SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1995
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE
REQUIRED]
For the Transition period
from____________to______________
Commission File Number 0-10176
DOMINION RESOURCES INC.
(Exact name of small business issuer as specified in
its charter)
Delaware 22-2306487
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
355 Madison Avenue, Morristown, New Jersey 07960
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code
(201) 538-4177
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
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 X No___
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-B is not
contained herein, and will not be contained, to the
best of the issuer's knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this Form 10-KSB or in any amendment to
this Form 10-KSB.
[ ]
For the year ended September 30, 1995, the issuer's
revenues were $4,915,226.
On January 31, 1996, the aggregate market value of the
voting stock of Dominion Resources Inc. (consisting of
Common Stock, $.01 par value) held by non-affiliates of
the Issuer was approximately $3,265,000 based upon the
high bid price for such Common Stock on said date in
the over-the-counter market as reported by the National
Quotation Bureau. On such date, there were 5,369,100
shares of Common Stock of the Issuer outstanding.
Transitional Small Business Disclosure Format
Yes___ No X
PART I
Item 1. Business
Introduction
Dominion Resources Inc. ("Resources") was principally
engaged through a wholly owned subsidiary formed in
1991, Dominion Cellular, Inc. ("DCI") in the operation
of a nonwireline cellular radio telephone system
servicing a six county area in central Alabama with a
population of approximately 150,000 located between
Montgomery and Birmingham, Alabama. In fiscal 1995,
the Company formed two wholly owned subsidiaries -
Diamond Leasing and Management Corp. and Diamond World
Funding Corp. As of September 30, 1995, Diamond
Leasing and Management Corp. had extended loans to the
Resort Club, Inc. ("Resort Club") an entity of which
the Company's principal shareholder is a creditor. As
of September 30, 1995, Diamond World Funding Corp. had
no material operations or investments. As used herein,
the term (the "Company") shall refer to Resources as
well as to Resources and its wholly owned subsidiaries
unless the context otherwise requires.
On November 7, 1995, the Company completed the sale of
its cellular telephone system. The cellular telephone
system was substantially the Company's only source of
revenues. After November 7, 1995, the Company had no
significant operations.
Resources was incorporated under the laws of the State
of Delaware on October 11, 1979 to engage in the
business of milling non-ferrous metals in the Mohave
County region of Arizona. Management subsequently
concluded, based upon declining non-ferrous metal
prices, that a mill project in such region was not
feasible. In August 1989, Resources was awarded a
permit by the Federal Communications Commission ("FCC")
pursuant to a lottery process, to provide nonwireline
cellular radio telephone service in the Bibb, Alabama
RSA and in June 1990, the FCC granted Resources'
application to construct a cellular system in the Bibb,
Alabama RSA (also referred herein as the "System").
Construction commenced in the last quarter of fiscal
1991 after receipt of required construction permits and
the arrangement of financing with Motorola, Inc.
("Motorola"). The cellular system commenced operations
in November 1991. The FCC license for the cellular
system expires on October 1, 2001. Such licenses are
generally renewed for ten year periods. Renewals are
granted upon application made more than 30 days prior
to the license expiration date for relatively minimal
fees and it has been the industry experience that such
renewals occur on a pro forma basis if the applicant is
in good standing at such time. To date, no complaints
have been filed with the FCC concerning the Company's
operation of its former cellular system.
1
Sale of Cellular Assets
On November 16, 1994, Resources announced that DCI had
retained an independent broker on an exclusive basis to
attempt to find a potential purchaser for DCI's
cellular system or a possible merger partner with DCI.
Management of the Company determined to seek a
purchaser because it believed that DCI's cellular
system had been developed to a point where it
represented an attractive acquisition for potential
acquirors in the cellular industry at a price, based on
current market conditions, substantially in excess of
DCI's costs in developing the system.
On May 8, 1995, the Company and DCI executed an Asset
Purchase Agreement (Subsequently amended on August 14,
1995 and December 14, 1995) with two unaffiliated
entities, PriCellular Corporation ("PriCellular") and
PriCellular's wholly-owned Northland subsidiary,
providing for the sale to Northland of the System
operated by DCI in the Bibb, Alabama RSA (the "AL-4
RSA"). The System was substantially the Company's only
source of revenues. Immediately after completion of
the sale of the System, the Company had no significant
operations.
Public announcement of the execution of the Asset
Purchase Agreement was disseminated by the Company and
by PriCellular on May 8, 1995. On May 5, 1995, the
trading day immediately preceding the date of the
announcement, the high and low bid and asked prices for
the Company's Common stock as quoted in the
over-the-counter market were $1, $.75, $1.75 and $1.06
respectively and the high and low sales prices for
PriCellular Class A Common Stock as traded on the
American Stock Exchange were $10.16 and $9.85
respectively.
In anticipation of the execution of the Asset Purchase
Agreement, PriCellular extended a $2,000,000 loan to
DCI on April 7, 1995. From the $2,000,000 of loan
proceeds, the Company (a) made a $1,417,598 loan to
Resort Club, an entity of which the Company's principal
stockholder is a creditor; (b) paid $250,000 to a
corporation owned by the Company's former president and
her husband in payment of bills rendered for previously
completed Cell Site and Tower construction for the
System; and (c) prepaid $125,000 of indebtedness owed
to an entity owned by members of the principal
stockholder's immediate family. The balance was
applied to legal and professional fees related to the
sale of the System.
The sale of the System was contingent upon obtaining
the consent of the FCC to the assignment by DCI 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 (which approval was obtained on November
6, 1995).
The Assets sold (subject to certain current liabilities
related to the System and being assumed by the
Purchaser) included
2
Sale of Cellular Assets(continued)
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 DCI's current
assets.
The parties also agreed that effective August 1, 1995,
PriCellular would become the manager of the System
pursuant to a management agreement providing for a
management fee to be paid to PriCellular equal to 7% of
the gross revenues of the System during the term of the
management agreement. Through November 7, 1995, the
Company accrued $114,600 in connection with the
management agreement.
The original purchase price of the system was
$19,900,000 (after a $100,000 reduction for the amount
by which certain liabilities assumed by the purchaser
at the closing exceeded DCI's current assets) payable
as follows: (a) $6,000,000 in cash, payable at the
Closing which occurred on November 7, 1995, (b)
$3,900,000 in cash payable 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 (also referred herein as the
"PriCellular Note"). The PriCellular Note was
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 was reduced to the extent required
to repay DCI's outstanding debt to Motorola
(approximately $2,864,000) incurred to finance
construction of the System, and to repay the 8%,
$2,000,000 loan extended to DCI by PriCellular on April
7, 1995 in anticipation of the execution of the Asset
Purchase Agreement. At the second closing, the
$4,000,000 cash portion of the purchase price was
decreased by $100,000, the amount by which assumed
current liabilities exceeded DCI's current assets. An
aggregate $400,000 of the $3,900,000 balance of the
purchase price was required to be held in escrow for a
one year period following the closing, to ensure the
accuracy of the Company's representations and
warranties.
Also at the closing, PriCellular elected to force
conversion of its five-year, 4%, $10,000,000
Convertible Subordinated Note to DCI into 1,175,088
shares of its Class A Common Stock. The high and low
sales prices for PriCellular Class A Common Stock, as
traded on the American Stock Exchange on November 7,
1995, were $13.125 and $12.75, respectively. As a
result, the Company recorded the 1,175,088 converted
shares at a value of $7,497,061 an amount which
reflects a 50% discount of the closing sales price of
PriCellular Class A Common Stock on November 7, 1995 of
$12.75. The Company recorded a 50% discount because of
the trading restrictions placed on the stock.
3
Sale of Cellular Assets(continued)
In connection with the second closing, the Company
entered into a second amendment to the Asset Purchase
Agreement dated December 14, 1995 whereby the Company
and PriCellular resolved certain disputes with respect
to the adjusted purchase price of the cellular
telephone system. As amended, the Company received
$3,500,000 at the second closing, with the $400,000
balance being held in escrow. As part of the second
amendment, the Company retained ownership of certain
accounts receivable deemed to be uncollectable as of
August 1, 1995 in the aggregate principal amount of
approximately $124,000. In addition, the Company
reserved the right to the proceeds of any insurance
claim arising from a loss that took place in the month
of August 1995.
Pursuant to a separate registration rights agreement,
PriCellular granted the holders of at least 50% of the
Class A Common Stock issuable or issued upon conversion
of the PriCellular Note, one "demand" right of
registration requiring PriCellular to register such
shares of Class A Common Stock for public offer and
sale under the Securities Act of 1933. The "demand"
registration right was exercisable after the earlier of
June 30, 1996 or the effective date of the first
registration statement for an underwritten public
offering of PriCellular securities. The registration
rights agreement also granted the holders of the
PriCellular Note or the underlying Class A Common Stock
certain "piggy-back" registration rights permitting it
to have such Class A Common Stock included in other
registration statements filed by PriCellular with
respect to a public offering of its securities at
PriCellular's expense, so as to permit public offer and
sale of such shares, subject to the right of any
underwriter of such public offering to limit the number
of shares so included.
On January 30, 1996, DCI entered into an agreement with
PriCellular whereby DCI agreed to sell to PriCellular
600,000 shares of its PriCellular Class A Common Stock
for $10.50 per share. The closing of this transaction
occurred on February 9, 1996. At the closing, DCI
entered into an agreement pursuant to which the demand
registration rights of the holders of the Company's
PriCellular registrable securities were waived.
Use of Proceeds from the System Sale
In addition to receipt of the PriCellular Class A
Common Stock, the Company received an aggregate of
approximately $9,900,000 (less closing costs and
associated expenses) in cash payments from PriCellular
at the initial closing and at the Second Payment Date
(of which $400,000 is being held in escrow for a one
year period as previously described).
