[TYPE] 10QSB
[DOCUMENT-COUNT] 1
[SROS] AMEX
[PERIOD] 06/30/95
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 0-10176
DOMINION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2306487
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
206, 7th Street South, Clanton, Alabama 35045
(Address of principal executive offices)
(Zip Code)
(205) 280-0376
(Registrant's telephone number, including area code)
NONE
(Former name, former address, and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) or 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 X No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable date.
Class Outstanding at September 13, 1995
Common Stock, $0.01 par value 5,559,000
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED JUNE 30, 1995
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The attached unaudited financial statements of Dominion Resources, Inc.
and subsidiaries ("Dominion") reflect all adjustments which are, in the
opinion of management, necessary to present a fair statement of the
operating results for the interim periods presented.
Condensed consolidated balance sheets 3-4
Condensed consolidated statements of operations 5-6
Condensed consolidated statements of cash flows 7-8
Notes to condensed consolidated financial statements 9-13
Item 2. Management's discussion and analysis of financial condition
and results of operations.
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, September 30,
1995 1994
(Unaudited) (See note below)
<S> <C> <C>
Current assets:
Cash $166,730 $293,393
Accounts receivable - trade
(net of allowance for doubtful
accounts of $106,498 at June
30, 1995 and $215,210 at
September 30, 1994 877,575 494,115
Related party receivable
- Resort Club, Inc. 1,417,598 -0-
Accrued interest receivable 77,042 36,958
Inventories 39,638 94,125
Prepaid expenses and other assets 271,371 92,135
Total current assets 2,849,954 1,010,726
Property, equipment, furniture, and
fixtures, net of accumulated
depreciation and amortization
of $1,040,483 at June 30, 1995
and $704,496 at September 30, 1994. 4,540,731 3,703,834
Other assets:
Related party receivable - MAFC
participation note 575,000 575,000
Cellular telephone license costs - net of
accumulated amortization of $144,239
at June 30 ,1995 and $113,573 at September
30, 1994 60,196 90,863
Unamortized discount on warrants 65,106 520,835
Investment in Silver Shield Mill 142,684 142,684
Total other assets 842,986 1,329,382
Total assets $8,233,671 $6,043,942
========= ==========
Note: The balance sheet at September 30, 1994, has been taken from
audited financial statements at that date and condensed.
See accompanying notes.
</TABLE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, September 30,
1995 1994
(Unaudited) (See note below)
<S> <C> <C>
Current liabilities:
Long-term debt, current portion $ 937,944 $ 880,992
Mortgages payable, current portion 109,526 111,542
Note payable, related parties -0- 202,878
Notes payable - other 2,125,000 -0-
Accounts payable 681,847 553,309
Accrued compensation -0- 82,637
Accrued interest and other 149,181 120,083
Total current liabilities 4,003,498 1,951,441
Long-term liabilities:
Long-term debt, net of current
maturities 2,204,559 2,404,337
Mortgages payable, net of current
maturities 56,679 70,843
Notes payable - other -0- 250,000
Total long-term liabilitie 2,261,238 2,725,180
Stockholders' equity:
Common stock, $0.01 par value; authorized -
25,000,000 shares; issued and outstanding -
5,559,000 shares at June 30, 1995 and
4,434,000 at September 30, 1994 55,590 44,340
Additional paid-in capital 5,058,706 4,866,831
Accumulated deficit (3,145,361) ( 3,543,850)
Total stockholders' equity 1,968,935 1,367,321
Total liabilities and
stockholders' equity $8,233,671 $6,043,942
========= =========
Note: The balance sheet at September 30, 1994, has been taken from
audited financial statements at that date and condensed.
See accompanying notes.
