SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-10176
DOMINION RESOURCES, INC
(Exact name of registrant as specified in its charter)
Delaware 22-2306487
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
355 Madison Avenue, Morristown, NJ 07960
(Address of principal executive offices)
(Zip Code)
(973) 538-4177
(Registrant's telephone number, including area code)
NONE
(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) or the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable
date.
Class Outstanding at August 1, 1999
Common Stock, $0.01 par value 7,630,576
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED DECEMBER 31, 1998
FINANCIAL INFORMATION
PART I
Part I
Item 1. Financial Statements
The attached unaudited financial statements of Dominion Resources,
Inc. and its wholly owned subsidiaries (the "Company") reflect
all adjustments which are, in the opinion of management, necessary
to present a fair statement of the operating results for the
interim period presented.
Condensed consolidated balance sheets 1-2
Condensed consolidated statements of operations 3
Condensed consolidated statements of cash flows 4-5
Notes to condensed consolidated financial statements 6-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II
OTHER INFORMATION
Part II
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
December 31, September 30,
1998 1998
(Unaudited) (See note below)
Current assets:
Cash and cash equivalents $ 670,511 $ 628,159
Membership receivables, net (including
allowance for doubtful accounts of $448,382
at December 31, 1998 and $393,423 at
September 30, 1998 1,148,833 1,254,793
Prepaid expenses and other assets 356,693 336,060
Investment in mutual fund and other
marketable securities 115,252 115,242
Accrued interest and other receivables 1,376,548 933,292
Deferred membership interests
held for sale 8,017,845 8,381,774
Total current assets 11,685,682 11,649,320
Property, equipment, furniture and fixtures, net
of accumulated depreciation and amortization of
$169,741at December 31, 1998 and $160,494 at
September 30, 1998 252,750 201,755
Other assets:
Membership receivables, net (including
allowance for doubtful accounts of $1,686,770
at December 31, 1998 and $1,480,021 at
September 30, 1998 4,321,805 4,720,415
RTC mortgages 155,791 155,791
Note receivable - Stonehill Recreation
(Note 3) 2,262,112 1,689,573
Note receivable and accrued interest-
RiceX, Inc. 1,624,475 1,602,639
Investment in RiceX, Inc. 813,396 -0-
Real estate and real estate related
activities 557,027 560,000
Total other assets 9,734,606 8,728,418
Total assets $ 21,673,038 $ 20,579,493
</TABLE>
Note: The balance sheet at September 30, 1998, has been taken from the audited
financial statements at that date and condensed.
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
December 31, September 30,
1998 1998
(Unaudited) (See note below)
Current Liabilities:
Secured debt, current portion $ 808,129 $ 800,615
Unsecured notes payable, current portion 1,680,057 1,680,000
Accounts payable and accrued liabilities 5,038,501 4,796,550
Deferred membership revenue 11,595,385 11,658,639
Total current liabilities 19,122,072 18,935,804
Long-term liabilities:
Secured debt, net of current maturities 2,886,856 3,100,381
Unsecured notes payable, net of current
maturities 9,736,185 8,434,327
12,623,041 11,534,708
Redeemable common stock; par value $0.01
per share 458,333 and 483,333 shares outstanding
at December 31, 1998 and September 30, 1998;
redeemable at $3.00 per share in July 1998
through July 2000 1,375,000 1,450,000
Stockholders' equity:
Common stock, $0.01 par value; Authorized -
25,000,000 Shares; issued and outstanding -
7,280,576 shares at December 31, 1998 and
5,058,354 shares at September 30, 1998 72,806 50,584
Additional paid-in-capital 5,647,984 5,270,206
Accumulated deficit (15,766,952) (15,260,896)
Less: 1,350,646 shares held in treasury
at December 31, 1998 and September 30, 1998 (1,400,913) (1,400,913)
Total stockholders' equity (11,447,075) (11,341,019)
Total liabilities and stockholders' equity $ 21,673,038 $ 20,579,493
</TABLE>
Note: The balance sheet at September 30, 1998, has been taken from the audited
financial statements at that date and condensed.
