cedars Note and related reserve. The Company entered into a Settlement Agreement and Mutual Release (the "Settlement") on May 23, 2002 with JST and JKT to resolve any claims of the parties arising out of the Loan Agreement. Pursuant to the Settlement, JST has agreed to pay the Company $1.5 million, plus interest, over a 36 month period, with an option to prepay, at a negotiated discount, the full amount at any time prior to the end of such 36 month period. Pursuant to the Settlement, the Company, JST and JKT have each agreed to mutually release each party to the Settlement from all claims or causes of action arising from the Loan Documents and related transactions. The Company collected approximately $338,000 under this Settlement during the three months ended June 30, 2002. Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operation This discussion and analysis should be read in conjunction with the Condensed Consolidated Financial Statements and notes thereto set forth elsewhere herein. FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include statements regarding the Company's expectations, hopes or intentions regarding the future, including but not limited to statements regarding the Company's strategy, competition, expenses, development plans, capital expenditures, financing, revenue, operations, the impact of the terrorist attacks in the United States, regulations, and compliance with applicable laws. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Among the factors that could cause actual results to differ materially are the following: declines in general economic conditions, increased labor costs, the Company's ability to refinance its debt, other financing needs, further terrorist attacks, the availability of sufficient funds for capital improvements and other risks related to such improvements, changes in gaming laws, loss of licenses or permits and other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. All forward-looking statements in this document are made as of the date hereof, based on information available to the Company as of the date hereof, and the Company assumes no obligation to update any forward-looking statement. The following tables sets forth certain operating information for the Company for the three and six months ended June 30, 2002 and 2001. 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.

(1) As substantially all of the assets of the Four Queens were held for sale, no depreciation was recorded on these assets for the six months ended June 30, 2002. On June 27, 2002, the Four Queens exercised its right to terminate the Agreement and sent written notice to SummerGate of such termination. Subsequently, Four Queens received a written termination notice from SummerGate. As such, assets held for sale as of June 30, 2002 will be depreciated effective July 1, 2002. EBITDA consists of earnings before interest, taxes, depreciation and amortization. While EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with accounting principles generally accepted in the United States of America("GAAP"), it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure, and working capital requirements. Although EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, management believes that certain investors find EBITDA to be a useful tool for measuring the ability of the Company to service its debt. EBITDA margin is EBITDA as a percentage of net revenues. The Company's definition of EBITDA may not be comparable to other companies' definitions.

THREE MONTHS ENDED JUNE 30, 2002 COMPARED TO THREE MONTHS ENDED JUNE 30, 2001 REVENUES Net revenues increased by approximately $133,000, or .9%, from $14,031,000 during the 2001 period, to $14,164,000 for the 2002 period. This increase was due, in part, to payments received during 2002 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., as discussed below. However, the acts of terrorism that occurred in New York City and Washington, D.C. on September 11, 2001, have resulted in a disruption in travel. Management believes that these terrorist acts and travel disruptions have resulted in decreased customer visitation to our property. We have experienced declines, most noticeably in room and casino revenues, which has adversely affected our operating results since September 11, 2001, also discussed below. Although the Company cannot be certain of the impact that the events of September 11 may continue to have, if any, on future operations, management believes that the current results compared to the periods immediately following September 11 are continuing to improve. Casino revenues increased by approximately $32,000, or .3%, from $9,848,000 during the 2001 period to $9,880,000 during the 2002 period. This increase was primarily due to a $242,000, or 12%, increase in table games revenue, offset by a $112,000, or 1.5%, decrease in slot machine revenue, a $83,000, or 23.6%, decrease in slot promotion revenue, and a $15,000, or 11%, decrease in keno revenue. The increase in table games revenue was attributable to an increase in drop of $1,799,000, or 13.9%, offset by a decrease in the win percentage of 0.26%. The decrease in slot machine revenue was attributable to a decrease