4
Use of Proceeds from the System Sale (continued)
The cash payments were applied substantially as
follows:
a) Repayment of Motorola debt and accrued interest
incurred to finance construction of the
System....................................$2,864,226
b) Repayment of PriCellular loan and accrued
interest...................................$2,040,000
c) Closing costs............................$ 747,955
d) Escrow account deposit...................$ 400,000
e) Amounts payable to the former president of the
Company to repurchase all of the shares of the
Company's common stock owned by the former
president, her son and her husband.......$1,568,626*
Total: $ 7,620,807
==========
________________
* On February 29, 1996, Debra Evers-Tierney advised the
Company of her intention to review the Company's
determination of net "book value" as of November 7,
1995. In addition, the Company and the former
president are currently negotiating to determine the
proportion of the amount to be paid in cash and in
PriCellular Class A Stock.
With the exception of the above described payments to
the Company's president and members of her family, no
portion of the sale proceeds will be distributed
directly to the Company's shareholders.
Future Business Plans
The System was substantially the Company's only source
of revenues. Immediately after completion of the sale
of the System, the Company had no significant
operations. Although management had not determined with
any degree of specificity, the allocation of the
Company's resources to future business activities,
management presently intends, 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 Recreation,
Inc. ("Great American") and affiliated companies.
5
Future Business Plans (continued)
The Company's involvement may be as a sole principal, a
partner, a joint venturer or in some other form.
Through January 31, 1996, the Company invested $2,300,000 of
the proceeds from the sale of the System in the Resort
Club in the form of an additional loan on terms
substantially similar to the previous $1,417,598 loan
arrangement with the Resort Club (See Note 9 to the
Company's Consolidated Financial Statements) paid $1,025,000
to lease the Vernon Valley/Great Gorge Ski Area Rental Shops and all
fixtures located thereon as well as the ski rental
equipment from a wholly owned subsidiary of Great American Recreation,
Inc. ("Great American"), an entity in which certain of the Company's
officers and directors have present and prior affiliations, loaned
$269,500 to Great American, assumed $750,000 of indebtedness of its
principal stockholder, repayable from Resort Club receivables and
paid $1,600,000 to purchase mortgages with a face value of
approximately $3,000,000 from the Resolution Trust Company.
See Note 11 to the Company's Consolidated Financial
Statements. On February 14, 1996, an involuntary
bankruptcy petition was filed against Great American by
three creditors in the United States Bankruptcy
Court, Newark, New Jersey. Management of the Company believes
that this filing will have no material impact on its investments
in Great American or entities affiliated with Great American
or the Resort Club for the reason that Praedium Phoenix, L.L.C.,
Great American's primary lender, has agreed to grant a
nondisturbance to Great American for the benefit of the
Resort Club and its members which secures the viability of
the Resort Club and provides an additional source of revenues
to Great American and otherwise prevents the impairment of the
collateral. The Company may also seek to pursue real estate
development activities on its "Silver Shield" Mill property in
Colorado. Despite the foregoing, management reserves
the right to apply the Company's assets in other
businesses as opportunities present themselves.
Cellular Telephone System Activities
A cellular telephone system transmits telephone calls
on radio frequencies and relays the calls over
telephone wires. Each service area is divided into
cells (thus, the name cellular) of up to 16 miles
across. As a cellular telephone moves from one place
to another, the phone conversation is transferred from
one cell to another. Using low power radio
transmitters and receivers, each cell has a limited
coverage area. A cellular telephone system includes a
central switching facility ("CSF") which, by means of a
computer, controls the system, the connection of the
individual subscribers' units to the central facility
and their link-up with the local exchange telephone
network. The CSF coordinates the connection of a call
with either mobile or land telecommunications systems
and the switching of a call from one cell site to
another. All system traffic information, including
billing, is recorded by the CSF.
System Construction and Properties
After obtaining a construction permit from the FCC for
the construction of the System, Resources assigned the
permit and the construction rights to its newly formed
wholly owned subsidiary, DCI. In June 1991, Resources
and Motorola executed a Purchase Agreement (which
Resources assigned to DCI) and DCI and Motorola
executed a Financing Agreement subject to delivery of
various additional documents. Pursuant to the Purchase
Agreement, Motorola agreed to sell certain hardware and
software of its design of the System and install same
for use in the AL-4 RSA.
6
System Construction and Properties (continued)
DCI agreed to procure the necessary construction
permits and station licenses from the FCC and make
available the required Cell Site and Tower Locations.
Pursuant to the Financing Agreement, Motorola agreed to
lend DCI up to $1,650,000 to purchase equipment and
services to be provided primarily by Motorola for
construction and installation of the System and up to
$950,000 for working capital. All such loans were
repayable interest only until the third year after DCI
placed the System into commercial service and then paid
over a four year period on a seven year amortization
schedule plus interest. Interest was calculated at the
rate of 3% per annum in excess of Chase Manhattan
Bank's Corporate Base Rate. DCI had the right to
prepay such loans in whole or in part and the Financing
Agreement also provided for certain mandatory
prepayments including prepayments equal to 75% of DCI's
"Free Cash Flow" (operating cash flow less non-financed
capital purchases and less debt service). In October
1992, Motorola advanced an additional $686,193 to DCI
primarily for equipment and service purchases. This
loan was repayable interest only, at an annual rate
equal to three percent in excess of Chase Manhattan
Bank's prime rate in quarterly installments with the
principal due on December 31, 1994. On December 22,
1994, the Company and Motorola agreed to a
restructuring of this loan. Pursuant to the
restructuring, the Company paid $50,000 to reduce
principal and a $10,000 restructuring fee prior to
January 1, 1995. The $636,193 balance was payable in
ten consecutive monthly installments of $63,619
commencing August 15, 1995. Interest at prime plus 3%
on the unpaid balance was payable quarterly. An
additional $5,000 restructuring fee was paid prior to
March 31, 1995.
Resources had also executed a Stock Pledge Agreement
pledging all of the outstanding capital stock of DCI,
with Motorola, to be held as collateral security to
insure the fulfillment of DCI's obligations under the
Financing Agreement. As additional collateral
security, DCI had assigned its Cell Site and Tower
Leases and its Building Lease hereinafter described, to
Motorola, and its Lessor, Resources, had consented to
such assignments. DCI had also granted Motorola a
security interest in all of its tangible and intangible
assets as collateral to insure its performance under
the Financing Agreement.
At September 30, 1995, DCI was indebted to Motorola in
the approximate aggregate amount of $2,986,057 under
the Financing Agreement for advances made directly or
applied for the purchase of equipment and services, for
the construction and installation of the System and for
working capital. With the exception of $686,193
previously due on December 31, 1994 (and restructured
on December 22, 1994 as described above), this
indebtedness was payable with interest over a four-year
period commencing in January 1995. Principal payments
were calculated on a seven-year amortization schedule
and interest at the rate of 3% per annum in excess of
Chase Manhattan Bank's Corporate Base Rate.
7
System Construction and Properties (continued)
In connection with the sale of the Company's cellular
telephone system, the Company's outstanding
indebtedness to Motorola was paid out of the closing
which took place in the first quarter of fiscal 1996.
In July 1991, Resources closed the purchase of a 44' x
73' cinder block commercial building at 206 7th Street
South in Clanton, Alabama from an unrelated party for
$135,000. Resources made a $35,000 down payment and
delivered its 11.5% mortgage note in the principal
amount of $100,000 secured by a first mortgage on the
property for the balance. The note is payable in equal
monthly installments of $1,739 over a seven and
one-half year period. Resources leased the building to
DCI for its principal offices pursuant to a Building
Lease for a five-year term expiring August 31, 1996 at
a monthly rental of $1,200. The lease is a "net-net"
lease with DCI being responsible for all real estate
taxes and insurance costs as well as all non-structural
repairs. The lease also contains two three-year
renewal terms at rentals adjusted for changes in the
Consumer Price Index.
In September 1992, Resources completed the purchase of
a 25' x 45' sheet metal "butler" building at 1016
Highland Avenue in Selma, Alabama from an unrelated
party for $115,000. Resources made a $15,000 down
payment and delivered its 9% mortgage note in the
principal amount of $100,000 for the balance. The note
is payable in 35 equal monthly installments of $901
with a balloon payment of $89,903 due in August 1995
although the seller has agreed to refinance the balance
at such time provided Resources is not in default in
its installment payments. After purchase, Resources
leased this building to DCI by adding it to the Clanton
Building Lease described above and increasing the total
monthly rental to $2,200.
In connection with the Asset Purchase Agreement,
PriCellular assumed the Clanton office lease from DCI
and leases the Selma office from Resources on a
month-to-month basis.
During September 1991, Resources closed the purchase of
three parcels of land in Selma, Hayneville and Clanton,
Alabama from unrelated parties. The Selma parcel of
approximately 7.5 acres was purchased for approximately
$30,000 pursuant to a $6,000 down payment and a
three-year 12% mortgage note in the principal amount of
$24,000 secured by a mortgage on the property. The
note was paid in full during fiscal 1994. The
Hayneville parcel of approximately 4.05 acres was
purchased for approximately $16,200, all of which was
paid at the closing. The Clanton parcel of
approximately 5.22 acres was purchased for
approximately $20,000 pursuant to a seven and one-half
year 11.5% mortgage note in such $20,000 principal
amount secured by a mortgage on the property.
Resources leased the three parcels to DCI pursuant to a
Cell Site and Tower Lease at an aggregate monthly
rental of $1,800 and authorized DCI to construct towers
and shelters for equipment for the Cellular System at
the three
8
System Construction and Properties(continued)
locations. The Cell Site and Tower Lease was for a
five-year term expiring August 31, 1996 and was also a
"net-net" lease with DCI responsible for all real
estate taxes and insurance costs as well as all
non-structural repairs. The lease also contained two
three-year renewal terms at rentals adjusted for
changes in the Consumer Price Index.