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Revenues:
Membership revenue $ -0- $ -0-
Membership annual fee revenue 70,213 75,368
Other revenue 24,031 40,056
Total revenues 94,244 115,424
Expenses:
Other operations 19,094 74,955
Membership operations 289,518 135,957
Membership maintenance 191,242 80,392
Marketing and selling 115,643 220,862
General and administrative expenses 178,967 146,581
Depreciation and amortization 3,674 3,251
Total expenses 798,138 661,998
Income (loss) from operations (703,894) (546,574)
Other income (expenses):
Interest income 142,067 76,408
Financing fee income 531,714 -0-
Interest expense (467,642) (476,407)
Amortization of deferred financing costs (14,931) (72,915)
Gain on sale of marketable securities -0- 882,635
Gain on sale of real estate and RTC mortgages 6,630 40,123
Great American Settlement -0- (12,426,510)
Total other income (expenses) 197,838 (11,976,666)
Income (loss) before income taxes (506,056) (12,523,240)
Income taxes -0- -0-
Net income (loss) $ (506,056) $(12,523,240)
Net income (loss) per common share $ (0.10) $ (2.43)
Weighted average number of share used
in computing net income per share 5,130,818 5,158,354
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Cash flows provided by (used in) operating activities:
Net Income (loss) $ (506,056) $ (12,523,240)
Adjustments to reconcile net income to net cash provided
by continuing operating activities:
Depreciation and amortization 3,674 17,709
Amortization of interest income (21,836) (21,836)
Amortization of interest expense 337,734 337,734
Amortization of deferred financing costs 14,931 72,915
Financing fee income (RiceX) (531,714) -0-
Gain of sale of marketable securities -0- (882,635)
Great American Settlement -0- 12,426,510
Changes in assets and liabilities:
Membership receivables 504,570 (115,754)
Accrued interest receivable and other
Receivables (443,256) (189,898)
Prepaid expenses and other assets (35,562) 116,545
Deferred member expenses 363,929 (404,571)
Accounts payable and accrued expenses (39,733) 120,894
Deferred membership revenue (63,254) 746,166
Net cash provided by (used in) operations (416,573) (299,461)
Cash flows from investing activities:
Sale of (investment in) real estate and real
estate related activities 2,973 129,804
Note Receivable - Stonehill Recreation (572,539) -0-
Sale of (investment in) mutual fund and other
marketable securities (10) 995,196
Sale of RTC mortgages -0- 40,786
Capital expenditures (54,669) (3,318)
Net cash (used in) investing activities (624,245) 1,162,468
Cash flows from financing activities:
Proceeds from sale of common stock 400,000 -0-
Proceeds from borrowings 1,002,876 -0-
Repayment of borrowings (244,706) (911,216)
Redemption of Common Stock (75,000) -0-
Net cash provided by (used in) financing
Activities 1,083,170 (911,216)
Increase (Decrease) in cash 42,352 (48,209)
Cash balance, beginning of year 628,159 126,368
Cash balance, December 31, 1998 $ 670,511 $ 78,159
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Investment in RiceX $ 813,396 $ -0-
Financing fee income (531,714) -0-
Deferred interest income (281,682) -0-
Great American Settlement -0- 8,805,210
Unsecured notes payable -0- (7,505,210)
Common stock -0- 5,000
Additional paid-in-capital -0- 195,000
Redeemable common stock -0- (1,500,000)
Total Non-Cash Operating, Investing
and Financing Activities $ -0- $ -0-
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles for interim financial
reporting. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present fairly the
financial position as of December 31, 1998 and September 30, 1998,
the results of operations for the three months ended December 31,
1998 and 1997, and cash flows for the three months ended December
31, 1998 and 1997. Operating results for the three months ended
December 31, 1998, are not necessarily indicative of the results
which may be expected for the year ended September 30, 1999.
These statements should be read in conjunction with Form 10-KSB
for fiscal 1998 which is on file with the Securities and Exchange
Commission.
The Company's consolidated financial statements are prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern. The
Company has incurred a net loss for the year ended September 30,
1998 of $14,801,817, of which $12,426,510 represents a non-
recurring loss in connection with the Great American Settlement
(Note 3), and incurred a net loss for the three months ended
December 31, 1998 of $506,056. In addition, the Company's current
liabilities exceeded its current assets as of December 31, 1998 by
$3,858,850, excluding Deferred Membership Interests Held for Sale
and Deferred Membership Revenue.