in hold percentage of 0.02% and a decrease in slot coin-in of $2,187,000, or 1.8%. The decrease in slot promotion revenue was due to a decrease in the average daily headcount of $21 WinsSM, a promotional slot program, of 45, or 23.3%, due to a decline in foot traffic. Hotel revenues decreased by approximately $194,000, or 8.6%, from $2,262,000 during the 2001 period to $2,068,000 during the 2002 period. This decrease was primarily due to a decrease in room occupancy, as a percentage of total rooms available for sale, from 90.0% for the 2001 period, to 87.3% for the 2002 period and a decrease in the average daily room rate of $1.13, from $36.22 in the 2001 period to $35.09 in the 2002 period. The overall decline in performance was primarily attributed to a reduction in individual reservations call volume. Food and beverage revenues increased approximately $107,000, or 4.0%, from $2,663,000 during the 2001 period to $2,770,000 during the 2002 period. This increase was primarily due to an increase in cash sales as a result of a higher average check. Other revenues increased by approximately $281,000, or 71.9%, from $391,000 during the 2001 period to $672,000 during the 2002 period. This increase was primarily due to payments received during 2002 of approximately $338,000 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. partially offset by a decrease in parking garage revenue of $24,200, or 17.8%, due to a decline in the number of cars parked, and a decrease in interest income of $34,800, or 78.6%. Promotional allowances increased by approximately $93,000, or 8.2%, from $1,133,000 during the 2001 period to $1,226,000 during the 2002 period due to an increase in complimentary rooms, food and beverage resulting from an increase in casino complimentaries due, in part, to increased table games play. DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS Total direct costs and expenses of operating departments, including taxes and licenses, increased by approximately $187,000, or 2.1%, from $8,951,000 for the 2001 period to $9,138,000 for the 2002 period. Casino expenses increased $129,000, or 4.0%, from $3,221,000 during the 2001 period to $3,350,000 during the 2002 period, and expenses as a percentage of revenue increased from 32.7% to 33.9%. The increase was due, in part, by an increase in labor costs associated with an increase in the number of table games open for play as well as an increase in the reclassification of cost of complimentary rooms, food, and beverage reflected as a casino expense. Hotel expenses decreased $43,000, or 1.8%, from $2,453,000 during the 2001 period to $2,410,000 during the 2002 period; however, expenses as a percentage of revenue increased from 108.4% to 116.5%. The decrease was due, in part, to an increase in the reclassification of cost of complimentary rooms reflected as a casino expense. Food and beverage costs and expenses increased by approximately $94,000, or 5.2%, from $1,808,000 during the 2001 period to $1,902,000 during the 2002 period, and expenses as a percentage of revenues increased from 67.9% to 68.7%. The increase was due, in part, to an increase in labor costs. The Company recently concluded negotiations with the Culinary Workers Union Local 226 and Bartenders Union Local 165 as well as the International Union of Operating Engineers Local 501 (AFL-CIO). Pursuant to such negotiations, the Company has commitments for various union payroll increases which are expected to increase future payroll costs. OTHER OPERATING EXPENSES Selling, general and administrative expenses increased $202,000, or 7.9%, from $2,543,000 during the 2001 period to $2,745,000 during the 2002 period, and, as a percentage of total net revenues, expenses increased from 18.1% to 19.4%. The increase was primarily due to expenses incurred relating to the proposed sale of assets of Four Queens which, was not consummated. Rent expense increased by approximately $50,000, or 4.7%, from $1,075,000 during the 2000 period to $1,125,000 during the 2001 period, due primarily to corresponding annual Consumer Price Index increases for land lease agreements. During 2002, the Company incurred approximately $798,000, net, in merger and litigation costs. Approximately $1,312,000 was incurred as a result of litigation and settlement costs related to the Agreement and Plan of Merger, between Elsinore and Allen E. Paulson. See discussion in the Notes of the Condensed Consolidated Financial Statements. A receivable due from the Company's directors and officers' insurance carrier related to this matter partially offset this expense by $514,000. EBITDA Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased by approximately $1,041,000, or 74.4%, from $1,399,000 during the 2001 period to $358,000 during the 2002 period. The decrease is primarily due to an increase in selling, general, and administrative expenses related to the proposed sale of assets of Four Queens, which was not consummated, and expenses incurred in connection with the settlement of the Paulson Litigation as discussed in the Notes to the Condensed Consolidated Financial Statements. While EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with