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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 

 
FORM 10-Q
 

 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2012
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________
 
Commission File No.  000-54002

ELSINORE SERVICES, INC.
(Exact Name of Registrant As Specified In Its Charter)
 
Delaware
 
27-0289010
(State or Other Jurisdiction Of
Incorporation or Organization)
 
 
(I.R.S. Employer Identification No.)
 
 

4201 Connecticut Avenue, N.W., Suite 407, Washington, D.C. 20008
(Address of Principal Executive Offices and Zip Code)

Registrant’s Telephone Number, Including Area Code: (202) 609-7756

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 90 days.  Yes þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer  o
Accelerated Filer  o
Non-accelerated Filer  o
 (Do not check if a smaller reporting company)
Smaller Reporting Company  þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o   No þ

The number of shares outstanding of the registrant’s common stock, as of November 9, 2012 was 16,929,000.
 
 
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Report contains forward-looking statements that involve a number of risks and uncertainties.  Forward-looking statements generally can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “intends, “plans,” “should,” “seeks,” “pro forma,” “anticipates,” “estimates,” “continues,” or other variations thereof (including their use in the negative), or by discussions of strategies, plans or intentions.  Such statements include but are not limited to statements under Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report, and elsewhere in this Report.  A number of factors could cause results to differ materially from those anticipated by such forward-looking statements, including those discussed under Part I, Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Report.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements.  Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons:

● 
our ability to implement our business plan;
● 
our ability to market our proposed services, commence revenue operations and then to achieve profitable results of operation;
● 
competition from larger, more established companies with far greater economic and human resources than we have;
● 
our ability to attract and retain customers and quality employees;
● 
the effect of changing economic conditions; and
● 
changes in government regulations, tax rates and similar matters.

You should not unduly rely on these forward-looking statements, which speak only as of the date of this Report. We undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Report, or to reflect the occurrence of unanticipated events.  You should, however, review the factors and risks we describe in the reports we file from time to time with the Securities and Exchange Commission (“SEC”).  The cautionary statements made in this Report are intended to be applicable to all related forward-looking statements wherever they appear in this Report.


TABLE OF CONTENTS
 
 
ITEM NUMBER AND CAPTION
 
PAGE
       
PART I
   
       
ITEM 1.
 
4
ITEM 2.
 
14
ITEM 3
 
16
ITEM 4
 
16
       
PART II
   
       
ITEM 1.
 
18
ITEM 1A.
 
18
ITEM 2.
 
18
ITEM 3.
 
18
ITEM 4.
 
18
ITEM 5.
 
18
ITEM 6.
 
19
 
 
PART I
 
FINANCIAL INFORMATION
 
Item 1.     Financial Statements

ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
 

 
 
ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
(UNAUDITED)

 
    
September 30, 2012
   
December 31, 2011
 
ASSETS
           
Current Assets
  
   
  
   
      Cash
  
$
316
 
  
$
198
 
      Prepaid expenses
  
  
45
 
  
  
45
 
                        Total current assets
  
  
361
 
  
  
243
 
  
  
  
  
 
  
  
   
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
  
  
  
 
  
  
   
  
  
  
  
 
  
  
   
 Current Liabilities
  
  
  
 
  
  
   
      Accounts payable and accrued expenses
  
$
37,191
 
  
$
25,327
 
      Loans payable, officers
   
21,290
     
46,155
 
                          Total current liabilities
  
  
58,481
 
  
  
71,482
 
  
  
  
  
 
  
  
   
  Stockholders’ Deficiency
  
  
  
 
  
  
   
      Preferred stock, $.001 par value; 5,000,000 shares authorized;
      none issued and outstanding
  
  
 
  
  
 —
 
      Common stock, $.001 par value; 245,000,000 shares authorized;
      16,929,000 and 12,227,000 shares issued and outstanding
  
  
            16,929
 
  
  
  12,227
 
      Additional Paid-in Capital
   
131,651
     
42,313
 
      Deficit accumulated during the development stage
  
  
(206,700
)
  
  
(125,779
)
                         Total stockholders' deficiency
  
  
(58,120
)
  
  
(71,239
)
                         Total liabilities and stockholders’ deficiency
  
$
361
 
  
$
243
 

The accompanying notes are an integral part of these condensed financial statements.
 