These factors create uncertainty whether the Company can continue
as a going concern.. The Company's plans to mitigate the effects
of the uncertainties of the Company's continued existence are: 1)
to seek to restructure its existing debt with GAR, Inc.; 2) to
improve profitability by reducing operating costs; 3) to
substantially reduce the Company's capital spending; and 4) to
continue to seek additional funding through private sources to
supplement the Company's cash needs. Management believes that
these plans can be effectively implemented in the next twelve
month period. The Company's ability to continue as a going
concern is dependent on the implementation and success of these
plans. The financial statements do not include any adjustments in
the even the Company is unable to continue as a going concern.
NOTE 2 - RECLASSIFICATION:
Certain fiscal 1999 items have been reclassified to conform with
the fiscal 1998 presentation.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS:
Certain of the Company's executive officers, Directors, and
principal stockholders have been at various times, including
during the two years ended December 31, 1998, officers, Directors,
and principal stockholders of Great American and its affiliates.
Mr. Bellantoni, the Chief Executive and Financial Officer and a
Director of the Company was Vice President and Chief Financial
Officer of Great American and is currently the Treasurer and a
Director of Great American subsequent to the Chapter 11
Proceedings. Gene Mulvihill, the former Chairman of the Board and
Chief Executive Officer of the Company is a former Officer of
Great Mountain Development Corporation ("GMD") and former
Chairman of the Board and Chief Executive Officer of Great
American. Mr. Gene Mulvihill's son, Andrew Mulvihill, is a former
Executive Officer of Resort Club and a former officer of GMD. Mr.
Gene Mulvihill may also be deemed to be an affiliate of Stonehill
Recreation and Berkowitz Wolfman Assoc., Inc.
Commencing in June 1993, Resort Club entered into arrangements
with Great American to provide amenities and access to certain
properties for the benefit of Resort Club members. Under amended
and restated agreements entered into in March 1996, the
consideration paid for the use of these amenities was a payment
equal to 10% of the gross sales price of the Resort Club
memberships. The amenities included admission passes to the
Vernon Valley and Great Gorge ski facilities, admission passes to
the summer participation theme park and admission passes to the
Mountain Top Recreation Center for a period of 35 years. In
addition, commencing in 1993, Stonehill Recreation Corporation,
the owner of a health club and spa facility contiguous to the
Great American ski facilities and summer participation theme park,
agreed to provide access to the Resort Club members to its health
club and spa facility (the "Spa"). Under amended and restated
agreements entered into in March 1996, the consideration for these
Spa amenities was the payment of $25,000 for each condominium unit
controlled by Resort Club in the adjacent Great Gorge Village
condominium development. On April 2, 1996, Great American and its
subsidiaries, filed voluntary petitions with the United States
Bankruptcy Court for the District of New Jersey seeking
reorganization under Chapter 11 of the United States Bankruptcy
Code (the "Chapter 11 'Proceedings'"). In order to attempt to
ensure the collectability of the advances made by the Company to
Resort Club, which aggregated $9,719,900 at June 30, 1997, and
maintain the viability of Resort Club's future business
operations, including the continued payment of its outstanding
membership receivables, management determined that it was in the
Company's best interest to assist Great American in resolving the
Chapter 11 Proceedings for the reason that the majority of the
Resort Club amenity package was owned and operated by Great
American and the failure of Great American to continue to provide
these amenities to the Resort Club members would jeopardize the
continued operation of the Resort Club. In the event the Resort
Club's operations failed to continue, management of the Company
believed the Company was exposed to claims by Club Members for
recession of their membership purchase agreements, aggregating
$18,417,500. At June 30, 1997, under the amended and restated
agreements described above, the Company owed approximately
$540,000 to Great American on account of the amenities it agreed
to provide to Resort Club members and owed approximately $738,000
to
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
Stonehill Recreation Corporation on account of the amenities it
agreed to provide. On July 10, 1997, the Company and its wholly-
owned subsidiaries entered into an agreement pursuant to which the
Company agreed to make certain contributions to resolve the
Chapter 11 Proceedings of Great American and received certain
benefits described below:
A. The Company repaid in full the claims of Summit Bank
("Summit"), Lakeview Savings Bank ("Lakeview") and Public
Loan Corporation against Great American in the aggregate amount
of approximately $4,700,000.