GAAP, it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. Although EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, management believes that certain investors find EBITDA to be a useful tool for measuring the ability of the Company to service its debt. EBITDA margin is EBITDA as a percentage of net revenues. OTHER EXPENSES Depreciation and amortization expense decreased by approximately $1,027,000, or 100.0% from $1,027,000 during the 2001 period to $0 during the 2002 period. As a result of the Four Queens' assets being held for sale, no depreciation was recorded during the 2002 period. If assets had not been held for sale, depreciation would have been approximately $856,000. Due to the termination of the sale of assets of the Four Queens depreciation will begin again effective July 1, 2002. Interest expense decreased by approximately $27,000, or 7.8% from $348,000 during the 2001 period to $321,000 for the 2002 period. The reduction in interest expense was primarily due to a reduction in the principal balance of the Company's 12.83% Mortgage Notes (the "Notes") as a result of a principal payment by the Company in June 2001. NET INCOME BEFORE PROVISION FOR INCOME TAXES AND UNDECLARED DIVIDENDS ON CUMULATIVE CONVERTIBLE PREFERRED STOCK As a result of the factors discussed above, the Company experienced net income before provision for income taxes and undeclared dividends on cumulative convertible preferred stock in the 2002 period of $37,000 compared to $24,000 in the 2001 period, an increase of $13,000, or 54.2%. SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO SIX MONTHS ENDED JUNE 30, 2001 REVENUES Net revenues decreased by approximately $445,000, or 1.6%, from $28,403,000 during the 2001 period, to $27,958,000 for the 2002 period. This decrease was due, in part, to a decrease in casino and hotel revenues, partially offset by an increase in other income. On September 11, 2001, acts of terrorism occurred in New York City and Washington, D.C. As a result of such terrorist acts, there has been a disruption in travel. Management believes that these terrorist acts and travel disruptions have resulted in decreased customer visitation to our property. We have experienced declines, most noticeably in room and casino revenues, which has adversely affected our operating results since September 11, 2001, as discussed below. Although the Company cannot be certain of the impact that the events of September 11 may continue to have, if any, on future operations, management believes that the current results compared to the periods immediately following September 11 are continuing to improve. The increase in other income was primarily due to payments received during 2002 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., also discussed below. Casino revenues decreased by approximately $340,000, or 1.7%, from $20,013,000 during the 2001 period to $19,673,000 during the 2002 period. This decrease was primarily due to a $812,000, or 5.5%, decrease in slot machine revenue and a $26,000, or 9.3%, decrease in keno revenue, partially offset by a $490,000, or 11.3%, increase in table games revenue and a $8,000, or 1.5%, increase in slot promotion revenue. The decrease in slot machine revenue was attributable to a decrease in hold percentage of 0.01% and a decrease in slot coin-in of $13,275,000 or 5.3%. The increase in table games revenue was attributable to an increase in the win percentage of 0.37% and an increase in drop of $2,446,000, or 8.7%. The increase in slot promotion revenue was due to six complete months of $21 WinsSM revenue in the 2002 period. $21 WinsSM is a promotional slot program which began in February 2001. Hotel revenues decreased by approximately $570,000, or 11.8%, from $4,824,000 during the 2001 period to $4,254,000 during the 2002 period. This decrease was primarily due to a decrease in room occupancy, as a percentage of total rooms available for sale, from 91.4% for the 2001 period, to 88.7% for the 2002 period and a decrease in the average daily room rate of $2.68, from $38.37 in the 2001 period to $35.69 in the 2002 period. The overall decline in performance was primarily attributed to a reduction in individual reservations call volume. Food and beverage revenues increased approximately $183,000, or 3.3%, from $5,533,000 during the 2001 period to $5,716,000 during the 2002 period. This increase was primarily due to an increase in cash sales as a result of a higher average check. Other revenues increased by approximately $214,000, or 27.5%, from $779,000 during the 2001 period to $993,000 during the 2002 period. This increase was primarily due to payments received during 2002 of approximately $338,000 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. partially offset by a decrease in parking garage revenue of $52,000, or 19.3%, due to a decline in the number of cars parked, and a decrease in interest income of $73,000, or 82.9%. Promotional allowances decreased by approximately $68,000, or 2.5%, from $2,746,000 during the 2001 period to $2,678,000 during the 2002 period due to a decrease in complimentary rooms, food and beverage resulting from a decrease in casino complimentaries due, in part, to decreased slot machine play. DIRECT