In August 1992, Resources closed the purchase of two
additional parcels of land in Centerville (Bibb County)
and Jemison (Chilton County), Alabama from unrelated
parties. The Centerville parcel of approximately 12.8
acres was purchased for $15,383 payable in equal
monthly installments with 10% interest over a six-year
period and secured by a purchase money mortgage. The
Jemison parcel was purchased for $8,496 paid at the
closing.
During fiscal 1994, Resources purchased four additional
Alabama parcels for the System in Verbena and
Maplesville (Chilton County), Ft. Deposit (Lowndes
County), and Benton (Dallas County) from unrelated
parties. The Verbena parcel of 4.814 acres was
purchased for $12,500. The Maplesville parcel of 5
acres was purchased for $10,000. The Ft. Deposit
parcel of 12.009 acres was purchased for $23,918. The
Benton parcel of 5 acres was purchased for $10,000.
All parcels purchased in fiscal 1994 were paid in full
at closing.
During fiscal 1995, Resources purchased an additional 5
acre Alabama parcel for the System in Camden (Wilcox
County) for $13,000 paid at the closing from an
unrelated party. Resources also entered into a lease
arrangement with an unrelated party for a 6 acre parcel
for $200.00 per month in W. Blockton (Bibb County)
which expires in March of 2000.
After the purchases, Resources leased the seven parcels
acquired in fiscal 1992, 1994 and 1995 to DCI by adding
them to the Cell Site and Tower lease described above
and increasing the total montly rental to $6,600.
Resources applied its own funds in connection with the
purchase of the two buildings and the ten parcels.
In connection with the sale of the System, PriCellular
purchased all of Resources cell site locations and
assumed the W. Blockton lease.
The civil work (roads, power, electric, shelter pad,
etc.) for the first three Cell Site and Tower Locations
(Selma, Hayneville and Clanton) was provided by
Resources at an agreed fee of $399,000 (paid from
funding provided by Motorola pursuant to the Financing
Agreement)and was completed in fiscal 1992. A
significant portion of the outside labor for the civil
work was performed by Lyncor Construction Co.,
Inc. ("Lyncor"), a
9
System Construction and Properties(continued)
corporation 50% owned by Debra Evers-Tierney, president
and chief executive officer, at the time, of both
Resources and DCI with the other 50% owned by her
husband. Lyncor was paid $110,160 by Resources for its
services in the construction of these three locations.
DCI purchased the next two completed Cell Site and
Tower Locations (Centerville and Jemison) from Motorola
for $686,193 which charged DCI for same under the
Financing Agreement. The bulk of the construction for
these two Cell Site and Tower Locations completed in
fiscal 1993 was also performed by Lyncor who was paid
$307,158 for its services and costs directly by
Motorola. After neogtiation, the Company, effective
October 1, 1993 issued Warrants to Michael L. Tierney,
exercisable to purchase 400,000 shares of the Company's
Common Stock as compensation for the savings realized
by the Company attributable to Lyncor's construction of
these two locations. The prices charged by Lyncor for
this construction were in each instance substantially
below the prices submitted by Motorola in its bid to
perform this construction for the Company. On January
17, 1995, Michael L. Tierney exercised these Warrants
and purchased the 400,000 shares of Common Stock at an
exercise price of $.125 per share.
During fiscal 1994, Lyncor performed the civil work and
constructed the buildings and the towers at the
Verbena, Ft. Deposit and Maplesville locations. Lyncor
billed DCI $231,911 in full payment for its services at
Verbena, billed DCI $242,028 for its services at Ft.
Deposit and billed DCI $239,122 for its services in
constructing Maplesville. Construction commenced on the
Benton location in December 1994. During fiscal 1995,
Lyncor performed the civil work and constructed the
buildings and towers at the Benton, Camden, and W.
Blockton locations. Lyncor billed DCI $269,887 in full
payment for its services at Benton, billed DCI $263,297
for its services at Camden and billed DCI $244,896 at
W. Blockton.
The Selma Cell Site and Tower became operational in
November 1991 and the Hayneville and Clanton Cell Sites
and Towers became operational in January 1992. The
Jemison Cell Site and Tower became operational in
November 1992 and the Centerville Cell Site and Tower
became operational in January 1993. The Verbena, Ft.
Deposit, Maplesville, and Benton Cell Sites and Towers
became operational in August, September, October, and
December of 1994, respectively. The Camden and W.
Blockton Cell Sites and Towers became operational in
May and June of 1995, respectively.
DCI's principal sources of revenues were attributable
to monthly fees paid by subscribers for use of the
System and to "roamer" traffic (subscribers to another
system who use the Company's system when entering the
Company's RSA). The System was substantially the
Company's only source of revenues. After November 7,
1995, the Company had no significant operations.
10
System Construction and Properties(continued)
DCI's approximate aggregate revenues from subscribers
and from "roamer" traffic in the last three fiscal
years were as follows:
Revenues
Fiscal Year Subscribers Roamer Traffic
1993 $ 827,100 $ 766,500
1994 1,457,300 1,540,700
1995 2,064,546 2,562,137
In fiscal 1994, the Company became a member of the
North American Cellular Network ("NACN"). Membership
in the NACN enabled the Company to provide call
delivery to its customers while traveling in
approximately 600 cities located outside its RSA and to
roamer traffic inside its RSA without the caller having
to first dial roamer access numbers.
Competition
The Company's competition in the AL-4 RSA was provided
by Frontier Cellular, an amalgamation of five local
telephone companies which maintain six towers in the
AL-4 RSA (as compared to the Company's eleven towers).
Frontier Cellular had substantially larger financial
resources than the Company and was competitive through
pricing based on what it believed were lower overhead
costs.
Employees
At September 30, 1995, the Company had one full time
management employee, its former president, four
clerical employees, four full-time and three part-time
salespeople, all but one of whom was compensated on a
commission only basis, and four technical employees
providing installation and maintenance as well as one
agent. In addition, one outside business marketed the
Company's cellular services including an appliance
repair store. The Company also advertised its services
locally. Since the sale of the System in November
1995, the Company has had no employees.
Real Estate Investment Activities
Ouray, Colorado Property and Mill. 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. It is management's belief that
this property will be sold for an amount at least equal
to the Company's $142,000 cost for same although no
assurances can be given that such will be the case.
11
Real Estate Investment Activities (continued)
Other Investments. See Item 12 herein and Notes 9 and
11 of the Notes to the Consolidated Financial
Statements as to investments made by the Company with
entities affiliated with three directors, one of which
is also the principal stockholder of the Company.
Item 2. Properties
See Item 1 herein as to the Company's purchase of three
parcels of land in Selma, Hayneville and Clanton,
Alabama in September 1991, its purchase of two
additional parcels of land in Centerville and Jemison,
Alabama in August 1992, its purchase of four additional
parcels in Verbena, Maplesville, Ft. Deposit and
Benton, Alabama purchased during fiscal 1994, its
purchase of one parcel in Camden and lease of a parcel
in W. Blockton in fiscal 1995 and its construction of
Cell Sites and eleven Towers on these parcels. In
addition, See Item 1 herein as to the Company's former
principal executive offices which were located at 206
7th Street South in Clanton, Alabama which it purchased
in July 1991 as well as a building in Selma, Alabama
purchased in September 1992 which it previously used
for sales, installation and marketing functions.
In connection with the sale of the System, PriCellular
purchased all of Resources cell site locations and
assumed the W. Blockton Lease.
PriCellular has assumed the lease of Company's former
principal executive offices which are located at 206
7th Street South in Clanton, Alabama and currently
leases the Selma office from Resources on a
month-to-month basis.
Subsequent to the sale of the cellular telephone
system, the Company transferred its executive offices
to 355 Madison Avenue, Morristown, New Jersey. In
connection with this move, the Company entered into a
lease agreement with St. Marks Associates, a real
estate partnership owned 50% by Mr. Gene Mulvihill.
The lease provides for a lease term of 5 years
commencing December 1, 1995 with a base rent of
$2,764.58 per month and a monthly payment of $774.08
for the Company's proportionate share of impositions
and operating expenses. The lease provides for rental
adjustments for changes in the Consumer Price Index.
Item 3. Legal Proceedings
The Company is not a party to any pending legal
proceedings which it regards as material in nature.
12
Item 4. Submission of Matters to a Vote of
Security Holders
No matter was submitted to a vote of security holders
during the quarter ended September 30, 1995. At a
special meeting of the Company's stockholders held on
November 6, 1995, by a vote of 3,355,048 in favor and
38,950 against, the Company's stockholders approved the
sale of the System to the Northland subsidiary of
PriCellular in accordance with the terms of the Asset
Purchase Agreement dated as of May 8, 1995, the terms
of which are hereinafter described.
13
PART II
Item 5. Market for Common Equity
and Related Stockholder Matters
Resources' Common Stock is traded in the
over-the-counter market. The following table sets
forth the range of high and low bid and asked
quotations for the Common Stock during the past two
fiscal years as derived from reports furnished by the
National Quotation Bureau.
<TABLE>
<S> <C> <C> <C> <C>
Bid(1) Asked(1)
High Low High Low
Quarter Ended
December 31, 1993 $5.00 $.50 $6.00 $1.75
March 31, 1994 1.38 .75 2.50 1.75
June 30, 1994 1.50 .75 2.50 1.75
September 30, 1994 1.50 .50 2.50 .88
December 31, 1994 1.375 .25 2.00 .75
March 31, 1995 1.75 .75 2.00 1.125
June 30, 1995 1.125 .50 1.75 .875
September 30, 1995 .719 .50 1.50 .8125
</TABLE>
__________
(1) The above quotations represent prices between
dealers and do not include retail mark-ups, mark-downs
or commissions. They do not necessarily represent
actual transactions.