B. Paid $1.8 million in cash to Great American, which included
$100,000 allocated for costs in connection with soliciting the
Great American Plan of Reorganization.
C. Agreed to allocate 100% of the Resort Club net cash flow to pay
the notes of professionals, indenture trustees and others,
which aggregated approximately $4,000,000 (the "Resort Club
Notes"), and a $7.5 million unsecured creditors' note (the
"Resort Club Unsecured Creditors' Note"). Any proceeds
dividended to Great American subsequent to the Conclusion
Chapter 11 Proceedings from Stonehill Recreation also will be
used to pay the Resort Club Notes and the Resort Club Unsecured
Creditors' Note. Such net cash flow and dividends will be
allocated and distributed with the first $1,000,000 of such net
cash flow allocated to pay the Resort Club Notes in partial
satisfaction of unpaid allowed professional fees and expenses
and other administrative claims. After distribution of the
first $1,000,000 of net cash flow, 50% of net cash flow
thereafter will be paid pro rata under the Resort Club Notes
and 50% of such net cash flow will be paid in satisfaction of
the Resort Club Unsecured Creditors' Note. The Resort Club
Notes and Resort Club Unsecured Creditors' Note are non-
interest bearing. As a result, the Company has imputed an
interest rate of 24% and recorded as liabilities both notes at
a discounted value of $7,505,210.
D. Transferred to Great American certain ski facility maintenance
equipment used on the Vernon Valley ski area previously leased
to Vernon Valley by the Company and 54 building lots owned by
the Company prior to the sale of Great American's assets in its
Chapter 11 Proceedings.
E. Great American received from the Company (i) 35% of the common
equity of Resort Club and 35% of the common equity of Stonehill
Recreation and (ii) the Resort Club Unsecured Creditors' Note
described above.
F. Resort Club received 275 excess capacity passes per day (the
"Excess Passes") for use at the Great Gorge Resort by
actual Resort Club members. Daily usage of the Excess Passes
is limited to such number of Excess Passes that will not
interfere with the usage of the Great Gorge Resort in greater
than an agreed capacity.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
G. Resort Club is permitted to purchase additional passes but is
not, under any circumstances, permitted to use such passes to
solicit new Resort Club members.
H. Resort Club was granted (i) a 25 year license to use six of the
existing cabins and four lots on the Mountaintop Recreation
Center and (ii) a lease of the Mountaintop Recreation Center
for a nominal price for an initial term of one (1) year, with
twenty-four (24) automatic one year extensions.
I. Resort Club was granted a five year lease to operate on the ski
area and summer recreational theme park property a winter time-
share office at two specified locations and a summer time-share
sales office at one specified location at an aggregate rental
of $100 per month.
J. Resort Club was granted a ten (10) year lease to operate a
time-share "closing house" at a rental of $500 per month.
K. Resort Club assumed the defense of, and assumed the liabilities
associated with, post-petition personal injury claims arising
out of the post-petition operation of Great American's
businesses to the date of the consummation of the sale of the
Great American assets in the Chapter 11 Proceedings; provided,
however, that to the extent possible, payment of such
liabilities is first to be made from a $300,000 amusement bond
held by Great American.
L. Praedium Phoenix, L.L.C. ("Praedium") was granted a $3.2
million first mortgage lien on the assets of Stonehill
Recreation Corporation, including, but not limited to, the Spa
(the "Spa Mortgage"), which lien has been satisfied.
M. Great American transferred to Stonehill Recreation Corporation
a 9-hole executive golf course and clubhouse adjacent to the
Spa.