COSTS AND EXPENSES OF OPERATING DEPARTMENTS Total direct costs and expenses of operating departments, including taxes and licenses, increased by approximately $223,000, or 1.3%, from $17,707,000 for the 2001 period to $17,930,000 for the 2002 period. Casino expenses increased $277,000, or 4.46%, from $6,287,000 during the 2001 period to $6,564,000 during the 2002 period, and expenses as a percentage of revenue increased from 31.4% to 33.4%. The increase was due, in part, by an increase in labor costs associated with an increase in the number of table games open for play as well as an increase in the reclassification of cost of complimentary rooms, food, and beverage reflected as a casino expense. Hotel expenses decreased $214,000, or 4.4%, from $4,830,000 during the 2001 period to $4,616,000 during the 2002 period; however, expenses as a percentage of revenue increased from 100.1% to 108.5%. The decrease was due, in part, to an increase in the reclassification of cost of complimentary rooms reflected as a casino expense. Food and beverage costs and expenses increased by approximately $206,000, or 5.7%, from $3,614,000 during the 2001 period to $3,820,000 during the 2002 period, and expenses as a percentage of revenues increased from 65.3% to 66.8%. The increase was due, in part, to an increase in labor costs. Taxes and licenses decreased $46,000, or 1.6%, from $2,976,000 in the 2001 period to $2,930,000 in the 2002 period as a result of corresponding decreases in casino revenues. The Company recently concluded negotiations with the Culinary Workers Union Local 226 and Bartenders Union Local 165 as well as the International Union of Operating Engineers Local 501 (AFL-CIO). Pursuant to such negotiations, the Company has commitments for various union payroll increases which are expected to increase future payroll costs. OTHER OPERATING EXPENSES Selling, general and administrative expenses increased $291,000, or 6.2%, from $4,715,000 during the 2001 period to $5,006,000 during the 2002 period, and, as a percentage of total net revenues, expenses increased from 16.6% to 17.9%. The increase was primarily due to expenses incurred relating to the sale of assets of Four Queens. Rent expense increased by approximately $81,000, or 3.8%, from $2,133,000 during the 2001 period to $2,214,000 during the 2002 period, due primarily to corresponding annual Consumer Price Index increases for land lease agreements. In connection with the Purchase Agreement (defined below), the Company recognized a non-cash impairment loss of approximately $13.2 million during 2001. An impairment loss was necessary as net proceeds resulting from the sale of the Four Queens will be less than the carrying value of the assets to be sold as of December 31, 2001. Approximately $12.9 million of the impairment loss was related to buildings and equipment and the remainder was related to the impairment of reorganization value in excess of amounts allocable to identifiable assets. The Company recorded an adjustment to the impairment loss by 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 assets being purchased at March 31, 2002. See discussion in the Notes of the Condensed Consolidated Financial Statements. During 2002, the Company incurred approximately $989,000, net, in merger and litigation costs. Approximately $2,054,000 was incurred as a result of litigation and settlement costs related to the Agreement and Plan of Merger, between Elsinore and Allen E. Paulson. See discussion in the Notes of the Condensed Consolidated Financial Statements. A receivable due from the Company's directors and officers' insurance carrier related to this matter partially offset this expense by $1,065,000. EBITDA Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased by approximately $2,195,000, or 59.5%, from $3,690,000 during the 2001 period to $1,495,000 during the 2002 period. The decrease is primarily due to an increase in selling, general, and administrative expenses related to the proposed sale of assets of Four Queens, which was not consummated, and expenses incurred in connection with the settlement of the Paulson Litigation as discussed in the Notes to the Condensed Consolidated Financial Statements. While EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flows from operating activities, which are determined in accordance with GAAP, it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. Although EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, management believes that certain investors find EBITDA to be a useful tool for measuring the ability of the Company to service its debt. EBITDA margin is EBITDA as a percentage of net revenues. OTHER EXPENSES Depreciation and amortization expense decreased by approximately $2,035,000, or 100.0% from $2,035,000 during the 2001 period to $0 during the 2002 period. As a result of the Four Queens' assets being held for sale, no depreciation was recorded during the 2002 period. If assets had not been held for sale, depreciation would have been approximately $1,693,000. Due to the termination of the sale of assets of the Four Queens depreciation will begin again effective July 1, 2002. Interest expense decreased by approximately $184,000, or 