 
ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2012
AND 2011 (WITH CUMULATIVE TOTALS SINCE INCEPTION)
(UNAUDITED)
 
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
   
Cumulative Totals Since Inception (June 2, 2009 Through September 30,
 
   
2012
   
2011
   
2012
   
2011
   
2012)
 
                               
                               
                               
Revenues
 
$
   
$
   
$
   
$
   
$
 
                                         
Operating Expenses
                                       
   Professional fees
   
57,789
     
6,884
     
67,519
     
20,933
     
171,202
 
   Administrative fees
   
12,489
     
650
     
13,402
     
1,585
     
35,498
 
Total Operating Expenses
   
70,278
     
7,534
     
80,921
     
22,518
     
206,700
 
    Net loss
 
$
(70,278
)
 
$
(7,534
)
 
$
(80,921
)
 
$
(22,518
)
 
$
(206,700
)
                                         
Net loss per basic and diluted share
 
$
(0.00
)
   
(0.00
)
 
$
(0.00
)
   
(0.01
)
       
Weighted average common shares outstanding
   
16,929,000
     
12,227,000
     
16,929,000
     
12,227,000
         

The accompanying notes are an integral part of these condensed financial statements.

 
ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
FOR THE PERIOD OF INCEPTION (JUNE 2, 2009)
THROUGH SEPTEMBER 30, 2012
(UNAUDITED)
 
   
Common Stock
   
Common
   
Additional
   
(Deficit) Accumulated During
       
   
Shares
   
Amount
   
Stock Subscriptions
   
Paid-in Capital
   
the Development Stage
   
Totals
 
Balance – at inception
   
   
$
   
$
   
$
   
$
   
$
 
Common stock issued
   
10,000,000
     
10,000
     
(2,587
)
   
             
7,413
 
Net (loss) for the period
                                   
(18,529
)
   
(18,529
)
Balance - December 31, 2009
   
10,000,000
   
$
10,000
   
$
(2,587
)
 
$
   
$
(18,529
)
 
$
(11,116
)
Common stock issued
   
2,227,000
     
2,227
     
2,587
     
42,313
             
47,127
 
Net (loss) for the period
                                   
(77,226
)
   
(77,226
)
Balance – December 31, 2010
   
12,227,000
   
$
12,227
     
   
$
42,313
   
$
(95,755
)
 
$
(41,215
)
Common stock issued
   
     
     
     
     
     
 
Net loss for the period
   
     
     
     
     
(30,024
)
   
(30,024
)
Balance – December 31, 2011
   
12,227,000
   
$
12,227
   
$
   
$
42,313
   
$
(125,779
)
 
$
(71,239
)
Debt settled in exchange for common stock: Significant stockholders
   
4,702,000
     
4,702
     
     
89,338
     
     
94,040
 
Net loss for the period
   
     
     
     
     
(80,921
)
   
(80,921
)
Balance – September 30, 2012
   
16,929,000
   
$
16,929
   
$
   
$
131,651
   
$
(206,700
)
 
$
(58,120
)
 
The accompanying notes are an integral part of these condensed financial statements.

 
ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011
 (WITH CUMULATIVE TOTALS SINCE INCEPTION)
(UNAUDITED)
 
  
 
Nine Months Ended
September 30, 2012
   
Nine Months Ended
 September 30, 2011
   
Cumulative Totals Since Inception (June 2, 2009 Through September 30, 2012)
 
Cash flows from operating activities
                 
Net loss
 
$
(80,921
)
 
$
(22,518
)
 
$
(206,700
)
Adjustments to reconcile net loss to net cash
used in operating activities:
                       
                Stock issued for operating expenses
   
     
     
8,000
 
          Changes in assets and liabilities:
                       
                (Increase) in prepaid expenses  
   
     
     
(45
)
                Increase in accounts payable and accrued expenses
   
11,864
     
7,672
     
37,191
 
                         
Net cash (used in) operating activities
   
(69,057
)
   
(14,846
)
   
(161,554
)
  
                       
Cash flows from financing activities
                       
          Cash receipts from stock sales
   
     
     
46,540
 
          Loans payable, officers
   
69,175
     
6,626
     
115,330
 
Net cash flow provided by financing activities
   
69,175
     
6,626
     
161,870
 
  
                       
          Net increase (decrease) in cash
   
118
     
(8,220
)
   
316
 
          Cash at the beginning of the reporting period  
   
198
     
8,250
     
 
Cash at the end of the reporting period
 
$
316
   
$
30
   
$
316
 
                         
Supplemental cash flow disclosure
         Non-cash financing activities
                       
Issuance of common stock through stock subscriptions
 
$
   
$
   
$
2,587
 
Conversion of debt to equity
 
$
      94,040
   
$
   
$
      94,040
 
 
The accompanying notes are an integral part of these condensed financial statements.