In consideration for the Company's contributions, ownership of
Stonehill Recreation was transferred to the Company
contemporaneously with a 35% interest in Stonehill Recreation
being transferred to Great American at the conclusion of the
Chapter 11 Proceedings. Subsequently, the Company exchanged its
65% ownership interest in Stonehill Recreation, effective October
16, 1997, for 100% of the capital stock of Billhill, Inc., a real
estate holding company affiliated with Mr. Gene Mulvihill, the
Company's former Chairman of the Board and Chief Executive
Officer. Billhill, Inc. held an approximately 153.51 acre parcel
of vacant land on the top of Hamburg Mountain in Vernon, New
Jersey. This property was sold to Intrawest Corporation
("Intrawest") on February 17, 1998 for $840,000.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
Accordingly, as of October 16, 1997, the Company recorded a loss
as a consequence of its participation in the settlement of the
Great American Chapter 11 Proceedings as follows:
<TABLE>
<S> <C>
Repayment of Lakeview and Summit Mortgage $ 2,649,467
Contribution of land 2,070,000
Cash payout 1,855,000
Sale of Space Shot 65,651
Transfer of Piston Bullies 176,600
Legal and contingency reserve 605,384
Contribution of condominiums 245,476
Contribution of Great Gorge Note 50,000
Issuance of Unsecured Notes 7,505,210
Less:
Forgiveness of amenities debt (1,544,778)
Receipt of leasehold and contract rights (782,000)
Release of mortgages and real estate (469,500)
Net recorded loss $12,426,510
</TABLE>
The Company is obligated to Mr. Gene Mulvihill in the amount of
$239,363 as of December 31, 1998 on mortgage indebtedness arising
out of the Company's purchase in March 1996 of nine condominium
units. The mortgage indebtedness is due in equal monthly
installments of principal and interest through December 2000 and
bears interest at 10.25% per annum.
The Company's executive office premises are leased in a building
owned by a general partnership in which Mr. Gene Mulvihill is a
50% partner. During the three months ended December 31, 1998 and
1997, the Company paid to the partnership $1,500 and $6,232
pursuant to the terms of the lease.
During the year ended September 30, 1997, the Company leased
certain ski facility maintenance equipment to the Great American
ski area. Rental payments were structured so that the Company
earned a 28% return; however, Great American did not make any
payments under the agreement. This equipment was transferred to
Great American as part of the resolution of Great American's
Chapter 11 Proceedings having a carrying value of $176,600 at the
time.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
The Company also leased from Great American the ski rental shops
and related equipment located at the Vernon Valley-Great Gorge ski
area. During the year ended September 30, 1997, the Company paid
rental of $950,000 to Great American pursuant to these
arrangements. This lease was terminated in connection with the
resolution of Great American's Chapter 11 Proceedings.
At September 30, 1997, the Company was owed $97,134 by Great
American as the balance outstanding on $269,500 loaned by the
Company to Great American in January 1996, prior to the Chapter 11
Proceedings. In connection with the resolution of the Chapter 11
Proceedings, the Company accepted a payment of $46,000 in
satisfaction of this obligation.
In conjunction with the resolution of Great American's Chapter 11
Proceedings, the Company sold for $900,000 to Praedium, a Space
Shot amusement attraction, formerly leased to Great American.
Such assets had a carrying value at the time of $965,651.
Prior to September 30, 1997, in connection with the Company's
decision to assist Great American in resolving its Chapter 11
proceedings, the Company had paid an aggregate of $2,739,782 to
Summit and Lakeview in consideration of their forbearance
agreements with respect to loans to Great American that had gone
into default and that had been guaranteed by Mr. Gene Mulvihill
and two of his associates. These loans were repaid in full by the
Company as part of the resolution of Great American's Chapter 11
Proceedings.
At December 31, 1998, Stonehill Recreation owed the Company
$2,262,112 including accrued interest arising out of cash advances
from the Company to Stonehill Recreation. The obligation bears
interest at 18% per annum and is due on demand.
Also at December 31, 1998, the Company is obligated to Berkowitz
Wolfman Assoc., Inc. in the amount of $2,042,305 arising out of a
cash advance from Berkowitz Wolfman Assoc., Inc. Such obligation
bears interest at 15% per annum and is due on demand.
In February 1998, the Company deposited in escrow with Lakeview
the sum of $500,000 as additional collateral on a first mortgage
loan to Stonehill Recreation from Lakeview. The mortgage loan is
due to be repaid on June 30,1999.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
The Company is currently engaged in negotiations with Stonehill
Recreation with respect to compensation to be paid by the Company
to Stonehill Recreation for the use of the Spa facility by Resort
Club members.
In March 1996, Mr. Bellantoni purchased from the Company for
$15,625 a total of 25,000 shares of common stock of The RiceX
Company. The shares were purchased at the Company's cost of
$0.625 per share which approximated a fair market value at the
time due to trading restrictions placed on the stock. In
addition, Mr. Bellantoni is indebted to the Company in the amount
of $15,441. The loan bears interest at 8% and is due to be repaid
on demand.