</TABLE>
<TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
<S> <C> <C>
Revenues:
Cellular telephone operation $3,619,205 $2,166,495
Total revenues 3,619,205 2,166,495
========= =========
Expenses:
Cellular system operations 1,588,377 911,297
Marketing and selling 68,005 44,533
General and administrative expenses 411,921 314,157
Depreciation and amortization 366,653 263,995
Bad debt expense 15,000 15,000
Total expenses 2,449,956 1,548,982
Income from operations 1,169,249 617,513
Other income (expenses):
Interest income 84,500 36,656
Interest expense (352,656) (256,787)
Amortized discount on warrants and
deferred financing costs (502,604) (437,499)
Total other income (expenses) (770,760) (657,630)
Income (loss) before income taxes $ 398,489 $ (40,117)
Income taxes -0- -0-
Net Income (loss) $ 398,489 $ (40,117)
========= =========
Net Income (loss) per common share $ 0.08 $ (0.01)
========= =========
Weighted average number of share used
in computing net income (loss) per share 5,159,733 4,434,000
========= =========
See accompanying notes.
</TABLE>
<TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
<S> <C> <C>
Revenues:
Cellular telephone operations $1,353,663 $830,659
Total revenues 1,353,663 830,659
Expenses:
Cellular system operations 588,769 360,135
Marketing and selling 2,141 13,916
General and administrative expenses 201,212 107,481
Depreciation and amortization 135,281 94,857
Bad debt expense 5,000 5,000
Total expenses 932,403 581,389
Income from operations 421,260 249,270
Other income (expenses):
Interest income 60,062 12,218
Interest expense (145,353) (87,327)
Amortized discount on warrants and deferred
financing costs (210,938) (145,833)
Total other income (expenses) (296,229) (220,942)
Income before income taxes $125,031 28,328
Income taxes -0- -0-
Net income $125,031 $28,328
========= =========
Net Income per common share $ 0.02 $ 0.01
========= =========
Weighted average number of shares used
in computing net income (loss) per share 5,559,000 4,434,000
========= =========
See accompanying notes.
</TABLE>
<TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
<S> <C> <C>
Cash flows used in operating activities:
Net Income (Loss) $398,489 (40,117)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 366,653 263,995
Amortization of discount on warrants and
deferred financing costs 502,604 437,499
Provision for doubtful accounts 15,000 15,000
Changes in assets and liabilities:
Trade receivables (398,460) (183,960)
Accrued interest receivable (40,084) (24,740)
Inventories 54,487 (7,377)
Prepaid expenses and other assets (226.111) 4,296
Accounts payable and accrued expenses 74,999 165,756
Net Cash provided by operations 747,577 630,352
Cash flows from investing activities:
Increase in related party receivable (1,417,598) -0-
Decrease in related party payable -0- (2,000)
Loan in connection with Sale of Cellular
Assets 2,000,000 -0-
Capital expenditures (1,172,884) (691,292)
Net cash (used in) investing activities (590,482) (693,292)
Cash flows from financing activities:
Proceeds from borrowings -0- 305,441
Repayment of borrowings (486,883) (20,986)
Proceeds from issuance of common stock and
warrants 203,125 -0-
Net cash provided by (used in)
financing activities (283,758) 284,455
Increase (decrease) in cash (126,663) 221,515
Cash balance, beginning of year 293,393 191,881
Cash balance, June 30, $ 166,730 $ 413,396
See accompanying notes.
</TABLE>
<TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE OF NON-CASH FINANCING ACTIVITIES
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
1995 1994
<S> <C> <C>
Issuance of warrants as compensation for cell
site construction $ -0- $ 333,333
======= ========
Deferred financing and discount on warrants $ -0- $ 1,020,834
======= =========
See accompanying notes.
</TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with
generally accepted accounting principals for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the
accompanying condensed consolidated financial statements contain all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of June 30, 1995 and September
30,1994, the results of operations for the nine months ended June 30,
1995 and 1994, and cash flows for the nine months ended June 30, 1995
and 1994. Operating results for the nine months ended June 30 1995, are
not necessarily indicative of the results which may be expected for the
year ended September 30, 1995. These statements should be read in
conjunction with Form 10-KSB for fiscal 1994, which is on file with the
Securities and Exchange Commission.
NOTE 2 - RECLASSIFICATION:
Certain fiscal 1995 items have been reclassified to conform with
the fiscal 1994 presentation.