 
ELSINORE SERVICES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2012
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Elsinore Services, Inc. (the “Company”) was incorporated on June 2, 2009 in the State of Delaware and established a fiscal year end of December 31. The Company is a development stage enterprise that provides full-service advertising and marketing services with an emphasis on digital interactive media.  The Company is currently in the development stage as defined in the Accounting Standards Codification 915. All activities of the Company to date relate to its organization, initial funding and share issuances.

Basis of Presentation

These condensed interim financial statements contain unaudited information as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 and for the cumulative period June 2, 2009 (inception) through September 30, 2012.  The unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying unaudited condensed financial statements do not include complete footnotes and financial statement presentations. As a result, these unaudited condensed financial statements should be read along with the audited financial statements of the Company for the year ended December 31, 2011 filed with form 10-K.  In our opinion, the unaudited condensed financial statements reflect all adjustments, including normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for those periods presented. The preparation of financial statements in conformity with United States (U.S.) generally accepted accounting principles requires management to make estimates and assumptions that affect reported assets, liabilities, revenues and expenses, as well as disclosure of contingent assets and liabilities. Actual results could differ from those estimates and assumptions. Moreover, the results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the entire year.
 
Use of Estimates

Management uses estimates and assumptions in preparing financial statements.  Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results could differ from these estimates.
 
Income Taxes

The Company accounts for income taxes pursuant to the provisions of the Accounting Standards Codification 740, Income Taxes, which requires an asset and liability approach to calculate deferred income taxes.  The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary difference between the carrying amounts and the tax basis of assets and liabilities.

Loss Per Common Share

Basic loss per share is calculated using the weighted-average number of common shares outstanding during each reporting period.  Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each reporting period.  The Company does not have any potentially dilutive instruments.

Fair Value of Financial Instruments

The carrying value of current assets and liabilities approximates fair value due to their short-term nature.


Recent Accounting Pronouncements
 
In May 2011, FASB issued ASU No. 2011-04 “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”.  The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements.  Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing  information about fair value measurements. ASU 2011-04 shall be effective for public entities for interim and annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted for public entities. For nonpublic entities, the amendments are effective for annual periods beginning after December 15, 2011, and should be applied prospectively. Nonpublic entities may elect to apply the amendments early, but no earlier than interim periods beginning after December 15, 2011. The Company does not expect that the adoption of ASU 2011-04 will have a material effect on its financial statements. 
 
In June 2011, FASB issued ASU No. 2011-05 “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. Under the amendments to Topic 220, “Comprehensive Income”, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The amendments in this update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. Early adoption is permitted. The Company does not expect that the adoption of ASU 2011-05 will have a material effect on its financial statements. 

In September 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will not have an impact on our consolidated financial position, results of operations, or cash flows, as it is intended to simplify the assessment for goodwill impairment.

In December of 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, which enhances disclosure requirements regarding an entity’s financial instruments and derivative instruments that are offset or subject to a master netting arrangement. This information about offsetting and related netting arrangements will enable users of financial statements to understand the effect of those arrangements on the entity’s financial position, including the effect of rights of setoff. The amendments are required for annual reporting periods beginning after January 1, 2013, and interim periods within those annual periods. Elsinore Services is evaluating the impact of this ASU on its disclosure requirements.
 
In July of 2012, the FASB issued ASU 2012-02, Intangibles - Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment, which revises the way an entity can test indefinite-lived intangible assets for impairment by allowing an entity to first assess qualitative factors to determine whether the existence of events and circumstances indicates that it is more likely than not that the indefinite-lived intangible asset is impaired. If there is no indication of impairment from the qualitative impairment test, the entity is not required to complete a quantitative impairment test of determining and comparing the fair value with the carrying amount of the indefinite-lived asset. Under the guidance in this ASU, an entity also has the option to bypass the qualitative assessment in any period and proceed directly in performing the quantitative impairment test and can resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this standard will allow the Company to more efficiently complete annual goodwill impairment tests but will not have a significant impact on the Company's consolidated financial statements.
 