NOTE 4 - COMMON STOCK:
On or about December 28, 1998, the Company sold 555,555 shares of
the Company's common stock to two unaffiliated corporations and
1,111,111 shares to an unaffiliated individual at a per share
price of $0.18.
NOTE 5 - FOODCEUTICALS PARTICIPATION:
In March 1996, the Company entered into a $1.75 million secured
loan with the RiceX, Inc. ("RiceX"). In December 1998, the
Company entered into a Loan Participation Agreement with
FoodCeuticals, L.L.C. ("FoodCeuticals") whereby the Company
contributed its secured loan with RiceX including accrued interest
due from RiceX in the aggregate of approximately $2 million and
FoodCeuticals contributed its secure loan with RiceX including
accrued interest due from RiceX in the amount of $1.85 million.
The Company and FoodCeuticals' collateral includes certain
tangible and intangible assets of RiceX including RiceX's
extrusion machines located at two rice mills in California,
contract rights , and all of RiceX's intellectual property. These
assets represent substantially all of the assets in RiceX . In
addition FoodCeuticals received an aggregate of 940,679 shares of
RiceX's common stock and a warrant to purchase an aggregate of
3,743,450 shares of RiceX's common shares at an exercise price of
$0.75 per share. Collectively, the Company's and FoodCeuticals
secured loans of $2 million and $1.85 million, respectively, are
hereinafter referred to as the Participation Loan. Pursuant to
the Loan Participation agreement the Company and FoodCeuticals
share pro rata as to the Participation Loan, warrants, shares and
collateral due, payable or granted under the loan agreement to the
extent that their participation amount bears to the total
Participation Loan. As a result, the Company received 409,421
shares of RiceX common stock and a warrant to purchase 1,429,338
shares of RiceX common stock.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
NOTE 6 - SUBSEQUENT EVENTS:
During the third quarter of fiscal 1999, the Company negotiated a
restructuring of its $7.5 million Unsecured Creditors Note with
GAR, Inc. Pursuant to the terms of the agreement, the Company
will issue $750,000 fair market value of its common stock in
return for the cancellation of the $7.5 million Unsecured
Creditors Note. The agreement is subject to Bankruptcy Court
approval.
On January 15, 1999, the Company entered into a third loan
agreement with Binghamton in the principal amount of $500,000.
The loan bears interest at 12.25%
Simultaneously with the closing of the third loan agreement, the
Company entered into a Mortgage Modification and Consolidation
Agreement, whereby the first, second and the third mortgage were
combined, consolidated, and made equal and coordinate in lien on
the collateral without priority of one over another, so that
together they are one first mortgage. As of January 15, 1999, the
balance due and owing on this loan was $1,845,000 payable as
follows:
The principal sum of $50,000.00 plus accrued interest on the
13th day of each month commencing September 13, 1997 and on
the 13th day of each month thereafter until December 13,
2000, when the entire unpaid principal balance plus accrued
interest is due and payable.
On or about January 15, 1999 the Company issued 350,000 shares of
its $0.01 par value common stock to three unaffiliated
corporations in connection with their efforts in assisting the
Company in various financing transactions. Due to the trading
restrictions placed on the stock, the Company recorded the
transaction at a discount of 75% or a per share price of $0.50.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
accompanying unaudited financial statements and the notes thereto
included in Item I of this quarterly report, and the financial
statements and the notes thereto and management's discussion and
analysis of financial condition and results of operations
contained in the Company's Annual Report on Form 10-KSB for the
year ended September 30, 1998.
A. Liquidity and Capital Resources
During fiscal 1998, the Company had a net loss from operations of
approximately $14, 801,800. Included in the net loss from
operations was a loss of approximately $12,426,500 resulting from
the Company's contributions to resolve the Chapter 11 Proceedings.