NOTE 3 - NOTES PAYABLE - LONG-TERM DEBT:
On December 22, 1994 the Company and Motorola agreed to a
restructuring of the $686,193 Motorola line of credit originally
scheduled to be repaid December 31, 1994. Pursuant to the
restructuring, the Company paid $50,000 to reduce principal and a
$10,000 restructuring fee prior to January 1, 1995. An additional fee
of $5,000 was paid prior to March 31, 1995. The $636,193 balance will be paid
in ten consecutive monthly installments of $63,619 commencing
August 15, 1995. Interest at prime plus 3% on the unpaid balance is
payable quarterly.
NOTE 4 - RELATED PARTY TRANSACTIONS:
On December 16, 1994, Blue Horizon Corporation, a Corporation
owned by Mr. Mulvihill and members of his immediate family exercised its
warrant to purchase 625,000 shares of the Company's common stock at an
aggregate exercise price of $78,125.
In February 1995, Michael L. Tierney, the husband of the Company's
chief executive officer, exercised his warrant to purchase 400,000
shares of the Company's common stock at an aggregate exercise price of
$50,000.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (continued):
In addition, on February 1, 1995 the Company's chief executive
officer exercised stock options previously granted to her and purchased
100,000 shares of the Company's common stock for an aggregate exercise
price of $75,000.
In connection with the $2,000,000 loan extended by PriCellular to
the Company's wholly owned cellular subsidiary, Dominion Cellular, Inc.
("Cellular") on April 8, 1995 in anticipation of the execution of the
Asset Purchase Agreement, an aggregate $1,417,598 of the loan proceeds
were applied by the Company to the extension of a loan to Resort Club,
Inc., a New Jersey Corporation ("Resort Club"). The Resort Club Loan is
repayable on April 20, 1996 together with interest thereon at an annual
rate of 18%, the interest payable quarterly. Resort Club is engaged in
the business of offering membership interests in the Resort to the
general public. The membership entitles the member to the use of
certain accommodations for a defined period of time each year of the
membership term and the right to utilize certain amenities such as
skiing, admission to a participation theme park known as the "Action
Park," a health club and other forms of outdoor recreation on certain
leased lands. The accommodations are provided in the form of
condominiums.
The average Resort Club membership sales price is $10,000 of which
between 10% and 20% is paid initially and the balance is payable over an
average seven-year term with interest at an annual rate of 14%. As
collateral to secure repayment of the Resort Club Loan, a security
interest in membership promissory notes in the aggregate principal
amount of $1,417,598 have been assigned by Resort Club to the Company.
Approximately $200,000 principal amount of such notes are payable by
April 20, 1996. Each of the assigned promissory notes is presently
performing. In the event an individual promissory note goes into
default, Resort Club is obligated to replace the promissory note with a
performing promissory note similar in amount.
The security interests granted to the Company in the Resort Club
membership promissory notes are junior in priority to security interests
in such notes granted to an unaffiliated creditor holding Resort Club
senior indebtedness. An entity beneficially owned by Gene Mulvihill is
also owed $1,000,000 by Resort Club, payable June 30,1996 and has been
granted a security interest in the Resort Club membership promissory
notes to secure repayment of indebtedness. However, such security
interest is subordinate to the Company's security interest in such
notes.
The entity presently providing Resort Club members with admission
to its "Action Park" and skiing facilities is Great American Recreation,
Inc., a New Jersey corporation ("Great American") which together with its
subsidiaries, owns and operates the summer Action Park and winter
recreational ski area in Vernon
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (continued):
Township, Sussex County, New Jersey. Gene W. Mulvihill is a director
and former principal stockholder of Great American and his daughter is a
director and chief operating officer of such corporation. Joseph
Bellantoni, secretary, treasurer and a director of the Company, is also
vice president and chief financial officer of Great American.
In May 1995, First Fidelity Bank N.A., a national banking
association ("First Fidelity"), instituted a complaint in foreclosure
against Great American based on an alleged default under certain
promissory notes representing aggregate outstanding indebtedness of
approximately $17,000,000. Gene W. Mulvihill is a guarantor of
repayment of approximately $5,000,000 of this indebtedness. The Company
owns a $600,000 secured position in a $1,400,000 junior participation
held by a third party, Madison Avenue Financial Corp. ("MAFC") with
respect to one of the Notes representing aggregate indebtedness of
approximately $14,900,000. (William E. McManus, II, a director of the
Company, is president of MAFC).