 
NOTE 2 – GOING CONCERN
 
As shown in the accompanying financial statements, the Company has incurred net losses and negative cash flows from operating activities for the period June 2, 2009 (date of inception) to September 30, 2012, and has an accumulated deficit of $206,700 as of September 30, 2012.  The Company has relied upon cash from its officers to fund its ongoing operations and plans to continue such reliance, as it has not been able to generate sufficient cash from its operating activities.  These factors create an uncertainty about the Company’s ability to continue as a going concern.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – RELATED PARTY TRANSACTIONS
 
Effective May 17, 2010, the Company entered into a two year services agreement with FaceTime Strategy, LLC, a marketing, public relations, database development and management company.  Mr. Todd Mason, a former director of the Company, is the Chairman and Chief Executive Officer, managing member, and a control person of FaceTime.  Under the agreement, FaceTime has agreed to provide certain web site upgrade, development and maintenance services and web site blog, shareholder communications and maintenance, and related services for the Company for a one-time fee of $60,000 and a monthly maintenance fee of $2,500. Also, FaceTime has agreed to provide services with regard to: the preparation of the Company’s marketing kit; communication with supporting vendors in fulfillment of the Company’s client’s marketing programs; maintain software used for customer address standardization; provide the Company’s clients with access to certain system database management software, and related services for a one-time fee of $25,000 and a monthly maintenance fee of $2,500.  Further, FaceTime has agreed to provide to the Company email marketing services, online survey, and tracking and graphical reporting services, electronic email mailings services, and related services for a monthly maintenance fee of $1,000.  The commencement of the above services will begin upon mutual agreement between FaceTime Strategy and Elsinore Services and no services had been provided as of November 9, 2012.  FaceTime has also agreed to provide the following services for the Company’s clients: campaign design and creation; strategic planning; direct response programs; market research; media buying; promotion; podcast and webcast preparation; viral marketing campaigns; social networking and media content creation and management; and related services at costs to be agreed to by the Company and FaceTime.  Each of the foregoing services will commence upon the Company’s mutual agreement with FaceTime.  The Company or FaceTime may terminate the agreement upon thirty days’ prior written notice by a non-defaulting party to the defaulting party in the event of an uncured default under the agreement during which period the defaulting party shall have the opportunity to cure the default. The agreement also contains certain proprietary information, confidentiality, non-disclosure and indemnification provisions.
 
During the nine months ended September 30, 2012, Mr. Dunhem, CEO, President and a director of the Company, and Mr. Schauer, CFO, Senior Vice President and a director of the Company, have advanced to the Company $5,737 and $18,438, respectively, for an aggregate of $24,175 to cover various operating expenses.  The advances are non-interest bearing and the Company expects to repay them once additional funding has been obtained of which there can be no assurance.

On July 1, 2012 Mr. Dunhem, CEO, President and a director of the Company, and Mr. Schauer, CFO, Senior Vice President and a director of the Company each entered into executive management consulting and business advisory contracts with the Company.  The contracts run from July 1, 2012 on an as needed basis for a minimum of (3) three months.  Mr. Dunhem and Mr. Schauer are each to receive $7,500 per month as compensation for executive management and business advisory consulting services performed under these contracts.
 
The Company’s principal executive offices are provided to the Company on a month-by-month basis at nominal cost by Mason Media, LLC, a company controlled by Mr. Todd Mason, a former director of the Company.
 
During the nine months ended September 30, 2010, the Company received cash to fully satisfy a stock subscription in the amount of $2,000 from two of its directors.
 
For the period June 2, 2009 (date of inception) to March 31, 2010 the Company issued 8,000,000 shares of our common stock valued at $8,000 to related parties in exchange for $8,000 in expenses incurred on behalf of the Company.
 
 NOTE 4 – EQUITY TRANSACTIONS

On September 30, 2012 the Board of Directors, under unanimous written consent, authorized the Company to issue an aggregate 4,702,000 shares of restricted common stock to Arne Dunhem and Dean Schauer in exchange for canceling an aggregate of $94,040 in debt and liabilities.  The aggregate per share conversion price was $0.02 which is based upon the price of the Company’s common stock as of November 10, 2010, the effective date of the Company’s Registration Statement on Form S-1.  This price per share was used for the conversion because the Company’s common stock has not yet commenced trading on any public trading platform and thus the issuance price on November 10, 2010 for shares issued per the effective date of the Company’s Registration Statement on Form S-1 is the only recorded public price as of September 30, 2012.  The debt and liabilities canceled and converted to shares of restricted common stock included compensation for services provided, expenses incurred on behalf of the Company, outstanding short term loans and funds advanced since December 31, 2009.
 