As of January 31, 1996, the number of record holders of
Resources' Common Stock was 4,626. Resources has never
paid a cash dividend on its Common Stock and
anticipated capital requirements make it unlikely that
any cash dividends will be paid on the Common Stock in
the foreseeable future.
14
Item 6. Management's Discussion and Analysis or
Plan of Operation
Introduction
The following discussions and analysis of financial
condition and results of operations should be read in
conjunction with the consolidated financial statements
and accompanying notes.
Through November 7, 1995, the Company was principally
engaged through DCI in the operation of a cellular
telephone system servicing a six county area in
central Alabama, pursuant to a permit awarded by the
FCC in August 1989. Construction of the System
commenced in the last quarter of fiscal 1991 and
cellular telephone operations commenced in November
1991. The FCC license for the System expires on
October 1, 2001. Such licenses are generally renewed
for ten year periods. Renewals are granted upon
application made more than 30 days prior to the license
expiration date for relatively minimal fees and it has
been the industry experience that such renewals occur
on a pro forma basis if the applicant is in good
standing at such time. To date, no complaints have
been filed with the FCC concerning the Company's
operation of its former Cellular System.
On November 7, 1995, the Company completed the sale of
its cellular telephone system. The cellular telephone
system was substantially the Company's only source of
revenues. After November 7, 1995, the Company had no
significant operations.
Results of Operations
Fiscal Year 1995 compared with Fiscal Year 1994
Revenue from cellular telephone operations for fiscal
1995 increased $1,742,822 (54.94%) from the comparable
fiscal 1994 period. The net income applicable to
common shareholders for fiscal 1995 was $651,476 ($0.12
per share) as compared to a net loss applicable to
common shareholders of $34,051 ($0.01 per share) in the
comparable prior fiscal year. Revenues for fiscal 1995
increased primarily as a result of increased subscriber
revenue of approximately $607,000 and increased roamer
traffic revenue of approximately $1,021,000 over fiscal
1994.
Costs of cellular system operations for fiscal 1995
increased $854,223 (68.67%) from fiscal 1994 primarily
as a result of increased technical salaries of
approximately $34,000, increased system maintenance of
approximately $44,000, increased telephone switch
expense of approximately $138,000, increased costs of
equipment sales of approximately $197,000, increased
roamer costs of approximately $335,000, increased
billing expense of approximately $38,000 and increased
commissions of approximately $42,000 over fiscal 1994.
15
Results of Operations(continued)
Fiscal Year 1995 compared with Fiscal Year
1994(continued)
Marketing and selling expenses for fiscal 1995
decreased $10,950 (11.35%) from fiscal 1994. This
decrease is primarily a result of decreased promotional
advertising.
General and administrative expenses for fiscal 1995
increased $145,433 (29.87%)from fiscal 1994 primarily
as a result of increased office expense.
Depreciation and amortization costs for fiscal 1995
increased $125,163 (34.91%) from fiscal 1994. The
increase in depreciation and amortization is a result
of additions to fixed assets of approximately
$1,174,000 related to the commencement of operations of
four additional cell sites in fiscal 1995.
Bad debt expense for fiscal 1995 decreased $92,428
(68.98%) from the comparable fiscal 1994 period.
Interest income for fiscal 1995 increased $101,735
(208.15%) from fiscal 1994 primarily as a result of
loans of approximately $1,129,000 to a related party
during the third quarter of fiscal 1995.
Interest expense for fiscal 1995 increased $137,123
(38.95%) from fiscal 1994 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.
Fiscal Year 1994 Compared with Fiscal Year 1993
Revenue from cellular telephone operations for fiscal
1994 increased $1,564,288 (97.27%) from the comparable
fiscal 1993 period. The net loss applicable to common
shareholders for fiscal 1994 was $34,051 ($0.01 per
share) as compared to a net loss applicable to common
shareholders of $304,334 ($0.07 per share) in the
comparable prior year period. Revenues for fiscal 1994
increased primarily as a result of increased subscriber
revenue of approximately $401,000, increased roamer
traffic revenue of approximately $1,173,000 offset by a
decrease in equipment sales of approximately $23,000
from fiscal 1993.
Costs of cellular system operations for fiscal 1994
increased $459,946 (58.66%) from the comparable fiscal
1993 period primarily as a result of increased roamer
costs of approximately $305,000, increased billing
expenses of $69,000, increased telephone switch expense
of approximately $30,000 and technical salaries of
approximately $17,000.
Marketing and selling expense for fiscal 1994 increased
$58,182 (151.80%) from the comparable fiscal 1993
period. This increase is primarily as a result of
additional promotional advertising.
16
Results of Operations(continued)
Fiscal Year 1994 Compared with Fiscal Year
1993(continued)
General and administrative expenses for fiscal 1994
increased $101,418 (26.31%) from the comparable fiscal
1993 period primarily as a result of increased
administrative and management salaries.
Depreciation and amortization costs for fiscal 1994
increased $88,809 (32.93%) from the comparable fiscal
1993 period. The increase in depreciation and
amortization is a result of additions to fixed assets
of approximately $1,077,000 related to the two
additional cell sites built and put into operation in
fiscal 1994.
Interest income for fiscal 1994 decreased $3,438
(6.57%) from the comparable fiscal 1993 period.
Interest expense for fiscal 1994 increased $31,152
(9.71%) from the comparable fiscal 1993 period
primarily as a result of additional debt associated
with a private placement which raised $250,000 in
working capital which took place in the first quarter
of fiscal 1994.
Amortized discount and financing costs was $583,332 in
fiscal 1994 as compared to $-0- in fiscal 1993. In
connection with the private placement which commenced
on October 1, 1994, 1,250,000 warrants to purchase the
Company's common stock were issued. As a result,
additional paid-in capital was credited in the amount
of $1,166,667 of which $125,000 had been capitalized as
prepaid and deferred financing costs and $1,041,667 as
unamortized discount to be amortized over the life of
the loan.
Bad debt expense for fiscal 1994 increased $56,790
(73.55%) from the comparable fiscal 1993 period.
Litigation settlement expense was $-0- for fiscal 1994
as compared to $89,062 in fiscal 1993. In fiscal 1993,
the Company recorded a charge of $89,062 for 85,000
shares of the Company's common stock issued to six
individuals in connection with litigation associated
with the Company's brewery.
Liquidity and Capital Resources
Fiscal Year 1995
During fiscal 1995, the Company had net income of
approximately $651,000. Included in net income is
depreciation and amortization and allowance for bad
debts for an aggregate of approximately $1,155,000,
which are non cash expenses. After reflecting the net
change in assets and liabilities, net cash provided by
operations was approximately $1,122,000. Investing
activities included additions to properties of
approximately $1,174,000 and a loan to a related party
of approximately $1,129,000. Financing activities
provided net cash of
17
Liquidity and Capital Resources(continued)
Fiscal Year 1995 (continued)
approximately $1,555,000 which resulted from the
exercise of common stock purchase warrants of
approximately $203,000 and a $2,000,000 loan received
in connection with the sale of the System offset by the
repayment of borrowings of approximately $648,000.
Accordingly, during fiscal 1995, the Company's cash
increased by approximately $373,000.
Fiscal Year 1994
During fiscal 1994, the Company had a net loss of
approximately $34,000. Included in this net loss is
depreciation and amortization and allowance for bad
debts for an aggregate of approximately $1,076,000,
which are non cash expenses. After reflecting the net
change in assets and liabilities, net cash provided by
operations was approximately $904,000. Investing
activities included additions to properties of
approximately $1,077,000. Financing activities
provided net cash of approximately $275,000 which
resulted from additional borrowings of approximately
$305,000 offset by the repayment of borrowings of
approximately $31,000. Accordingly, during fiscal 1994,
the Company's cash increased by approximately $102,000.
Sale of Cellular Assets
On November 16, 1994, Resources announced that DCI had
retained an independent broker on an exclusive basis to
attempt to find a potential purchaser for DCI's
cellular system or a possible merger partner with DCI.
Management of the Company determined to seek a
purchaser because it believed that DCI's cellular
system had been developed to a point where it
represented an attractive acquisition for potential
acquirors in the cellular industry at a price, based on
current market conditions, substantially in excess of
DCI's costs in developing the system.
On May 8, 1995, the Company and DCI executed an Asset
Purchase Agreement (Subsequently amended on August 14,
1995 and December 14, 1995) with two unaffiliated
entities, PriCellular and PriCellular's wholly-owned
Northland subsidiary, providing for the sale to
Northland of the System operated by DCI in the AL-4
RSA. The System was substantially the Company's only
source of revenues. Immediately after completion of
the sale of the System, the Company had no significant
operations.
Public announcement of the execution of the Asset
Purchase Agreement was disseminated by the Company and
by PriCellular on May 8, 1995. On May 5, 1995, the
trading day immediately preceding the date of the
announcement, the high and low bid and asked prices
for the Company's Common stock as quoted in the
over-the-counter market were $1, $.75, $1.75
and $1.06,
18
Liquidity and Capital Resources(continued)
Sale of Cellular Assets(continued)
respectively and the high and low sales prices for
PriCellular Class A Common Stock as traded on the
American Stock Exchange were $10.16 and $9.85,
respectively.