22.9% from $805,000 during the 2001 period to $621,000 for the 2002 period. The reduction in interest expense was primarily due to a reduction in the principal balance of the Company's 12.83% Mortgage Notes (the "Notes") as a result of a principal payment by the Company in June 2001. NET INCOME BEFORE PROVISION FOR INCOME TAXES AND UNDECLARED DIVIDENDS ON CUMULATIVE CONVERTIBLE PREFERRED STOCK As a result of the factors discussed above, the Company experienced net income before provision for income taxes and undeclared dividends on cumulative convertible preferred stock in the 2002 period of $874,000 compared to $850,000 in the 2001 period, an increase of $24,000, or 2.8%. LIQUIDITY AND CAPITAL RESOURCES On March 14, 2002, the Company entered into a purchase agreement (the "Purchase Agreement") for the sale of substantially all of Four Queens Casino's assets, including the hotel and casino, to SummerGate, Inc., a Nevada corporation, for a purchase price, subject to certain adjustments, of approximately $22 million, plus the value of cash on hand and the assumption of certain liabilities. On April 5, 2002, the Four Queens amended the Purchase Agreement to, among other things, extend the termination date to June 30, 2002, and reduce the $22 million purchase price to approximately $21.15 million (plus the value of cash on hand and the assumption of certain liabilities) if the sale of assets was consummated after May 7, 2002. In connection with the Purchase Agreement, the Company recognized a non-cash impairment loss of approximately $13.2 million during 2001. An impairment loss was necessary as net proceeds resulting from the sale of the Four Queens will be less than the carrying value of the assets to be sold as of December 31, 2001. Approximately $12.9 million of the impairment loss was related to buildings and equipment and the remainder was related to the impairment of reorganization value in excess of amounts allocable to identifiable assets. The Company has recorded an adjustment to the impairment loss of approximately $324,000, in the first quarter of 2002, due to an amendment of the Purchase Agreement and an increase in the carrying value of assets being purchased at March 31, 2002. See discussion in Notes of the Condensed Consolidated Financial Statements. On June 27, 2002, the Four Queens exercised its right to terminate the Agreement and sent written notice to SummerGate of such termination. Subsequently, Four Queens received a written termination notice from SummerGate. The Company had cash and cash equivalents of approximately $5.1 million at June 30, 2002, as compared to approximately $4.6 million at December 31, 2001. During the first half of 2002, the Company's net cash provided by operating activities was $1.8 million compared to $2.3 million in the first half of 2001. As a result of the acts of terrorism which occurred in New York City and Washington, D.C. on September 11, 2001, there have been disruptions in travel, which have resulted in decreased customer visitation to our property. We have experienced declines, most noticeably in room and casino revenues, which have materially adversely affected our operating results since September 11, 2001. The Company cannot be certain of the impact that the events of September 11 may continue to have, if any, on future operations. Earnings before interest, taxes, depreciation and amortization ("EBITDA"), for the six months ended 2002 and 2001 was $1.5 million and $3.7 million, respectively. While EBITDA should not be construed as a substitute for operating income or a better indicator of liquidity than cash flow from operating activities, which are determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"), it is included herein to provide additional information with respect to the ability of the Company to meet its future debt service, capital expenditure and working capital requirements. Although EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, management believes that certain investors find EBITDA to be a useful tool for measuring the ability of the Company to service its debt. EBITDA margin is EBITDA as a percentage of net revenues. The Company's definition of EBITDA may not be comparable to other companies' definitions. The following table summarizes our obligations and commitments as of June 30, 2002:

Significant debt service on the Company's Notes is paid in August and February, during each fiscal year, which significantly affects the Company's cash and cash equivalents in the second and fourth quarters and should be considered in evaluating cash increases or decreases in the second and fourth quarters. In connection with the Purchase Agreement, Elsinore notified the trustee under the Company's 12.83% Second Mortgage Notes due 2003 (the "Notes"), that the Company was going to redeem the Notes on April 30, 2002, pursuant to the originally scheduled closing date for the asset sale transaction. Both the failure to redeem the Notes on April 30, 2002 in accordance with the Company's notice to the trustee, as well as the execution of the Purchase Agreement to sell the Four Queens assets, were defaults under the Notes. The Company obtained a waiver of such