 
The table below sets forth a summary of the debt and liability canceled and converted to shares of restricted common stock pursuant to the Board of Director’s resolution on September 30, 2012:

 
Name
 
Debt and Liability Canceled and Converted
 
Amount
   
Conversion per Share Price
   
Shares Issued
 
Arne Dunhem
 
Compensation for services provided, expenses incurred on behalf of the Company, outstanding short term loans and funds advanced.
  $ 45,000     $ 0.02       2,250,000  
Dean Schauer
 
Compensation for services provided, expenses incurred on behalf of the Company, outstanding short term loans and funds advanced.
  $ 49,040     $ 0.02       2,452,000  
Total
      $ 94,040     $ 0.02       4,702,000  

We believe that each of the above referenced transactions was made on terms no less favorable to us than could have been obtained from an unaffiliated third party.  Furthermore, any future transactions or loans between us and our officers, directors, principal stockholders or affiliates, and any forgiveness of such loans, will be on terms no less favorable to us than could be obtained from an unaffiliated third party, and will be approved by a majority of our directors.

No equity transactions occurred during the nine months ended September 30, 2011.
 
During the nine months ended September 30, 2010 the Company received $2,000 in cash from the sale of 2,000,000 common shares subscribed at an offering price of $0.001 to two of our directors.  Another 587,000 shares were issued to a director in exchange for $587 in expenses paid on behalf of the Company.  Total consideration received for the sale of common shares during the period was $2,587.  The Company also commenced a capital formation activity by filing a Registration Statement on Form S-1 with the SEC to register and sell in a self-directed offering 3,000,000 shares of newly issued common stock at an offering price of $0.02 per share for proceeds of up to $60,000.  The Registration statement was declared effective on June 10, 2010.  As of September 30, 2010 2,017,000 shares had been sold for a total consideration received of $40,340.

NOTE 5 – COMMITMENTS
 
In June 2010, the Company entered into an Agreement with ComputerShare for transfer agent services.  Under the Agreement, the Company agreed to pay ComputerShare an initial setup fee of $750 and $250 per month in addition to standard service fees for transfer agent services received.  The initial term for the Agreement is one year and will automatically renew from year to year unless advance written notice is provided.  The Company will incur a one-time termination fee not to exceed $3,750 at the time of expiration or termination of the Agreement.  This agreement is still in place at September 30, 2011.

The Company has maintained an office in Fairfax, Virginia, under a month to month lease obligation basis as a sub-lease.  The Company is seeking an alternative location, since the lease for the sub-lessor will expire in early 2013.
 
NOTE 6 – SUBSEQUENT EVENTS
 
Executive Employment Agreements
 
On November 1, 2012, Elsinore Services, Inc. (the “Company”) entered into employment agreements effective November 1, 2012, with Arne Dunhem, the Company’s Chief Executive Officer and Chairman of the Board of Directors, and Dean V. Schauer, the Company’s Senior Vice President and Chief Financial Officer (collectively, the “Employment Agreements”).
 
Mr. Dunhem’s Employment Agreements provides for Mr. Dunhem to continue to serve as the Company’s Chief Executive Officer and Chairman of the Board of Directors with compensation defined as follows:
 
1.  
For the period from November 1, 2012 through the Closing with a major institutional investor (the “Closing”), Mr. Dunhem’s compensation shall be seven thousand five hundred dollars ($7,500) per month.  The cash salary compensation shall be accrued and deferred for later payout or conversion into equity;
 
2.  
For the period from the Closing as defined in paragraph 1. above, through the first anniversary of the agreement, a compensation of twenty-one thousand dollars ($21,000) per month;
 
3.  
The period from the first anniversary through the second anniversary of the agreement, a compensation of twenty-five thousand dollars ($25,000) per month;
 
4.  
The base salary may be increased, but not decreased, at the discretion of the Company. After the initial two years of the Employment Period, Executive shall be entitled to receive a minimum of a 5% per annum increase in this base salary
 
 
Mr. Schauer’s Employment Agreement provides for Mr. Schauer to continue to serve as the Company’s Senior Vice President and Chief Financial Officer with compensation defined as follows:
 
1.  
For the period from November 1, 2012 through the Closing with a major institutional investor (the “Closing”), Mr. Schauer’s compensation shall be seven thousand five hundred dollars ($7,500) per month.  The cash salary compensation shall be accrued and deferred for later payout or conversion into equity;
 
2.  
For the period from the Closing as defined in paragraph 1. above, through the first anniversary of the agreement, a compensation of twenty thousand dollars ($20,000) per month;
 
3.  
The period from the first anniversary through the second anniversary of the agreement, a compensation of twenty-two thousand dollars ($22,000) per month;
 
4.  
The base salary may be increased, but not decreased, at the discretion of the Company. After the initial two years of the Employment Period, Executive shall be entitled to receive a minimum of a 5% per annum increase in this base salary
 
The initial terms of employment under the Employment Agreements for Mr. Dunhem and Mr. Schauer are twenty-four (24) months, unless earlier terminated.
 