In anticipation of the execution of the Asset Purchase
Agreement, PriCellular extended a $2,000,000 loan to
DCI on April 7, 1995. From the $2,000,000 of loan
proceeds, the Company (a) made a $1,417,598 loan to
Resort Club, an entity of which the Company's principal
stockholder is a creditor; (b) paid $250,000 to a
corporation owned by the Company's former president and
her husband in payment of bills rendered for previously
completed Cell Site and Tower construction for the
System; and (c) prepaid $125,000 of indebtedness owed
to an entity owned by members of the principal
stockholder's immediate family. The balance was
applied to legal and professional fees related to the
sale of the System.
The sale of the System was contingent upon obtaining
the consent of the FCC to the assignment by DCI 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 (which approval was obtained on November
6, 1995).
The Assets sold (subject to certain current liabilities
related to the System and being assumed by the
Purchaser) included 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
DCI's current assets.
The parties also agreed that effective August 1, 1995,
PriCellular would become the manager of the System
pursuant to a management agreement providing for a
management fee to be paid to PriCellular equal to 7% of
the gross revenues of the System during the term of the
management agreement. Through November 7, 1995, the
Company accrued $114,600 in connection with the
management agreement.
The original purchase price of the system was
$19,900,000 (after a $100,000 reduction for the amount by which
certain liabilities assumed by the purchaser at the closing
exceeded DCI's current assets) payable as follows: (a) $6,000,000 in
cash, payable at the Closing which occurred on November
7, 1995, (b) $3,900,000 in cash payable 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 (also
referred herein as the "PriCellular Note"). The
PriCellular Note was 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.
19
Liquidity and Capital Resources(continued)
Sale of Cellular Assets(continued)
At the closing, the initial $6,000,000 cash portion of
the purchase price was reduced to the extent required
to repay DCI's outstanding debt to Motorola
(approximately $2,864,000) incurred to finance
construction of the System, and to repay the 8%,
$2,000,000 loan extended to DCI by PriCellular on April
7, 1995 in anticipation of the execution of the Asset
Purchase Agreement. At the second closing, the
$4,000,000 cash portion of the purchase price was
decreased by $100,000, the amount by which assumed
current liabilities exceeded DCI's current assets. An
aggregate $400,000 of the $3,900,000 balance of the
purchase price was required to be held in escrow for a
one year period following the closing, to ensure the
accuracy of the Company's representations and
warranties.
Also at the closing, PriCellular elected to force
conversion of its five-year, 4%, $10,000,000
Convertible Subordinated Note to DCI into 1,175,088
shares of its Class A Common Stock. The high and low
sales prices for PriCellular Class A Common Stock, as
traded on The American Stock Exchange on November 7,
1995, were $13.125 and $12.75, respectively. As a
result, the Company recorded the 1,175,088 converted
shares of a value of $7,497,061 an amount which
reflects a 50% discount of the closing sales price of
PriCellular Class A Common Stock on November 7, 1995 of
$12.75. The Company recorded a 50% discount because of
the trading restrictions placed on the stock.
In connection with the second closing, the Company
entered into a second amendment to the Asset Purchase
Agreement dated December 14, 1995 whereby the Company
and PriCellular resolved certain disputes with respect
to the adjusted purchase price of the cellular
telephone system. As amended, the Company received
$3,500,000 at the second closing, with $400,000 balance
being held in escrow. As part of the second amendment,
the Company retained ownership of certain accounts
receivable deemed to be uncollectable as of August 1,
1995 in the aggregate principal amount of approximately
$124,000. In addition, the Company reserved the right
to the proceeds of any insurance claim arising from a
loss that took place in the month of August 1995.
Pursuant to a separate registration rights agreement,
PriCellular granted the holders of at least 50% of the
Class A Common Stock issuable or issued upon conversion
of the PriCellular Note, one "demand" right of
registration requiring PriCellular to register such
shares of Class A Common Stock for public offer and
sale under the Securities Act of 1933. The "demand"
registration right was exercisable after the earlier of
June 30, 1996 or the effective date of the first
registration statement for an underwritten public
offering of PriCellular securities. The registration
rights agreement also granted the holders of the
PriCellular Note or the underlying Class A Common
Stock certain
20
Liquidity and Capital Resources(continued)
Sale of Cellular Assets(continued)
"piggy-back" registration rights permitting it to have
such Class A Common Stock included in other
registration statements filed by PriCellular with
respect to a public offering of its securities at
PriCellular's expense, so as to permit public offer and
sale of such shares, subject to the right of any
underwriter of such public offering to limit the number
of shares so included.
On January 30, 1996, DCI entered into an agreement with
PriCellular whereby DCI agreed to sell to PriCellular
600,000 shares of its PriCellular Class A Common Stock
for $10.50 per share. The closing of this transaction
occurred on February 9, 1996. At the closing, DCI
entered into an agreement by which the demand registration
rights of the holders of the Company's PriCellular
registrable securities were waived.
Use of Proceeds from the System Sale
In addition to receipt of the PriCellular Class A
Common Stock, the Company received an aggregate of
approximately $9,900,000 (less closing costs and
associated expenses) in cash payments from PriCellular
at the initial closing and at the Second Payment Date
(of which $400,000 is being held in escrow for a one
year period as previously described).
The cash payments were applied substantially as
follows:
a) Repayment of Motorola debt and accrued interest
incurred to finance construction of the
System...................................$ 2,864,226
b) Repayment of PriCellular loan and accrued
interest.................................$ 2,040,000
c) Closing costs............................$ 747,955
d) Escrow account deposit...................$ 400,000
e) Amounts payable to the former president of the
Company to repurchase all of the shares of the
Company's common stock owned by the former
president, her son and her husband......$ 1,568,626*
Total: $ 7,620,807
==========
________________
* On February 29, 1996, Debra Evers-Tierney advised
the Company of her intention to review the Company's
determination of net "book value" as of November 7,
1995. In addition, the Company and the former
president are currently negotiating to determine the
proportion of the amount to be paid in cash and in
PriCellular Class A Stock.
21
Liquidity and Capital Resources(continued)
Use of Proceeds from the System Sale(continued)
With the exception of the above described payments to
the Company's president and members of her family, no
portion of the sale proceeds will be distributed
directly to the Company's shareholders.
Future Business Plans
The System was substantially the Company's only source
of revenues. Immediately after completion of the sale
of the System, the Company had no significant
operations. Although management had not determined with
any degree of specificity the allocation of the
Company's resources to future business activities,
management presently intends 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. Through January 31, 1996, the Company invested
$2,300,000 of the proceeds from the sale of the System in the
Resort Club, Inc. in the form of an additional loan on
terms substantially similar to the previous $1,417,598 loan
arrangement with the Resort Club (See Note 9 to
the Company's Consolidated Financial Statements) paid $1,025,000
to lease the Vernon Valley/Great Gorge Ski Area Rental
Shops and all fixtures located thereon as well as the
ski rental equipment from a wholly owned subsidiary of Great American,
an entity in which certain of the Company's officers and directors have
present and prior affiliations, loaned $269,500 to Great American,
assumed $750,000 of indebtedness of its principal stockholder,
repayable from Resort Club receivables and paid $1,600,000 to
purchase mortgages with a face value of approximately $3,000,000
from the Resolution Trust Company. See Note 11 to the Company's
Consolidated Financial Statements. On February 14, 1996, an
involuntary bankruptcy petition was filed against Great
American by three creditors in the United States
Bankruptcy Court, Newark, New Jersey. Management of
the Company believes that this filing will have no
material impact on its investments in Great American or
entities affiliated with Great American or the Resort Club
for the reason that Praedium Phoenix, L.L.C., Great American's
primary lender, has agreed to grant a nondisturbance to Great
American for the benefit of the Resort Club and its members
which secures the viability of the Resort Club and provides an
additional source of revenues to Great American and otherwise
prevents the impairment of the collateral. The Company
may also seek to pursue real estate development
activities on its "Silver Shield" Mill property in
Colorado. Despite the foregoing, management reserves
the right to apply the Company's assets in other
businesses as opportunities present themselves.
Item 7. Financial Statements
Financial statements are attached hereto.
Item 8. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None.
22
PART III
Item 9. Directors and Executive Officers,
Promoters and Control Persons, Compliance with
Section 16(a) of the Exchange Act
The directors and executive officers of the Company are
as follows:
<TABLE>
<S> <C> <C> <C>
Name Age Principal Occupation Director
Since
Gene W. Mulvihill* 61 Director; Chief
Executive Officer 1981
William E. McManus II* 40 President and
Director 1995
Joseph R. Bellantoni* 33 Treasurer; Chief
Financial Officer
and Director 1995
Paul J. Donahue 62 Director 1995
</TABLE>
___________
(*) Member of the Executive Committee. The
Executive Committee is responsible for oversight with
respect to executive decisions.
Gene W. Mulvihill became CEO of Dominion
Resources on November 7, 1995. Gene W. Mulvihill is a
private investor, involved in venture capital, golf
course and real estate development. Mr. Mulvihill was
one of the founders, in 1983, of American Cellular
Network Corporation (Amcell), a public owner and
operator of cellular telephone systems in the Northeast
corridor between New York City and Washington D.C., and
was active in assisting in the development and
financing of Amcell until its acquisition in 1987. Mr.
Mulvihill was founder, Chairman of the Board and the
major stockholder of Ribi ImmunoChem Research, Inc.
involved in the biotechnology industry from 1981 to
1985. Mr. Mulvihill was founder of NMR of America,
Inc., a public company involved in magnetic resonance
imaging and was a primary shareholder from 1985 to
1986. Mr. Mulvihill was Chairman of the Board of Great
American and a principal stockholder from 1981 to
January 1991 and a Director from 1991 to 1994.
Great American is involved in the recreation industry.
23
Item 9. Directors and Executive Officers,
Promoters and Control Persons, Compliance with
Section 16(a) of the Exchange Act(continued)
Mr. McManus became a Director of the Company in April
1995 and was elected President in November 1995. He
has been employed in the private practice of law for
more than the past five years.