The lands which are the subject of the First Fidelity foreclosure
suit against Great American include certain lands upon which certain
amenities provided by the Resort Club to its members are located.
Consequently, in the event First Fidelity is successful in its
foreclosure suit, the Resort Club's ability to fulfill certain of its
contractual obligations to its members could become impaired and could
thereby have a substantial adverse effect on the collectability of the
members' notes assigned as security to insure repayment of the Resort
Club Loan. Although the company's management has been advised by
representatives of Great American that negotiations are currently being
conducted with an investor group to acquire and recast the First
Fidelity notes and the underlying securing interests (thereby assuring
the ability of the Resort Club to fulfill its obligations to its
members), no assurances can be given that such acquisition will be
consummated.
As Chairman of the Company's Executive Committee, Gene W.
Mulvihill was active in negotiating the proposed transaction with
PriCellular. In consideration for such services, the Board of Directors
authorized the prepayment by the Company in April 1995 out of the
proceeds of the $2,000,000 PriCellular loan, of a $125,000 principal
amount promissory note due October 1, 1995 held by Blue Horizon
Corporation.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
NOTE 5 - SALE OF CELLULAR ASSETS :
On May 8, 1995, the Company and Cellular executed an Asset
Purchase Agreement with two unaffiliated entities, PriCellular and
PriCellular's wholly-owned Northland subsidiary, providing for the sale
to Northland of the Bibb, Alabama Cellular System (also referred to
herein as the "System") operated by Cellular in the Bibb, Alabama RSA
(the "AL-4 RSA"). In anticipation of the execution of the Asset
Purchase Agreement, PriCellular extended a $2,000,000 loan to Cellular
on April 7, 1995. The loan proceeds have been applied by the Company to
the extension of a loan to an entity of which the Company's principal
stockholder is a creditor and to the payment of certain expenses and
indebtedness including the prepayment of certain indebtedness owed to an
entity owned by members of such principal stockholder's immediate
family. The sale of the System is contingent upon obtaining the consent
of the Federal Communication Commission ("FCC") to the assignment by
Cellular of the licenses to operate the System, to Northland (which
consent was obtained on June 9, 1995), and upon obtaining the approval
of the sale from holders of a majority of the outstanding shares of the
Company's Common Stock.
The Assets being sold (subject to certain current liabilities
related to the System and being assumed by the Purchaser) include the
FCC nonwireline license for the AL-4 RSA, the cellular sites, towers and
related equipment used by the System, the real property on which the
cellular sites are located, and the bulk of Cellular's current assets.
PriCellular, through subsidiaries, owns and operates FCC licensed
cellular telephone systems in various sections of the United States.
The purchase price is $20,000,000 payable as follows: (a)
$6,000,000 in cash, payable at the closing originally scheduled to occur
on August 1, 1995, (b) $4,000,000 in cash payable at the later of
October 1, 1995 or 30 days following the closing (The "second Payment
Date") and (c) $10,000,000 by delivery at the closing of PriCellular's
five-year 4% Convertible Subordinated Note in the principal amount of
$10,000,000. The Convertible Subordinated Note is convertible into
shares of PriCellular Class A Common Stock at $8.51 per share (i) at the
option of the holder and (ii) at the option of PriCellular if the
closing price for PriCellular Class A Common Stock when trading on the
American Stock Exchange (or such other exchange which at such time may
be the principal exchange where such stock is traded) is $10.60 or
higher for ten consecutive trading days. At the closing, the initial
$6,000,000 cash portion of the purchase price will be increased to the
extent Cellular's current assets exceed assumed current liabilities plus
$75,000 or will be decreased to the extent assumed liabilities exceed
Cellular's current assets. In addition, at the closing, the initial
$6,000,000 cash portion of the purchase price will be reduced to the
extent required to repay Cellular's outstanding debt to Motorola, Inc.