These items included:
<TABLE>
<S> <C>
Repayment of Lakeview and Summit Mortgage $ 2,649,467
Contribution of land 2,070,000
Cash payout 1,855,000
Sale of Space Shot 65,651
Transfer of Piston Bullies 176,600
Legal and contingency reserve 605,384
Contribution of condominiums 245,476
Contribution of Great Gorge Note 50,000
Issuance of Unsecured Notes 7,505,210
Less:
Forgiveness of amenities debt (1,544,778)
Receipt of leasehold and contract rights (782,000)
Release of mortgages and real estate (469,500)
Net recorded loss $12,426,510
</TABLE>
During the first three months of 1999, the Company had a loss from
operations of approximately $506,060. Included in the net loss
from operations is depreciation of approximately $3,680,
amortization of interest expense of approximately $337,700 and
amortization of deferred financing costs of $14,931, all of which
are non-cash expenses. Amortization of interest income of $21,836
offset these items. The Company had non-cash income from its
transaction with RiceX in the amount of $531,714.
Also during the first three months of the fiscal 1999, changes in
assets and liabilities included an increase in membership
receivables of approximately $504,600, a decrease in accrued
interest and other receivables of approximately $443,300, a
decrease in prepaid expenses and other assets of approximately
$35,600, an increase in deferred member expenses of approximately
$363,900, decreases in accounts payable and accrued expenses of
approximately $39,730 and deferred membership revenue of
approximately $63,250. After reflecting the net changes in assets
and liabilities, net cash used by operations was approximately
$416,600.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A. Liquidity and Capital Resources (continued)
During the first three months of the fiscal 1999, investing
activities used net cash of approximately $624,200 and includes
primarily the purchase of furniture and equipment and advances to
Stonehill Recreation of approximately $572,500.
During the first three months of the fiscal 1999, financing
activities provided net cash of approximately $1,083,200 which
resulted primarily from the sale of common stock of approximately
$400,000 and borrowings of approximately $1,002,900 offset by the
repayment of borrowings in the amount of approximately $245,000
and the purchase of redeemable common stock of approximately
$75,000.
Accordingly, during the first three months of fiscal 1999, the
Company's cash increased by approximately $42,350.
Management has determined that in order to adequately assure to
the members the availability of the Resort Club accommodations,
title to certain of the Company's resort condominium properties
will be conveyed to and held but a trustee. The trustee will hold
title to 36 condominiums units including 25 units that are the
subjects of mortgage's aggregating $1,052,702. The trustee will
administer the collection of certain of the Company's member notes
receivable aggregating approximately $2,500,000 due over a period
of two-seven years and the annual maintenance assessments from
membership owners. Out of the receivables, the trustee will pay
the principal of even amount with the interest payments on the
mortgages and retain funds for the payment of insurance, taxes,
and capital improvements. The trustees will pay the balance of
the collections over to the Company on a regular basis, after
deducting certain impounds, provided that annual maintenance
assessments have been disbursed by the Company according to a
budget submitted by the Company. Under the trust and management
agreements, the Company will have the exclusive rights the control
and management of the facilities held in trust. The trust will
continue until the expiration date of the last membership
interest. Under the terms of the trust, the trust assets will
revert to the Company upon the expiration of the term of trust.
Future Business Plans
Through fiscal 1998, the Company's primary business operations
were in connection with the sale of membership interest through
the Resort Club. During the third quarter of fiscal 1999, the
Company discontinued selling new Membership Interests through
Resort Club primarily as a result of its inability to obtain
financing. In the event financing can be obtained, Resort Club
may resume these activities in the future.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Future Business Plans (continued)
In addition, the 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. The Company's involvement
may be as a sole principal, a partner, a joint venture or in some
other form.
As of December 31, 1998, the Company had engaged in various
transactions with certain of its officers, directors, principal
stockholders and certain of their affiliated entities. In
addition, as of December 31,1998, the Company had made an
investment in RiceX, Inc.
Despite the foregoing, management reserves the right to apply the
Company's resources in other businesses as opportunities present
themselves.
B. Results of Operations
Three months ended December 31, 1998 compared with three months
ended December 31, 1997.
Membership annual fee revenue was $70,213 in the first three
months of fiscal 1999 compared with $75,368 in the first three
months of fiscal 1998, or a decrease of $5,155 (6.84%). This
decline was primarily the result of establishing a reserve for
uncollected fees.
Other revenue was $24,031 in the first three months of fiscal 1999
compared with $40,056 in the first three months of fiscal 1998 or
a decline of $16,025 (40.01%). The decline in revenues was the
result of less overnight rental income generated by vacant resort
club condominiums.