In addition to their base salary, Mr. Dunhem and Mr. Schauer are eligible for the following bonuses:
 
1.  
Annual Performance Bonus: The executive is entitled to receive an annual cash bonus of up to 50% of such officer’s then applicable base salary, subject to achieving performance metrics mutually agreed to between the Company and Executive; and
 
2.  
Acquisition Bonus: The executive is entitled to receive a cash bonus equal to one half of one percent (0.5%) of the revenues, with an EBITDA percentage of at least 10%, for the most recent twelve (12) month period of each acquisition made by the Company during the Employment Period and for which Executive has been actively instrumental in managing and performing due diligence and closing the acquisition
 
Mr. Dunhem and Mr. Schauer will be eligible for grants under the Company’s Executive Stock Incentive Plan, once established, with the terms and conditions of such grants to be determined by the Company’s Board of Directors (the “Board”).  Mr. Dunhem and Mr. Schauer shall be entitled to participate in all of the employee benefit plans, programs and arrangements of the Company in effect during the Employment Period that are generally available to senior executives of the Company.
 
A copy of the Employment Agreement with Mr. Dunhem is attached hereto as Exhibit 10.1 and is incorporated herein by reference. A copy of the Employment Agreement with Mr. Schauer is attached hereto as Exhibit 10.2 and is incorporated herein by reference.
 
Nonemployee Director Compensation
 
On October 1, 2012, the Board of Directors of Elsinore Services, Inc. (the “Company”), approved a restricted stock award to Leif T. Carlsson, the only nonemployee director on the Board of Directors. Mr. Carlsson was awarded 300,000 shares of restricted common stock for full compensation for his service on the Board of Directors of the Company for the service period of March 2010 through September 2012 (30 months).  This award compensates Mr. Carlsson the equivalent of $6,000, or $200 per month for 30 months, based on an aggregate per share conversion price of $0.02.  This conversion price was the price of the Company’s common stock as of November 10, 2010, the effective date of the Company’s Registration Statement on Form S-1.  This price per share was used for the conversion because the Company’s common stock has not yet commenced trading on any public trading platform and thus the issuance price on November 10, 2010 for shares issued per the effective date of the Company’s Registration Statement on Form S-1 is the only recorded public price as of September 30, 2012.  The common stock awarded Mr. Carlsson is restricted as per SEC rule 144.

Item 2.    Management’s Discussion and Analysis of Financial Conditions and Results of Operation
 
Throughout this Report references to “Elsinore Services,” “Company,”  “we,” “our,” or “us” means Elsinore Services, Inc.
 
Forward-Looking Statements
 
The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

For a description of certain risks and uncertainties related to us and our business, please refer to “Risk Factors” set forth in our prospectus related to our self-directed initial public offering included in our Registration Statement on Form S-1, filed with the Securities and Exchange Commission that became effective on June 10, 2010 (File No. 333-165949). While these forward-looking statements, and any  assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Overview of the Company
 
We were incorporated in Delaware on June 2, 2009, and are a development stage company.  We are a “new media” advertising and marketing agency that operates through different practice groups providing advertising and marketing services, with an emphasis on digital interactive media. We intend to utilize state-of-the-art digital interactive media technology to develop more targeted, effective, quantifiable, less expensive, and more comprehensive advertising and marketing campaigns than traditional methods.  By utilizing digital interactive media such as the internet, mobile communications, and digital interactive signage, we believe that we can implement highly targeted campaigns to a local and global market quickly and cost effectively. 

Our ability to continue to implement our business plan is dependent on our ability to raise certain financing in addition to the proceeds of our initial public offering.  We anticipate that we will seek to raise additional funds to further implement our business plan, including through one or more equity or debt financings or bank borrowing.  There can be no assurance that we will be successful in these efforts.

Plan of Operation
 
We are a full-service advertising and marketing agency that operates through different practice groups and provides advertising and marketing services, with an emphasis on digital interactive media. We intend to utilize state-of-the-art digital interactive media technology to develop more targeted, effective, quantifiable, less expensive, and more comprehensive advertising and marketing campaigns than traditional methods. By utilizing digital interactive media such as the internet, mobile communications, and digital interactive signage, we believe that we can implement highly targeted campaigns to a local and global market quickly and cost effectively.  Accordingly, we believe that we are able to provide a greater, tangible, value-added service to our clients, versus our competition. Our strategy is to develop and establish strategic relationships with existing complementary agencies and provide marketing and sales of our services using some of their existing services. In order to fully develop and implement our own full-service agency, over the next 12 months, we expect we will need to raise additional funds through one or more equity or debt financing or bank borrowings.
 