(which was $3,142,503 at June 30, 1995) incurred to finance construction
of the system and to repay the 8%, $2,000,000 loan extended to Cellular
by PriCellular on April 7, 1995 in anticipation of execution of the
Asset Purchase Agreement. In addition, $400,000 of the $4,000,000
balance of the purchase price will be held in escrow for a one-year
period following the Closing to ensure the accuracy of the Sellers'
representations and warranties.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
NOTE 6 - PREPAID EXPENSES AND OTHER ASSETS:
Included in prepaid expenses and other assets at June 30, 1995 is
approximately $248,500 of professional fees and other costs directly
associated with the sale of Cellular assets.
These costs will be deducted from the sales proceeds of the sale
of Cellular assets at the time of closing which is expected to occur in
the fourth quarter of fiscal 1995.
NOTE 7 - INCOME TAXES:
As of June 30, 1995, the Company has available for federal income
tax purposes approximately $2,565,000 of net operating loss
carryforwards, which expire in fiscal 1997 to 2007 and investment tax
credit carryforwards of approximately $8,000 which expire in fiscal 1996
to 2000.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".
This statement adopts a balance sheet approach to accounting for income
taxes and requires, among other things, that deferred assets and
liabilities be adjusted to reflect the rate at which the applicable
timing items will reverse based on current enacted law. The effect of
adopting this statement in 1993 was not significant to the Company. The
principle effect of adopting this statement for the nine months ended
June 30, 1995, is that utilization of net operating loss carryforwards
is reflected as a reduction of the tax provision rather than an
extraordinary item.
As of June 30, 1995 the Company has a deferred tax asset of
approximately $875,000 as a result of its net operating loss
carryforward. However, the Company has established an allowance
offsetting this asset, due to the uncertainty of the realization and
utilization of the net operating loss carryforward.
NOTE 8 - SUBSEQUENT EVENTS:
In connection with the May 8, 1995 Asset Purchase Agreement
effective August 1, 1995, PriCellular had become the manager of the
System pursuant to a management agreement. Pursuant to the agreement,
PriCellular will be paid a management fee equal to 7% of the gross
revenues of the System during the term of the management agreement which
will expire upon the earliest of the closing of the sale of the System
or the termination of the Asset Purchase Agreement in accordance with
its terms (such as due to failure to obtain any required approvals).
As of September 13, 1995, $550,000 was repaid to the Company
against the outstanding loan balance due from Resort Club.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following information should be read in conjunction with the
accompanying unaudited financial statements and the notes thereto
included in Item I of this quarterly report, and the financial
statements and the notes thereto and management's discussion and
analysis of financial condition and results of operations contained in
the Company's Annual report on Form 10-KSB for the year ended September
30, 1994.
A. Liquidity and Capital Resources
During the first nine months of fiscal 1995, the Company had net
income of approximately $398,000. Included in net income is
depreciation and amortization and allowance for bad debts for an
aggregate of approximately $884,000, which are noncash expenses. After
reflecting the net change in assets and liabilities, net cash provided
by operations was approximately $748,000. Investing activities included
additions to properties of approximately $1,173,000 and a loan to a
related party of approximately $1,418,000 offset by a $2,000,000 loan
received in connection with the Sale of Cellular Assets. Financing
activities used net cash of approximately $284,000 which resulted from
the repayment of borrowings of approximately $487,000 offset by the
exercise of common stock purchase warrants of approximately $203,000.
Accordingly, during the first nine months of fiscal 1995, the Company's
cash decreased by approximately $127,000.
In November 1994 the Company announced that Cellular had retained
an independent broker on an exclusive basis to attempt to find a
potential purchaser for Cellular's System or a possible merger partner,
which could assist Cellular in meeting its debt obligations. On April
7, 1995, Cellular signed a letter of intent for the sale of the System's
assets including cell sites and real property to PriCellular Corporation
for $20,000,000 in cash and convertible notes. On May 8, 1995, a
definitive agreement was executed with respect to the sale with an
expected closing on or about August 1, 1995. See Sale of Cellular
Assets and Future Business Plans
In connection with the $2,000,000 loan extended by PriCellular to
Cellular on April 8, 1995 in anticipation of the execution of the Asset
Purchase Agreement, an aggregate $1,417,598 of the loan proceeds were
applied by the Company to the extension of a loan to Resort Club. The
Resort Club Loan is repayable on April 20, 1996 together with interest
thereon at an annual rate of 18%, the interest payable quarterly.