Mr. Bellantoni has been a Director and Treasurer of the
Company since April 1995. He is also employed by Great
American. He has been employed by Great American since
February 1989, where he became Vice President of
Administration in 1993 and Chief Financial Officer in
June 1994. On February 14, 1996, an involuntary
bankruptcy petition was filed against Great American by
three creditors in the United States Bankruptcy Court,
Newark, New Jersey. From May 1987 to February 1989, he
was employed by Jaymont Properties, Inc., an owner,
developer, and manager of commercial real estate as a
Project Analyst. Prior to working with Jaymont, Mr.
Bellantoni was employed by KPMG Peat Marwick from
November 1983 through May 1987.
Mr. Donahue is currently employed by Crystal Springs
Golf Club as a Pro Shop Manager. Prior to working at
Crystal Springs, Mr. Donahue was employed as a Bank
Examiner with the State of Florida in 1994 and from
1990 through 1993, he was employed by Midlantic Bank as
a Vice President.
No Director is a director of any other company with a
class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934 or subject to
the requirements of Section 15(d) of that Act or any
company registered as an investment company under the
Investment Company Act of 1940 with the exception of
Joseph R. Bellantoni who is also a director of Great
American.
Compliance with Section 16(a) of the Exchange Act
Based solely on a review of Forms 3 and 4 and any
amendments thereto furnished to the Company pursuant to
Rule 16a-3(e) under the Securities Exchange Act of
1934, or representations that no Forms 5 were required,
the Company believes that with respect to fiscal 1995,
all Section 16(a) filing requirements applicable to its
officers, directors and beneficial owners of more than
10% of its equity securities were timely complied with
in fiscal 1995.
24
Item 10. Executive Compensation
The following table sets forth all cash compensation
paid or accrued by the Company during the three years
ended September 30, 1995 to its Chief Executive
Officer. No other executive officer received
compensation in excess of $100,000 in any such fiscal
year. The Company's group life, health and
hospitalization plans do not discriminate in favor of
the executive officers and directors of the Company and
are generally available to all salaried employees.
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term
Annual Compensation Compensation
Name and Fiscal Other Options Restricted LTIP All
Principal Year Salary Bonus Annual SARs Stock Payouts Other
Position Compensation Awards Compensation
Debra
Evers-Tierney 1995 $112,333 $ -0- $ -0- -0- -0- $-0- $-0-
Debra
Evers-Tierney 1994 $108,849 $82,837(1) $ -0- 25,000 -0- $-0- $-0-
Debra
Evers-Tierney 1993 $106,090 $ -0- $ -0- 25,000 -0- $-0- $-0-
President and
Chief Executive
Officer
</TABLE>
___________
(1) On June 26, 1994, the Board of Directors in
consideration for the operating results achieved by DCI
in fiscal 1992 and 1993 which it determined was largely
due to the efforts of Ms. Evers-Tierney, authorized the
payment to Ms. Tierney of a bonus of $40,608 with
respect to fiscal 1992 and a bonus of $42,229 with
respect to fiscal 1993, or an aggregate bonus of
$82,837. The bonus, payable in January 1995, was based
on a percentage of the improvement in DCI's operating
results for the particular fiscal year as contrasted
with the previously forecasted operating results for
such periods.
25
Item 10. Executive Compensation(continued)
Employment Agreement
On February 25, 1991, the board of directors approved
an employment agreement with Debra Evers-Tierney,
effective retroactively to October 1, 1990, employing
Ms. Evers-Tierney as president, chief executive and
chief financial officer of the Company through
September 30, 1995, at an annual salary of $100,000
subject to annual percentage increases based upon
percentage increases in the Consumer Price Index. Ms.
Evers-Tierney agreed to devote not less than 90% of her
working time to the business of the Company and on or
before June 30, 1991, to transfer her principal
residence to Alabama in order to supervise development
of the Company's Bibb County, Alabama cellular
telephone business (at which time she agreed to devote
all of her working time to the business of the
Company). In the event of termination due to a Change
in Control of the Company, Ms. Evers-Tierney was
entitled to be paid a Severance Payment equal to 2.99
times her average annual salary during the preceding
five years (or such shorter period during which she was
employed by the Company). Ms. Evers-Tierney
subsequently transferred her principal residence to
Alabama and through November 7, 1995 devoted all of her
working time to the business of the Company. In June
1994, the board of directors in consideration for the
operating results achieved by DCI through fiscal 1993,
authorized the payment of a bonus to Ms. Evers-Tierney
of $82,637 payable January 1995.
In lieu of the severance payment described above and in
appreciation for her services in developing the System,
the Board of Directors agreed in principle with Ms.
Evers-Tierney that upon consummation of the sale of
the System (See Item 1 herein and Note 10 of the Notes
to the Consolidated Financial Statements), the Company
will repurchase all of the shares of the Company's
Common Stock owned by Ms. Evers-Tierney, her son and
her husband, at a price equal to the "book value" of
such shares computed as of the first business day after
the closing. The determination of "book value" was
made by the Company's auditors and was computed on an
accrual basis giving effect to the sale and the
expenses and taxes to be incurred in connection with
the sale, but without deducting any severance payment
obligations to Ms. Evers-Tierney (which was waived) or
the stock repurchase obligation to Ms. Evers-Tierney
and her family. Pro rata payments will be made to Ms.
Evers-Tierney and her family when received by the
Company. The calculation was $1.66 per share or
approximately $1,568,600 in the aggregate to be paid to
the Tierney family in consideration for their 943,411
shares of the Company's Common Stock. On February 29,
1996, Debra Evers-Tierney advised the Company of her
intention to review the Company's determination of net
"book value" as of November 7, 1995. In addition, the
Company and the former president are currently
negotiating to determine the proportion of the amount
to be paid in cash and in PriCellular Class A Stock.
26
Item 10. Executive Compensation(continued)
Stock Options
In her previous employment agreement effective December
18, 1989, the Company agreed to grant Ms. Evers-Tierney
five year options to purchase 125,000 shares of its
Common Stock at an exercise price of $.75 per share,
exercisable in annual increments of 25,000 shares on
September 30 of each year commencing September 30, 1990
provided that at the time of any exercise, her
employment contract was in full force and effect. Ms.
Evers-Tierney paid the Company the $18,750 exercise
price for the first 25,000 shares in fiscal year 1990.
On February 1, 1995, Ms. Evers-Tierney purchased her
remaining 100,000 shares at an exercise price of
$75,000.
Options Granted in Fiscal 1995
No options were granted during fiscal 1995.
27
Item 11. Security Ownership of Certain
Beneficial Owners and Management
The following table sets forth, as of January 31, 1996,
information with respect to each person (including any
"group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) who is known to the
Company to be the beneficial owner of more than five
percent of Resources' Common Stock as well as the
number of shares of Common Stock beneficially owned by
all Directors of Resources and all Directors and
officers of Resources as a group. The percentages have
been calculated on the basis of treating as outstanding
for a particular holder, all shares of Resources'
Common Stock outstanding on said date and all shares
issuable to such holder in the event of exercise of
outstanding options owned by such holder at said date.
Name of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
Directors:
Gene W. Mulvihill 2,416,300 shares 41.9%
Direct(1)
William E. McManus II -0- -0-
Joseph R. Bellantoni -0- -0-
Paul J. Donahue -0- -0-
All Officers and 2,416,300 shares 41.9%
Directors as a Group Direct(1)
(four persons)
Non-Directors:
Debra Evers-Tierney 478,100 shares 8.9%
107 Grand Pointe Drive Direct(2)
Clanton, Alabama 35045
Michael L. Tierney 465,311 shares 8.7%
107 Grand Pointe Drive Direct(3)
Clanton, Alabama 35045
____________
(1) Includes 625,000 shares owned by Blue Horizon
Corporation as well as 400,000 shares issuable upon
exercise of outstanding Warrants. Blue Horizon
Corporation is owned by members of Mr. Mulvihill's
immediate family.
(2) Includes 75,000 shares owned by Ms.
Evers-Tierney's son but does not include 465,311 shares
owned directly by Ms. Evers-Tierney's husband, Michael
L. Tierney. Ms. Evers-Tierney disclaims beneficial
ownership of the shares owned by her husband. See Item
12 herein.
(3) Michael L. Tierney is the husband of Debra
Evers-Tierney a former Director and Principal Executive
Officer of the Company who disclaims beneficial
ownership of such shares. See Item 12 herein.
28
Item 12. Certain Relationships and Related
Transactions
The Company has engaged in various transactions since
October 1, 1994 with certain of its officers, directors
and principal stockholders and certain of their
affiliated entities.
As set forth in Item 9 herein, Gene W. Mulvihill was a
Director (as well as a former principal stockholder) of
Great American.
On December 16, 1994, Blue Horizon Corporation, a
Corporation owned by members of Mr. Mulvihill's
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 former 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.
In addition, on February 1, 1995, Ms. Evers-Tierney
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 DCI on April 7, 1995 in anticipation of
the execution of the Asset Purchase Agreement(See Item
1 herein and Note 10 of the Notes to the Consolidated
Financial Statements), an aggregate $1,417,598 of the
loan proceeds were applied by the Company to the
extension of a loan to the 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 Great Gorge 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 "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.
29
Item 12. Certain Relationships and Related
Transactions
(continued)
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.
On October 16, 1995, the Company entered into a second loan
agreement with the Resort Club whereby the Company provided a
loan facility of $2,300,000 on terms substantially similar to the
previous loan agreement with the Resort Club (See Note 9). The
loan is due and payable to the Company on October 16, 1996.