We have entered into a strategic arrangement with a marketing and advertising agency to assist us in providing such services to our customers.  As we develop and expand our services offerings and expand into different geographical markets, we expect to enter into additional similar arrangements with other advertising and marketing services providers.

We continue to modify our business plan to incorporate trends within the industry and in the overall US economy.  Additionally, we continue to search for prospective strategic alliances within the industry to assist us in executing specific portions of our business plan and have also begun a search for potential acquisition targets.
 
 
Our business plan and strategy includes the following:
 
·  
New media advertising and marketing service development. We offer and plan to further develop our new media advertising and marketing services capabilities and our long-term service offerings. Initially, we plan to provide a full range of new media services by reselling the services of other agencies and, as we further develop our infrastructure and internal operational capabilities, through our own agency personnel.
 
·  
Establish additional strategic relationships. We anticipate entering into service agreements with advertising and marketing agencies that will enable us to access their services for our clients.  Such agreements will cover: the development and implementation of client media campaigns, including the internet, email, and other new media; the types of services and media to be made available to our customers; the development of demographic industry-centric data; the terms of reimbursement of the costs and charges of providing such services of the provider; time frames for providing such services; and availability of and access to databases for purposes of distributing marketing information and materials. We believe there may be significant cost savings if we could benefit from experience and complementary services already developed by service providers.  We have entered into a two year agreement with FaceTime Strategies, LLC, to assist us in providing new media advertising and marketing services to our clients and customers.  For a discussion of our agreement with FaceTime, refer to our Annual Report on Form 10-K for the year ended December 31, 2011.
 
·  
Initiate new media computer system usage. We have entered into an arrangement with FaceTime to provide to us access to an operational new media computer system.  We expect to utilize such system until we have acquired our own full-scale system.  However, since we will not own this initial computer system, we will not be able to fully control and modify the system to adapt to our business strategy. Thus, we may not be able to achieve the same revenue and profitability level as we would if we owned the computer system.
 
·  
Sales and marketing campaign. Our future success and the expansion of our business will require us to further develop our sales and marketing strategy.
 
·  
Media content production. We expect to offer our customers media content, including certain advertising material. We expect to offer such services either directly or through collaboration with our strategic partners.
 
·  
New media full scale computer system implementation and installation. Our ability to offer our own proprietary new media computer systems access and service will depend on our ability to raise financing in addition to the funds generated from this offering.
 
Our Results of Operations
 
Since inception through September 30, 2012, we have had no revenue.  Expenses for the period from inception (June 2, 2009) through September 30, 2012, totaled $206,700 resulting in a net loss of $206,700.  Expenses for the nine month period ended September 30, 2012 totaled $80,921 resulting in a net loss of $80,921 and expenses for the nine month period ending September 30, 2011 totaled $22,518 and resulted in a net loss of $22,518.  The increase in expenses for the nine months ended September 30, 2012 versus the same period in 2011 was due primarily management consulting fees paid to our CEO and CFO as well as additional legal fees associated with pending acquisitions.  All of such losses are attributable to expenses related to our initial organization.

Liquidity and Capital Resources

As of September 30, 2012, we had $316 in cash and prepaid expenses of $45.  We have not generated any revenue since our inception.  Since our inception we have relied upon cash proceeds from the sale of our securities to our directors and officers and advances to us by two officers in the aggregate amount of $78,431 to fund our initial organization, operation and certain costs of our initial public offering.  From June 10, 2010 through October 31, 2010, the Company sold an aggregate of 2,227,000 shares of common stock at an offering price of $0.02 per share, or for an aggregate offering price of $44,540 in conjunction with an initial public offering we completed on June 10, 2010.
 
In addition to the proceeds from the offering of our securities pursuant to our initial public offering, over the next 12 months, we anticipate we will require additional funds of approximately $5,000,000 to fund our operations, develop our business, and to satisfy the costs associated with the SEC public reporting and compliance requirements applicable to us under the Securities Exchange Act of 1934.  We expect to seek to raise such additional financing from one or more equity or debt financings or from bank borrowing.  There is no assurance that any or sufficient equity or debt financing or bank borrowings will be available to us, or upon terms that are acceptable to us.  Any such debt financing that we are able to secure may, because we are a development stage company, require us to pay additional costs associated with high risk loans and be subject to above market interest rates.  Any equity financing we are able to raise may result in a dilution to existing shareholders.  Also, we may be required to obtain financing in the form of securities convertible into our shares of common stock the conversion of which may be on the basis of the market price of our stock at the time or immediately prior to the conversion of such securities.  As a result, the continued or ongoing conversion of such securities we issue in any such financing may adversely affect the market price for our shares, if any such market ever develops. If any such financing is not available on satisfactory terms, we may be unable to commence and/or continue our operations.  As a result, investors would lose all of their investment in us.
 