Resort Club is engaged in the business of offering membership interests
in the Resort Club to the general public. The membership entitles the
member to the use of certain accommodations for a defined period of time
each year of the membership term and the right to utilize certain
amenities such as skiing, admission to a participation theme park known
as the "Action Park," a health club and other forms of outdoor
recreation on certain leased lands. The accommodations are provided in
the form of condominiums.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
A. Liquidity and Capital Resources (continued)
The entity presently providing Resort Club members with admission
to its "Action Park" and skiing facilities is Great American Recreation,
Inc., a New Jersey corporation ("Great American") which together with its
subsidiaries, owns and operates the summer Action Park and winter
recreational ski area in Vernon Township, Sussex County, New Jersey.
Gene W. Mulvihill is a director and former principal stockholder of
Great American and his daughter is a director and chief operating
officer of such corporation. Joseph Bellantoni, secretary, treasurer
and a director of the Company, is also vice president and chief
financial officer of Great American.
In May 1995, First Fidelity Bank N.A., a national banking
association ("First Fidelity"), instituted a complaint in foreclosure
against Great American based on an alleged default under certain
promissory notes representing aggregate outstanding indebtedness of
approximately $17,000,000. Gene W. Mulvihill is a guarantor of
repayment of approximately $5,000,000 of this indebtedness. The Company
owns a $600,000 secured position in a $1,400,000 junior participation
held by a third party, Madison Avenue Financial Corp. ("MAFC") with
respect to one of the Notes representing aggregate indebtedness of
approximately $14,900,000. (William E. McManus, II, a director of the
Company, is president of MAFC).
The lands which are the subject of the First Fidelity foreclosure
suit against Great American include certain lands upon which certain
amenities provided by the Resort Club to its members are located.
Consequently, in the event First Fidelity is successful in its
foreclosure suit, the Resort Club's ability to fulfill certain of its
contractual obligations to its members could become impaired and could
thereby have a substantial adverse effect on the collectability of the
members' notes assigned as security to insure repayment of the Resort
Club Loan. Although the company's management has been advised by
representatives of Great American that negotiations are currently being
conducted with an investor group to acquire and recast the First
Fidelity notes and the underlying securing interests (thereby assuring
the ability of the Resort Club to fulfill its obligations to its
members), no assurances can be given that such acquisition will be
consummated.
Management is of the opinion that the additional revenues which
the Company expects to receive in fiscal 1995, attributable to the
expansion of its cellular telephone system in fiscal 1994 and 1995
through the addition of towers at six new locations (Verbena, Ft.
Deposit, Maplesville, Benton, Camden and W. Blockton) will generate
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
A. Liquidity and Capital Resources (continued)
sufficient additional cash flows to service its short-term liquidity
needs. In addition, management is of the opinion that the improving
profitability of operations coupled with additional planned system
expansion will generate sufficient cash flows to meet the Company's
long-term liquidity needs in the event the Company does not sell the
System to a third party.
B. Results of Operations
Nine Months ended June 30, 1995 compared with nine months ended
June 30, 1994.
Revenue from cellular telephone operations for the first nine
months and third quarter of fiscal 1995 increased $1,452,710 (67.05%)
and $523,004 (62.96%) from the comparable fiscal 1994 periods. The net
income applicable to common shareholders for the first nine months of
fiscal 1995 was $398,489 ($0.08 per share) as compared to a net loss
applicable to common shareholders of $40,117 ($0.01 per share) in the
comparable prior year period. The third quarter of fiscal 1995 had net
income applicable to common shareholders of $125,031 ($0.02 per share)
as compared to net income applicable to common shareholders of $28,328
($0.01 per share) in the third quarter of fiscal 1994. Revenues for the
first nine months of fiscal 1995 increased primarily as a result of
increased subscriber revenue of approximately $299,000, increased roamer
traffic revenue of approximately $925,000 and increased equipment sales
of approximately $155,000 from the first nine months of fiscal 1994.