On November 27, 1995, the Company borrowed $1 million from
Donaldson, Lufkin & Jenrette ("DLJ"). The terms of the loan
require that the Company pay a rate of interest equal to the
broker's rate as established by DLJ from time to time. The loan
is due and payable on demand and is collateralized with 300,000
shares of the Company's PriCellullar Class A Common Stock. The
proceeds of the loan were utilized as part of the advance to the
Resort Club described above.
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
former director and former principal stockholder of
Great American and his daughter is a director and chief
operating officer of such corporation. Joseph R.
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 principal amount of
indebtedness of approximately $17,000,000. Gene W.
Mulvihill was a guarantor of repayment of approximately
$5,000,000 of this indebtedness. As of September 30,
1995, the Company owned 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
principal amount of indebtedness of approximately
$14,900,000. (William E. McManus, II, President and a
director of the Company, is president of MAFC).
In June 1995, First Fidelity commenced an action (The
"Guaranty Action") in the Superior Court of New Jersey,
Law Division, Morris County, against Great American,
substantially all of its subsidiaries, Princeton and
its subsidiaries and others including Mr. Mulvihill,
seeking to recover judgments against the defendants
on the indebtedness and on the guarantees of the
indebtedness owing to First Fidelity. The
Foreclosure Action and the Guaranty Action are
collectively referred to as the "Litigation".
30
Item 12. Certain Relationships and Related
Transactions (continued)
Pursuant to an option agreement entered into with First
Fidelity on September 13, 1995, on October 27, 1995,
First Fidelity assigned to Noramco (NJ), Inc.
("Noramco") its interest in First Fidelity's loans to
Great American, the related loan documents, the related
liens and security interest, its interest in
participations in the loan, and the Litigation. Herein
such assets as were assigned by First Fidelity to
Noramco are referred to as the "Indebtedness". Also on
October 27, 1995, Noramco assigned its interest in the
Indebtedness to Praedium Phoenix, L.L.C. ("Praedium").
At the time the transaction was competed, neither
Noramco nor Praedium were affiliated with either Great
American or its officers or directors.
Also on October 27, 1995, Great American entered into
agreements with Praedium to amend the terms of the
Indebtedness so as to provide, among other things, that
the principal thereof is due and payable on January 26,
1996, and that interest is payable monthly at the rate
of 11% per annum prior to any default on the
Indebtedness and after default at the rate of 18% per
annum.
As part of the transaction, Great American released
First Fidelity from any claims and agreed to indemnify
First Fidelity against claims asserts against it.
Great American entered into a settlement agreement (the
"Settlement") relating to the Litigation whereby Great
American agreed that, in the event of a default under
the Indebtedness, a judgment could be entered against it
in both the Foreclosure Action and the Guaranty Action
in the amount of $19,683,328.
Accordingly, in the event Great American defaults in
payment of the principal or accrued interest on the
Indebtedness, or otherwise defaults in its obligations
under the terms of the Indebtedness, Praedium would be
able, under the terms of the Settlement, to enter a
judgment against Great American in the Foreclosure
Action and the Guaranty Action and promptly seek a
foreclosure sale of Great American's properties
securing the loan which could result in a change in
ownership of substantially all of Great American's
assets without any assumption of Great American's
liabilities.
Also on October 27, 1995, Praedium entered into an
agreement with Skival Enterprises, Inc. ("Skival"), a
non-affiliated entity, pursuant to which Praedium
granted Skival an option exercisble through the earlier
of fifteen months from the date of the option agreement
or the day before a Sheriff's Sale of the property is
to be held, to purchase all of the Indebtedness.
The lands which are the subject of the Praedium
foreclosure suit against Great American include certain
lands upon which certain amenities provided by the
Resort Club to its members are located.
31
Item 12. Certain Relationships and Related
Transactions (continued)
Consequently, in the event Praedium enters into a
foreclosure sale 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 Praedium in connection
with the issuance by Praedium of "Non Disturbances" to
Great American which will provide access to amenities
of Great American to individuals (thereby assuring the
ability of the Resort Club to fulfill its obligations
to its members), no assurances can be given that the
Non Disturbances will be issued.
As of September 30, 1995, $398,130 was prepaid to the
Company against the outstanding loan balance due from
the Resort Club.
On December 1, 1995, the Company entered into a lease agreement
with Vernon Valley Recreation Association, Inc. ("Vernon
Valley"), a wholly-owned subsidiary of Great American. The lease
term commences on December 15, 1995 and expires on March 15,
1996. Pursuant to the lease, the Company has leased the Vernon
Valley/Great Gorge Ski Area Rental Shops and all fixtures located
thereon as well as the ski rental equipment. In consideration
for this lease, the Company has agreed to: 1) pay a base rent of
$950,000; 2) pay additional rent of $75,000 which represents an
unallocated payment for services provided by Vernon Valley
including but not limited to security, maintenance of the leased
premises, and general administrative services; and 3) pay a
percentage of gross revenue equal to 50% of gross revenue in
excess of $1,000,000. The Lease provides for a cap limitation
equal to a 28% rate of return to the Company. Proceeds received
in excess of a 28% rate of return are required to be remitted to
Vernon Valley. The Lease also provides the Company for the
absolute right of renewal for an additional three consecutive
December 15 - March 15 lease terms. Through February 29, 1996,
the Company received net proceeds of approximately $843,000 on
this transaction.
The Company entered into a capital lease for two Piston Bullys
with Bombardier Capital, Inc. ("Bombardier") commencing January
1, 1996 for a term of 18 months ending September 1, 1997. Piston
Bullys are snow grooming machines used for grooming ski trails.
The lease provides for 11 payments with aggregate rental payments
of $165,703.60 and has a $1.00 purchase option at the end of the
lease term. Concurrent with entering into the lease agreement
with Bombardier, the Company entered into a sublease agreement
with Vernon Valley on similar terms with the Company's lease
agreement with Bombardier except that the rental payment has been
adjusted to reflect a rate of return to the Company of 28%. In
connection with the lease agreement, Bombardier filed financing
statements to protect its security interest. In addition, the
Company issued 10,000 shares of its PriCellular Class A Common
Stock as additional collateral.
On January 26, 1996, the Company entered into a loan agreement
and advanced $269,500 to Great American. The agreement provides
that Great American will pay the insurance proceeds it receives
as a result of flooding that occurred on January 12, and 13, 1996
at one of its ski lodges to the extent of $269,500 with interest
at 9%. As further consideration, the Company and Vernon Valley
have amended the ski rental shop lease to provide that prior to
any "additional rent" being paid to Vernon Valley pursuant to the
lease agreement funds will be paid to the Company until the
principal amount of the loan is fully paid with accrued interest.
On February 27, 1996, the Company received a partial payment of
$150,000 on this loan.
On November 10, 1996, the Company entered into an assumption
agreement with Mr. Gene Mulvihill whereby the Company assumed
indebtedness of $750,000 previously advanced to Mr. Mulvihill
by his two partners in St. Marks Associates, the Company's
current landlord, on or about May 19, 1995 in consideration for
the Company's receiving the same principal amount of the Resort
Club receivables which was incorporated into the second loan
agreement with the Resort Club described above. The loan was
paid in full on February 15, 1996 together with interest at
15%.
Subsequent to the sale of the cellular telephone system, the
Company transferred its executive offices to 355 Madison Avenue,
Morristown, New Jersey. In connection with this move, the Company
entered into a lease agreement with St. Marks Associates, a real
estate partnership owned 50% by Mr. Gene Mulvihill. The lease
provides for a lease term of 5 years commencing December 1, 1995
with a base rent of $2,764.58 per month and a monthly payment of
$774.08 for the Company's proportionate share of impositions and
operating expenses. The lease provides for rental adjustments
for changes in the Consumer Price Index.
As Chairman of the Company's Executive Committee, Gene
W. Mulvihill was active in negotiating the 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.
At July 24, 1992, Great American and a subsidiary were
indebted to the Company for prior loans, in the
aggregate amount of approximately $680,000. At such
date, the Company agreed to reduce the amount of the
indebtedness to $600,000 in return for a $600,000
secured position in a junior participation hereinafter
described held by a third party, MAFC.
MAFC held a second junior participation in a loan
agreement between Great American and First Fidelity.
MAFC's second junior participation was limited to
receiving a pro rata share of the interest paid by
Great American to First Fidelity under a secured
promissory note (the "Term Note") until First Fidelity
and a prior participant had received full payment on
the indebtedness totaling approximately $11,750,000
owed to them. The Term Note was secured by a lien on
Great American's assets. At July 24, 1992, the total
principal indebtedness owed on the Term Note was
$14,450,000 with approximately $1,400,000 of such
amount owed to MAFC. Interest on the Term Note was
payable monthly at an annual rate equal to 2-1/2% above
First Fidelity's prime rate. By virtue of its
agreement to reduce the indebtedness owed to it to
$600,000 for a participation in MAFC's position, the
Company became entitled to 6/14ths of each monthly
interest payment received by MAFC subsequent to July 24
1992. The Company had filed a financing statement and
held a secured position in the payments made to MAFC
under the Term Note.
32
Item 12. Certain Relationships and Related
Transactions (continued)
In October 1995, Noramco and Skival entered into an
agreement with MAFC whereby MAFC agreed to accept
88.24% or $1,235,360 of the $1,400,000 second junior participation in
the Great American indebtedness. Thereafter, MAFC
agreed to accept approximately 50% of the amount due
and owing in cash and the balance in the form of a note
from Noramco in consideration of MAFC receiving a
secured position in Skival's option agreement with
Praedium. Accordingly, the Company adjusted its
carrying value of the MAFC investment to $529,440 as of
September 30, 1995. The Company accepted a discount on
its participation in consideration for being immediately
repaid from the cash payment made by Noramco. The proceeds
were utilized as a downpayment on nine condominiums from
a company owned 50% by Mr. Mulvihill for an aggregate
purchase price of $815,000, an amount which approximates
fair market value. The balance of $285,560 will be paid
upon closing of title.