defaults. Subsequently, in connection with an amendment to the Purchase Agreement and extension of the closing date for the asset sale, the Company notified the trustee that it intended to redeem the Notes on June 30, 2002. The failure to redeem the Notes on this date was also a default under the Notes. The Company is currently in the process of obtaining a waiver of this default. Since the Purchase Agreement was terminated on June 27, 2002, the Company does not have any current plans to redeem the Notes. The Notes are due in full on October 20, 2003. The Notes are redeemable by the Company at any time at 100% of par, without premium. The Company is required to make an offer to purchase all Notes at 101% of face value upon any "Change of Control" as defined in the indenture governing the Notes. The sale of the assets of Four Queens does not constitute a change in control, as defined in the indenture and does not require an offer to purchase the Notes at 101% of face. The indenture also provides for mandatory redemption of the Notes by the Company upon order of the Nevada Gaming Authorities. The Notes are guaranteed by Elsub Management Corporation, Four Queens and Palm Springs East Limited Partnership and are collateralized by a second deed of trust on, and a pledge of, substantially all the assets of the Company and the guarantors. Scheduled interest payments on the Notes and other indebtedness is approximately $1 million in 2002 and 2003. Management believes that sufficient cash flow will be available to cover the Company's debt service for the next twelve months and enable investment in budgeted capital expenditures of approximately $1.8 million for 2002, of which $500,000 is expected to be financed. The Company's ability to service its debt is dependent upon future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. Cash flow from operations is not expected to be sufficient to pay the remaining $7.1 million of principal of the Notes at maturity on October 20, 2003, and the ability of the Company to repay the Notes at maturity would be dependent upon its ability to refinance the Notes. There can be no assurance that the Company will be able to refinance the principal amount of the Notes on favorable terms or at all. A note agreement executed in connection with the issuance of the Notes, among other things, places significant restrictions on the incurrence of additional indebtedness by the Company, the creation of additional liens on the collateral securing the Notes, transactions with affiliates and payment of certain restricted payments. In order for the Company to incur additional indebtedness or make a restricted payment, the Company must, among other things, meet a specified consolidated fixed charges coverage ratio and have earned an EBITDA in excess of $0. The ratio is defined as the ratio (the "Ratio") of aggregate consolidated EBITDA to the aggregate consolidated fixed charges for the twelve-month reference period. As of the reference period ended June 30, 2002 the Ratio was 3.78 to 1.00 and the Company was in compliance. Pursuant to covenants applicable to the Company's Notes and Third Supplemental Indenture, the Company is required to maintain a minimum consolidated fixed charges coverage ratio of 1.25 to 1.00. At June 30, 2002, the Company was in compliance with the Ratio requirements. The Company must also maintain a minimum consolidated net worth of not less than an amount equal to its consolidated net worth on the Effective Date of the Plan, less $5 million. At June 30, 2002, the Company was in compliance with the minimum net worth requirements; however, the Company was not in compliance with a covenant pertaining to limitations on restricted payments. Specifically, we paid approximately $865,000 in connection with our ownership interest of the Fremont Street Experience, while the note agreement limited such payments to $600,000. A waiver has been obtained by the Company from the lender through December 31, 2002. Management considers it important to the competitive position of the Four Queens Casino that expenditures be made to upgrade the property. Uses of cash included capital expenditures of $835,000 and $419,000 during the six months ended June 30, 2002 and 2001, respectively. As a result of the acts of domestic terrorism committed in Washington D.C. and New York City on September 11, management has budgeted mandatory and maintenance capital expenditures to be $1.8 million for the year 2002. The Company expects to finance such capital expenditures from cash on hand, cash flow, and lease financing. Based upon current operating results and cash on hand, the Company estimates it has sufficient operating capital to fund its operations and capital expenditures for the next twelve months. The Company's ability to make such expenditures is dependent upon future performance, which will be affected by, among other things, prevailing economic conditions and financial, business and other factors, certain of which are beyond the Company's control. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. A fundamental conclusion reached by the FASB in this statement is that an entity's commitment to a plan, by itself, does not create a present obligation to others that meets the definition of a liability. SFAS No. 146 also establishes that fair value is the objective for initial measurement of the liability. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company believes that SFAS No. 146 will not have a material impact on its financial position and results of operations. CRITICAL ACCOUNTING POLICIES We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our accounting policies related to the allowance for casino receivables, long-lived assets impairments and self-insurance reserves require that we use significant judgment in the determination of estimates related to these items. We consider historical, as well as current and projected social, economic and regulatory information in the determination of these estimates, and there can be no assurance that actual results will not differ from our estimates. Additionally, see a summary of our signficant accounting policies in Note 1 to the Condensed Consolidated Financial Statements for the quarter ended June 30, 2002. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The Company's primary financial instruments include cash and long-term debt. At June 30, 2002, the carrying values of the Company's financial instruments approximated their fair values based on current market prices and rates. 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. Therefore, the Company does not have significant overall market risk exposure at June 30, 2002. Elsinore Corporation and Subsidiaries Other Information PART II. OTHER INFORMATION Item 1: Legal Proceedings. In the first half of 1997, Elsinore commenced discussions with Mr. Allen E. Paulson ("Paulson") which culminated in an Agreement and Plan of Merger (the "Merger Agreement"), dated as of September 15, 1997, between Elsinore and entities controlled by Paulson, namely R&E Gaming Corp. ("R&E") and Elsinore Acquisition Sub, Inc. ("EAS"), to acquire by merger (the "Merger") Elsinore's outstanding common stock ("Common Stock"). The Merger Agreement provided for a merger with EAS where Elsinore would become a wholly-owned subsidiary of R&E. On March 20, 1998, Elsinore was notified by R&E, through Paulson, that it was R&E's position that the Merger Agreement was void and unenforceable against R&E and EAS, or alternatively, R&E and EAS intended to terminate the Merger Agreement. R&E alleged, among other things, violations by Elsinore of the Merger Agreement, violations of law and misrepresentations by certain investment accounts (the "MWV Accounts") managed by Morgens, Waterfall, Vintiadis and Company, Inc. ("MWV") in connection with an Option and Voting Agreement executed by MWV in connection with the Merger and the non-satisfaction of certain conditions precedent to completing the Merger. Elsinore denied the allegations and asked that R&E complete the Merger. Thereafter, in April 1998, Paulson, R&E, EAS and certain other entities filed a lawsuit against 11 defendants, including Elsinore and MWV (Paulson, et al. v Jeffries & Company, et al.). The lawsuit was filed in the United States District Court for the Central District of California. Pursuant to a settlement agreement dated as of April 3, 2002, this lawsuit has now been resolved. A Settlement Bar Order and Final Judgment was entered by the Court on July 1, 2002. Pursuant to the settlement agreement, Elsinore agreed to pay the sum of $1,100,000, which was paid on June 1, 2002. Total litigation and settlement costs (including the settlement payment) incurred during the quarter ended June 30, 2002, were approximately $1,312,000. A receivable due from the Company's directors and officers' insurance carrier related to this matter partially offset this expense by $514,000. Item 6. (a) Exhibits and Reports 10.70 Settlement Agreement and Mutual Release entered into as of April 3, 2002 by and between John Michael Paulson, as executor of the Will of Allen E. Paulson; John Michael Paulson and Nicholas Diaco, M.D., as the trustees of the Allen E. Paulson Living Trust dated December 23, 1986, as amended; R&E Gaming Corp.; Elsinore Acquisition Sub, Inc.; Riviera Acquisition Sub, Inc.; and Carlo Corporation, on the one hand, and Elsinore Corporation and Morgens, Waterfall, Vintiadis & Company, Inc., on the other. 10.71 Settlement Agreement and Mutual Release, dated May 23, 2002, by and between Olympia Gaming Corporation, a wholly-owned subsidiary of Elsinore Corporation, The Jamestown S'Klallam Tribe, and JKT Gaming, Inc. 10.72 Waiver of Defaults (b) Form 8-K filed during this quarter (1) Current report on Form 8-K was filed on April 9, 2002, relating to an amendment of the sale of the Four Queens Casino. (2) Current report on Form 8-K was filed on May 28, 2002, relating to a settlement agreement by and between Elsinore Corporation through its wholly owned subsidiary, Olympia Gaming Corporation, the Jamestown S'Klallam Tribe and JKT Gaming, Inc. 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 authorized. ELSINORE CORPORATION (Registrant) By: /s/ Philip W. Madow PHILIP W. MADOW, President By: /s/ Gina L. Contner Mastromarino GINA L. CONTNER MASTROMARINO, Principal Financial and Accounting Officer Dated: August 14, 2002

ELSINORE CORP 10-Q