Costs of cellular system operations for the first nine months and
third quarter of fiscal 1995 increased $677,080 (74.30%) and $228,634
(63.49%) from the comparable fiscal 1994 periods primarily as a result
of increased technical salaries of approximately $132,000, increased
system maintenance of approximately $75,000, increased telephone
switch expense of approximately $90,000, increased costs of
equipment sales of approximately $162,000, and increased roamer costs of
approximately $332,000 offset by a decrease in billing expense of
approximately $74,000 and commissions of approximately $48,000.
Marketing and selling expenses for the first nine months and third
quarter of fiscal 1995 increased $23,472 (52.71%) and decreased $11,775
(84.61%) from the comparable fiscal 1994 periods. This overall increase
is primarily a result of additional promotional advertising.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Results of Operations (continued)
General and administrative expenses for the first nine months and
third quarter of fiscal 1995 increased $97,764 (31.12%) and $93,731
(87.21%) from the comparable fiscal 1994 periods primarily as a result
of increased professional fees of approximately $63,000 and increased
office expense of approximately $30,000 from the first nine months of
fiscal 1994.
Depreciation and amortization costs for the first nine months and
third quarter of fiscal 1995 increased $102,658 (38.89%) and $40,424
(42.62%) from the comparable fiscal 1994 periods. The increase in
depreciation and amortization is a result of additions to fixed assets
of approximately $1,173,000 related to the commencement of operations of
four additional cell sites in fiscal 1995.
Interest income for the first nine months and third quarter of
fiscal 1995 increased $47,844 (130.52%) and $47,874 (391.83%) from the
comparable fiscal 1994 periods primarily as a result of loans of
approximately $1,418,000 to a related party during the third quarter of
fiscal 1995.
Interest expense for the first nine months and third quarter of
fiscal 1995 increased $95,869 (37.33%) and $58,026 (66.45%) from the
comparable fiscal 1994 periods as a result of the loan received from
PriCellular in the third quarter of fiscal 1995 in connection with the
sale of Cellular assets and an increase in the prime rate.
Amortized discount on warrants and financing costs for the first
nine months and third quarter of fiscal 1995 increased $65,105 (14.88%)
and $65,105 (44.64%) from the comparable fiscal 1994 periods as a direct
result of the prepayment of $125,000 principal amount of the $250,000
private placement which was originally scheduled to be repaid on October
1, 1995. Accordingly, the Company had written off the remaining $65,105
of unamortized discount on warrants and financing costs associated with
the $125,000 principal amount of the private placement which was repaid
in the third quarter of fiscal 1995.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
C. Sale of Cellular Assets
On May 8, 1995, the Company and Cellular executed an Asset
Purchase Agreement with two unaffiliated entities, PriCellular and
PriCellular's wholly-owned Northland subsidiary, providing for the sale
to Northland of the Bibb, Alabama Cellular System (also referred to
herein as the "System") operated by Cellular in the Bibb, Alabama RSA
(the "AL-4 RSA"). In anticipation of the execution of the Asset
Purchase Agreement, PriCellular extended a $2,000,000 loan to Cellular
on April 7, 1995. The loan proceeds have been applied by the Company to
the extension of a loan to an entity of which the Company's principal
stockholder is a creditor and to the payment of certain expenses and
indebtedness including the prepayment of certain indebtedness owed to an
entity owned by members of such principal stockholder's immediate
family. The sale of the System is contingent upon obtaining the consent
of the Federal Communication Commission ("FCC") to the assignment by
Cellular of the licenses to operate the System, to Northland (which
consent was obtained on June 9, 1995), and upon obtaining the approval
of the sale from holders of a majority of the outstanding shares of the
Company's Common Stock.
The Assets being sold (subject to certain current liabilities
related to the System and being assumed by the Purchaser) include the
FCC nonwireline license for the AL-4 RSA, the cellular sites, towers and
related equipment used by the System, the real property on which the
cellular sites are located, and the bulk of Cellular's current assets.