On February 14, 1996, an involuntary bankruptcy
petition was filed against Great American by three
creditors in the United States Bankruptcy Court,
Newark, New Jersey. Management of the Company believes
that this filing will have no material impact on its
investments in Great American or entities affiliated
with Great American or the Resort Club for the reason that
Praedium, Great American's primary lender, has agreed to
grant a nondisturbance to Great American for the benefit
of the Resort Club and its members which secures the
viability of the Resort Club and provides an additional
source of revenues to Great American and otherwise
prevents the impairment of the collateral.
In order to alleviate the pressures created by its
working capital shortages, the Board of Directors
authorized and the Company, effective October 1, 1993,
consummated a private placement raising $250,000 in
working capital through the sale to a limited number of
investors of an aggregate $250,000 principal amount in
two-year 5% promissory notes (the "Notes") and warrants
(the "Warrants") exercisable to purchase an aggregate
1,250,000 shares of Resources' Common Stock. The
Warrants are exercisable during the five-year period
ending October 1, 1998 at a per share exercise price
equal to the lesser of (i) $2.50 or (ii) one-half of
the lowest reported bid price for the Common Stock in
the over-the-counter market on any date commencing on
the date of issuance until the close of business on the
date immediately preceding the date of exercise of the
Warrant. Blue Horizon, which purchased $125,000 in
principal amount of the Notes and Warrants to purchase
625,000 shares in the private placement, is an
investment vehicle wholly owned by members of the
immediate family of Gene W. Mulvihill, the chief
executive officer, director and a principal stockholder
of the Company. Mr. Mulvihill is also the chief
executive officer and a director of Blue Horizon. On
October 1, 1993, the high bid price for Resources'
Common Stock in the over-the-counter market was $5.00
per share. On December 16, 1994, Blue Horizon
exercised its Warrants and purchased 625,000 shares of
Common Stock for $78,125.
The bulk of the construction for DCI's Cell Site and
Tower Locations at Centerville and Jemison, Alabama was
conducted by Lyncor, a corporation 50% owned by Debra
Evers-Tierney, former president and chief executive
officer of both Resources and DCI
33
Item 12. Certain Relationships and Related
Transactions (continued)
with the other 50% owned by her husband, Michael L.
Tierney. DCI purchased these two Cell Site and Tower
Locations from Motorola which charged DCI $686,193 for
same under the Financing Agreement between Motorola and
DCI. Lyncor was also paid $307,158 for its services
and costs in such construction directly by Motorola.
After negotiations, the Company, effective October 1,
1993, issued Warrants to Michael L. Tierney exercisable
to purchase an aggregate 400,000 shares of Resources'
Common Stock as compensation for the savings realized
by DCI attributable to Lyncor's construction of these
two locations compared to anticipated construction
costs by third parties.
The Warrants issued to Michael L. Tierney are identical
to the Warrants issued in the private placement
described above. The Company's Board of Directors
valued these Warrants at $.10 per Warrant. See Item 1
herein as to the services rendered during fiscal 1995
by Lyncor in performing the civil work and constructing
the buildings and the Towers at Verbena, Ft. Deposit
and Maplesville, Alabama. To date, Lyncor has billed
the Company $1,908,459 for its services in constructing
the Company's former Cell Sites and Towers. The prices
charged by Lyncor for this construction were in each
instance substantially below the prices submitted by
Motorola in its bid to perform this construction for
the Company.
The Company was indebted to Mr. Mulvihill in
consideration for the payment by Mr. Mulvihill in June
1993 of the balance of the Summit Trust Bank Loan
incurred by the Company in June 1990 in connection with
its purchase of the brewery assets. On December 16,
1994, after payment to him of $34,000 in reduction of
the loan, Mr. Mulvihill applied $78,125 of this
indebtedness to the purchase of 625,000 shares of
Common Stock upon exercise of a Warrant held by an
affiliated corporation, and extended the due date of
the approximately $73,900 balance to June 14, 1995 when
it was payable with interest at the rate of 6% per
annum. The loan was repaid with accrued interest on
January 16, 1995.
See Item 1 and this Item 12 herein as to payments made
to Lyncor, a corporation owned by Debra Evers-Tierney
and her husband for services performed in connection
with construction of the Company's cell site and tower
locations.
Parent of the Company
Gene W. Mulvihill, the Chief Executive Officer and a
Director of the Company and beneficial owner of 40.5%
of the outstanding Common Stock may be deemed the
"parent" or controlling person of the Company as that
term is defined in the Regulations promulgated under
the Securities Act of 1933.
34
PART IV
Item 13. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
Page
(a) (1) Financial Statements.
Independent Auditors' Report S-1
Consolidated Balance Sheet -
September 30, 1995 S-2-3
Consolidated Statements of
Operations - years ended
September 30, 1995 and 1994 S-4
Consolidated Statements of Stockholders'
Equity - years ended September 30, 1995
and 1994 S-5
Consolidated Statements of Cash
Flows - years ended September 30, 1995
and 1994 S-6
Notes to Consolidated Financial
Statements S-7-29
(2) Financial Statement Exhibits - None
(b) Reports on Form 8-K. The Company did not file
any reports on Form 8-K during the quarter ended
September 30, 1995.
(c) Exhibits:
3(a) Certificate of Incorporation of
Registrant and Amendment No. 1 thereto(1)
(b) Certificate of Amendment dated June
24, 1992 to Certificate of Incorporation reducing the
authorized shares of Common Stock to 25,000,000,
increasing the par value to $.01 per share and
effecting a one-for-four reverse stock split(2)
(c) By-laws of Registrant(1)
4(d) Specimen Common Stock Certificate,
$.01 par value(2)
10(h) Consulting Agreement and First
Amendment to the Consulting Agreement dated November
11, 1989 between the Registrant and Gene W.
Mulvihill(3)
10(i) Employment Agreement dated as of
October 1, 1990 between the Registrant and Debra
Evers-Tierney(4)
10(j) Contract for Sale of Vernon Valley
Brewery Incorporated dated March 21, 1990 (but effected
in June, 1990) between Empire State Brewing Company
Inc. as Buyer and the Stockholders of the Brewery
including the Registrant as Sellers including $400,000
Promissory Note issued by the Buyer to the
Registrant(4)
10(k) Cellular System Purchase Agreement
dated as of June 28, 1991 between Resources and
Motorola and assignment by Resources on September 3,
1991 to DCI(5)
35
PART IV
Item 13. Exhibits, Financial Statement Schedules
and Reports on Form 8-K (continued)
(c) Exhibits:
10(l) Cellular System Financing
Agreement dated June 27, 1991 between DCI and
Motorola(5)
10(m) Building Lease as of September 1,
1991 between Resources and DCI as amended effective
September 1, 1992(2)
10(n) Cell Site and Tower Lease as of
September 1, 1991 between Resources and DCI as amended
effective September 1, 1992(2)
10(o) Form of 5% Promissory Note and
Warrant sold in the Registrant's October 1993 private
placement
____________
(1) Filed as an exhibit to the Registration Statement
on Form S-1 (File No. 2-66471) of the Registrant and
incorporated herein by reference.
(2) Filed as an exhibit to the Registrant's annual
report on Form 10-KSB for the year ended September 30,
1992 and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's annual
report on Form 10-K for the year ended September 30,
1989 and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant's annual
report on Form 10-K for the year ended September 30,
1990 and incorporated herein by reference.
(5) Filed as an exhibit to the Registrant's current
report on Form 8-K for October 9, 1991 and incorporated
herein by reference.
22 Subsidiaries of Registrant:
The Registrant's only significant subsidiary is
Dominion Cellular, Inc. ("DCI"), a New Jersey
corporation wholly owned by the Registrant.
(d) Financial statements omitted from annual
report to shareholders filed herewith - None.
36
Signatures
Pursuant to the requirements of Section 13 or 15(d) of
the Securities and Exchange 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: March 6, 1996 By:/s/ Gene Mulvihill
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the Registrant
and in the capacities and on the date indicated.
Signature Title Date
/s/ Gene Mulvihill Chief Executive
Officer and
Director March 6, 1996
Gene Mulvihill
/s/ William E. McManus II
William E. McManus II President and
Director March 6, 1996
/s/ Joseph R. Bellantoni
Joseph R. Bellantoni Treasurer;
Chief Financial
Officer and
Director March 6, 1996
/s/Paul J. Donahue Director March 6, 1996
Paul J. Donahue
37
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 10-KSB FOR PERIOD
ENDING 9/30/95 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 666,697
<SECURITIES> 0
<RECEIVABLES> 941,850
<ALLOWANCES> 133,070
<INVENTORY> 43,535
<CURRENT-ASSETS> 3,106,948
<PP&E> 5,582,729
<DEPRECIATION> 1,147,312
<TOTAL-ASSETS> 8,264,465
<CURRENT-LIABILITIES> 5,904,454
<BONDS> 0
<COMMON> 55,590
0
0
<OTHER-SE> 2,166,332
<TOTAL-LIABILITY-AND-EQUITY> 8,264,465
<SALES> 4,915,226
<TOTAL-REVENUES> 4,915,226
<CGS> 2,098,234
<TOTAL-COSTS> 3,341,424
<OTHER-EXPENSES> 583,798
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 489,138
<INCOME-PRETAX> 651,476
<INCOME-TAX> 0
<INCOME-CONTINUING> 651,476
<DISCONTINUED> 0
<EXTRAORDINARY> 651,476
<CHANGES> 0
<NET-INCOME> 651,476
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