Other operations expenses were $19,094 in the first three months
of fiscal 1999 compared with 74,955 in the first three months of
fiscal 1998, or a decrease of $55,861 (74.53%). The decrease was
the result of certain non-recurring operating expenses that the
Company recorded in the first three months of fiscal 1998.
Membership operations expenses increased in the first three months
of fiscal 1999 to $289,518 from $135,957 in the first three months
of fiscal 1998, or by $153,561 (112.95%) as a result of a larger
reserve for overbudget operating expenses in the first three
months of fiscal 1999 as compared to the reserve the Company
recorded in the first three months of fiscal 1998.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Membership maintenance expenses increased in the first three
months of fiscal 1999 to $191,242 from $80,392 in the first three
months of fiscal 1998, or by $110,850 as a result of increases in
check-in fees, real estate taxes, condominium association fees,
and repair and maintenance.
Marketing and selling expenses were $115,643 in the first three
months of fiscal 1999 compared with $220,862 in the first three
months of fiscal 1998, a decrease of $105,219. This decrease was
the result of the implementation of the Company's current business
plan which involves engaging third parties to sell membership
interests as opposed to selling the memberships through Company
personnel. The total amount expensed represents amounts reserved
for overbudget sales and marketing expenses in the first three
months of fiscal 1999 as compared to a reserve for overbudget
sales and marketing expenses in the first three months of fiscal
1998.
General and administrative expenses increased to $178,967 in the
first three months of fiscal 1999 from $146,581 in the first three
months of fiscal 1998, or by $32,386 as a result of higher
professional fees.
Depreciation and amortization was $3,674 in the first three months
of fiscal 1999, compared to $3,251 in the first three months of
fiscal 1998 resulting in an increase of $423 (13.01%).
Depreciation and amortization was essentially unchanged.
The Company's loss from operations was $703,894 in the first three
months of fiscal 1999, an increase of $157,320 over the loss from
operations of $546,574 in the first three months of fiscal 1998.
Interest income was $142,067 in the first three months of fiscal
1999 compared with $76,408 in the first three months of fiscal
The increase of $65,659 was primarily a result of the loan
due from Stonehill Recreation.
Interest expense decreased to $467,642 in the first three months
of fiscal 1999 compared with $476,407 in the first three months of
1998. The decrease of $8,765 was essentially unchanged.
During the first three months of fiscal 1999, the Company
recognized financing fee income of $531,714 in connection with the
FoodCeuticals transaction (Note 5).
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Amortization of deferred financing costs consists primarily of
deferred financing costs associated with the Company obtaining its
loans from Binghamton Savings Bank and Public Loan Company. These
costs decreased to $14,931 in the first three months of fiscal
1999 from $72,915 in the first three months of fiscal 1998, or a
decrease of $57,984. The decrease is primarily due from financing
costs incurred with a short-term loan with Public Loan Company
repaid in February 1998.
In the first three months of fiscal 1999, the Company did not sell
marketable securities as compared to a gain on the sale of
marketable securities in the first three months of fiscal 1998 of
$882,635 primarily resulting from a gain on the sale of RiceX,
Inc. stock.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Part II
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1998:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended December 31, 1998:
None.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Commission Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
DOMINION RESOURCES, INC.
Dated: By: /s/Joseph R. Bellantoni
Joseph R. Bellantoni
President, Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE 12/31/1998 FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 670,511
<SECURITIES> 115,252
<RECEIVABLES> 1,597,215
<ALLOWANCES> 448,382
<INVENTORY> 0
<CURRENT-ASSETS> 11,685,682
<PP&E> 422,491
<DEPRECIATION> 169,741
<TOTAL-ASSETS> 21,673,038
<CURRENT-LIABILITIES> 19,122,072
<BONDS> 12,623,041
0
0
<COMMON> 72,806
<OTHER-SE> (11,519,881)
<TOTAL-LIABILITY-AND-EQUITY> 21,673,038
<SALES> 94,244
<TOTAL-REVENUES> 94,244
<CGS> 0
<TOTAL-COSTS> 798,138
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 467,642
<INCOME-PRETAX> (506,056)
<INCOME-TAX> 0
<INCOME-CONTINUING> (506,056)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (506,056)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