 
Assuming we do not generate any revenue, we anticipate we will incur additional expenses and costs in the aggregate amount of approximately $5,000,000 related to our business and operations that will not be covered by the net proceeds of our initial public offering, and as set forth in the table below (and we expect to expend such amount in the following order of priority):

Nature of Expense
 
Amount
 
       
Resale of services from strategic partner agencies and use of their systems
 
$
2,500,000
 
         
Sales and marketing campaigns
   
750,000
 
         
Media content production
   
500,000
 
         
Business development
   
130,000
 
         
Initial computer system implementation and installation
   
1,000,000
 
         
General working capital
   
120,000
 
         
Total
 
$
5,000,000
 

We do not anticipate engaging in any research and development or purchasing any significant amount of equipment, except for certain capital lease purchases of equipment and systems for the initial computer system implementation. Also, we do not expect any significant increase in the number of our employees, except for contracting personnel for marketing and sales, media content production and initial computer system installation.  Our ability to purchase any such equipment or hire any such personnel is dependent on our ability to raise additional financing as discussed above, of which there can be no assurance.

Going Concern Consideration

Our auditors have issued a “going concern” opinion with regard to our financial statements for the year ended December 31, 2011, meaning that there is substantial doubt if we can continue as a going concern for the next 12 months unless we obtain financing in addition to the financing raised from our initial public offering.  No or no substantial revenues are anticipated until we have further implemented our business plan.  We are reliant upon the proceeds of our initial public offering and future sales of stock to fund operations and will be required to raise additional financing to fully implement our strategy and stay in business.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.
 
Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Disclosure not required by a “smaller reporting company.”

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures
 
As of the end of the period covered by this Report, the Chief Executive Officer and Chief Financial Officer of the Company (the “Certifying Officers”) conducted evaluations of the Company’s disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure the information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including the Certifying Officers, to allow timely decisions regarding required disclosure.
 
 
Based upon their evaluation as of the end of the period covered by this report, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective to ensure that information required to be included in our periodic SEC filings is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms.

Our Board of Directors was advised by management that its evaluation of internal control over financial reporting as of December 31, 2011 identified a material weakness as defined in Public Company Accounting Oversight Board Standard No. 5 in the Company’s internal control over financial reporting.

This deficiency consisted primarily of inadequate staffing and supervision that could lead to the untimely identification and resolution of accounting and disclosure matters and failure to perform timely and effective reviews.  However, the size of the Company prevents us from being able to employ sufficient resources to enable us to have adequate segregation of duties within our internal control system.  Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management has taken all actions to ensure that the filing includes all required content and the financial statements presented are in conformity with US generally accepted accounting principles for interim financial reporting pursuant to the rules of the SEC.

Changes in Internal Controls
 
There were no changes in the Company’s internal controls over financial reporting during the period covered by the Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
 
 
PART II
OTHER INFORMATION
 
Item 1.    Legal Proceedings
 
None.
 
Item 1A.  Risk Factors
 
Disclosure not required of a “smaller reporting company.”
 
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
 
None.
 
Item 3.    Defaults Upon Senior Securities
 
None.
 
Item 4.    Mine Safety Disclosures.
 
The Company is not engaged in mining activity. 

Item 5.    Other Information
 
None.
 
 
Item 6. Exhibits
 
Copies of the following documents are included as exhibits to this report pursuant to Item 601 of Regulation S-K.

     
Incorporated by Reference
     
Exhibit No.
 
 
Exhibit Description
 
Form
Exhibit No.
Filing Date
 
 
 
Filed
Herewith
 
10.1
         
X
 
10.2
         
X
 
31.1
         
 X
 
31.2
         
 X
 
32.1
         
 X
 
32.2
         
 X
 
101.INS
 
XBRL Instance Document
       
 X
 
101.SCH
 
XBRL Taxonomy Extension Schema Document
       
 X
 
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
       
 X
 
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
       
 X
 
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
       
 X
 
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
       
 X
 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
ELSINORE SERVICES, INC.
 
       
Date: November 9, 2012
By:
/s/ Arne Dunhem
 
   
Arne Dunhem
 
   
Chief Executive Officer
(Principal Executive Officer)
 
 
By:
/s/ Dean V. Schauer
 
   
Dean V. Schauer
 
   
Chief Financial Officer
(Principal Financial and Accounting Officer)