PriCellular, through subsidiaries, owns and operates FCC licensed
cellular telephone systems in various sections of the United States.
The purchase price is $20,000,000 payable as follows: (a)
$6,000,000 in cash, payable at the closing originally scheduled to occur
on August 1, 1995, (b) $4,000,000 in cash payable at the later of
October 1, 1995 or 30 days following the closing (The "second Payment
Date") and (c) $10,000,000 by delivery at the closing of PriCellular's
five-year 4% Convertible Subordinated Note in the principal amount of
$10,000,000. The Convertible Subordinated Note is convertible into
shares of PriCellular Class A Common Stock at $8.51 per share (i) at the
option of the holder and (ii) at the option of PriCellular if the
closing price for PriCellular Class A Common Stock when trading on the
American Stock Exchange (or such other exchange which at such time may
be the principal exchange where such stock is traded) is $10.60 or
higher for ten consecutive trading days. At the closing, the initial
$6,000,000 cash portion of the purchase price will be increased to the
extent Cellular's current assets exceed assumed current liabilities
plus $75,000 or will be decreased to the extent assumed liabilities
exceed Cellular's current assets. In addition, at the closing, the
initial $6,000,000 cash portion of the purchase price will be reduced to
the extent required to repay Cellular's outstanding debt to Motorola,
Inc. (which was $3,142,503 at June 30, 1995) incurred to finance
construction of the System, and to repay the 8%, $2,000,000 loan
extended to Cellular by PriCellular on April 7, 1995 in anticipation of
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
C. Sale of Cellular Assets (continued)
execution of the Asset Purchase Agreement. In addition, $400,000 of the
$4,000,000 balance of the purchase price will be held in escrow for a
one-year period following the Closing to ensure the accuracy of the
Sellers' representations and warranties.
In connection with the May 8, 1995 Asset Purchase Agreement
effective August 1, 1995, PriCellular had become the manager of the
System pursuant to a management agreement. Pursuant to the agreement,
PriCellular will be paid a management fee equal to 7% of the gross
revenues of the System during the term of the management agreement which
will expire upon the earliest of the closing of the sale of the System
or the termination of the Asset Purchase Agreement in accordance with
its terms (such as due to failure to obtain any required approvals).
D. Future Business Plans
The Company is the owner of 10 acres of land in Ouray, Colorado,
with the "Silver Shield" Mill located thereon. The mill, designed to
mill silver, has not been operated for more than 50 years. The Company
paid the balance of the purchase price for this property early in fiscal
1992 and listed the property for sale at a price of $239,000 based upon
a listing of comparable neighboring property. Although the listing
expired in October 1993, the Company did not renew the listing because
of an ongoing reconstruction project in the vicinity which management
believes may enhance the value of the Company's property. Based on
management's estimates of land values in the locality, it is
management's belief that the Company will realize the carrying value of
this investment of $142,684 at June 30, 1995 when the property is sold.
Although management has not determined with any degree of
specificity the allocation of the Company's resources to future business
activities, management presently intends, assuming consummation of the
sale of the System, to apply the bulk of the Company's resources in some
or all of the following real estate development activities;
residential, commercial and resort development. Some of such activities
may be conducted with entities affiliated with management such as Great
American and affiliated companies. The Company's involvement may be as
a sole principal, a partner, a joint venturer or in some other form.
The Company may also seek to pursue real estate development activities
on its "Silver Shield" Mill property in Colorado. In addition, the
Company is currently exploring certain joint venture relationships to
pursue possible cellular phone, mining, casino, and lottery
opportunities in southern Africa but no assurances can be given that
such opportunities will be made available. Despite the foregoing,
management reserves the right to apply the Company's assets in other
businesses as opportunities present themselves.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Commission Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
DOMINION RESOURCES, INC.
Dated: 09/14/95 By: /s/ Debra Evers - Tierney
Debra Evers - Tierney
President, Chief Executive Officer
Dated: 09/14/95 By: /s/ Joseph Bellantoni
Joseph Bellantoni
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM FORM 10-QSB FOR
THE PERIOD ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<PERIOD-END> JUN-30-1995
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