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, 1997
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)
(201) 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 September 1, 1998
Common Stock,
$0.01 par value 5,158,354
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED DECEMBER 31, 1997
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,
1997 1997
(Unaudited) (See note below)
Current assets:
Cash and cash equivalents $ 78,159 $ 126,368
Membership receivables, net
(including allowance for
doubtful accounts of $276,594
at December 31, 1997 and
$362,377 at September 30, 1997 1,595,511 1,570,991
Prepaid expenses and other assets 454,737 644,197
Investment in mutual fund and
other marketable securities 302,482 327,403
Accrued interest and other
receivables (including
receivables to related parties
of $926,912 at December 31, 1997
and $245,055 at September 30, 1997) 2,078,705 988,807
Deferred membership interests
held for sale 9,790,496 8,603,925
Total current assets 14,300,090 12,261,691
Property, equipment, furniture
and fixtures, net of accumulated
depreciation and amortization of
$108,216 at December 31, 1997 and
$90,507 at September 30, 1997 244,536 258,927
Other assets:
Membership receivables, net
(including allowance for doubtful
accounts of $1,029,125 at December 31,
1997 and $1,348,296 at September
30, 1997 5,936,429 5,845,195
Great American settlement assets -0- 6,764,684
RTC mortgages 269,004 309,790
Note receivable and accrued
interest- Food Extrusion, Inc. 1,537,131 1,515,295
Investment in Food Extrusion, Inc. 76,485 164,125
Real estate and real estate
related activities 1,137,690 745,504
Total other assets 8,956,739 15,344,593
Total assets $23,501,365 $27,865,211
</TABLE>
Note: The balance sheet at September 30, 1997, 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,
1997 1997
(Unaudited) (See note below)
Current Liabilities:
Secured debt, current portion $ 2,170,321 $ 2,170,844
Unsecured notes payable,
current portion 180,000 380,000
Accounts payable and
accrued liabilities 4,962,953 5,781,453
Deferred membership revenue 12,478,867 11,732,701
Total current liabilities 19,792,141 20,064,998
Long-term liabilities:
Secured debt, net of
current maturities 3,273,837 3,951,683
Unsecured notes payable, net
of current maturities 8,037,829 227,732
11,311,666 4,179,415
Redeemable common stock, par
value $0.01 per share; 500,000
shares outstanding redeemable
at $3.00 per share in July 1998
through July 2000 1,500,000 -0-
Stockholders' equity:
Common stock, $0.01 par value;
Authorized - 25,000,000 Shares;
issued and outstanding -
4,658,354 shares at December 31,
1997 and 5,158,354 at
September 30, 1997 46,584 51,584
Additional paid-in-capital 5,234,206 5,429,206
Accumulated deficit (12,982,319) (459,079)
Less: 1,350,646 shares held in
treasury at December 31, 1997
and September 30, 1997 (1,400,913) (1,400,913)
Total stockholders' equity (9,102,442) 3,620,798
Total liabilities and
stockholders' equity $23,501,365 $27,865,211
</TABLE>
Note: The balance sheet at September 30, 1997, 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, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Revenues:
Membership revenue $ -0- $ 108,939
Membership annual fee revenue 75,368 71,539
Other revenue 40,056 (10,743)
Total revenues 115,424 169,735
Expenses:
Other operations 74,955 21,261
Membership operations 135,957 385,450
Membership maintenance 80,392 (737,681)
Marketing and selling 220,862 244,582
General and administrative expenses 219,496 75,722
Depreciation and amortization 3,251 48,175
Total expenses 734,913 37,509
Income (loss) from operations (619,489) 132,226
Other income (expenses):
Interest income 76,408 78,251
Interest expense (476,407) (13,897)
Gain on sale of marketable
securities 882,635 -0-
Gain on sale (loss) of RTC mortgages 40,123 (207,165)
Great American Settlement (12,426,510) -0-
Total other income (expenses) (11,903,751) (142,811)
Income (loss) before income taxes (12,523,240) (10,585)
Income taxes -0- -0-
Net income (loss) $(12,523,240) $ (10,585)
Net income (loss) per common share $ (2.43) $ (0.00)
Weighted average number of share used
in computing net income per share 5,158,354 4,228,354
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Cash flows provided by (used in) operating activities:
Net Income (loss) $ (12,523,240) $ (10,585)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 17,709 48,175
Amortization of interest income (21,836) (21,193)
Amortization of interest expense 337,734 -0-
Gain of sale of marketable
securities (882,635) -0-
Reserve for RTC mortgages -0- 207,165
Great American Settlement 12,426,510 -0-
Changes in assets and liabilities:
Membership receivables (115,754) (805,326)
Accrued interest receivable and
other receivables (189,898) (91,111)
Prepaid expenses and other assets 189,460 (31,208)
Deferred member expenses (404,571) (1,332,362)
Accounts payable and accrued
expenses 120,894 (697,467)
Deferred membership revenue 746,166 1,707,182
Net cash provided by (used in)
operations (299,461) (1,026,730)
Cash flows from investing activities:
Sale of (investment in) real estate
and real estate related activities 129,804 (491,355)
Sale of (investment in) mutual fund
and other marketable securities 995,196 (72,021)
Sale of RTC mortgages 40,786 -0-
Capital expenditures (3,318) (50,109)
Net cash (used in) investing activities 1,162,468 (613,485)
Cash flows from financing activities:
Proceeds from borrowings -0- 1,221,015
Repayment of borrowings (911,216) -0-
Purchase of treasury stock -0- (1,000)
Net cash provided by (used in)
financing activities (911,216) 1,220,015
Increase (Decrease) in cash (48,209) (420,200)
Cash balance, beginning of year 126,368 903,659
Cash balance, December 31, 1997 $ 78,159 $ 483,459
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Great American Settlement $ 8,805,210 $ -0-
Unsecured notes payable (7,505,210) -0-
Common stock 5,000 -0-
Additional paid-in-capital 195,000 -0-
Redeemable common stock (1,500,000) -0-
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, 1997 AND 1996
(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, 1997 and September 30, 1997,
the results of operations for the three months ended December 31,
1997 and 1996, and cash flows for the three months ended December
31, 1997 and 1996. Operating results for the three months ended
December 31, 1997, are not necessarily indicative of the results
which may be expected for the year ended September 30, 1998.
These statements should be read in conjunction with Form 10-KSB
for fiscal 1997 which is on file with the Securities and Exchange
Commission.
NOTE 2 - RECLASSIFICATION:
Certain fiscal 1998 items have been reclassified to conform with
the fiscal 1997 presentation.
NOTE 3 - RELATED PARTY TRANSACTIONS:
During the period of October 1, 1995 through September 30, 1997,
the Company engaged in various transactions with certain of its
officers, directors, principal stockholders and certain of their
affiliated entities. Specifically, the Company has entered into
transactions with Great American Recreation, Inc. ("Great
American"), Stonehill Recreation Corporation ("Stonehill
Recreation"), and Great Mountain Development Corporation
("GMD") of which the Company's Directors and Officers are either
principal shareholders and/or Officers and Directors.
In this regard, Mr. Bellantoni, the Secretary, Treasurer and
Director of the Company was Vice President and Chief Financial
Officer of Great American and is currently Treasurer and a
Director of reorganized Great American; Mr. Gene Mulvihill, the
former Chairman of the Board and former Chief Executive Officer of
the Company is a former principal shareholder and Officer of GMD
and former Chairman of the Board and Chief Executive Officer of
Great American and his daughter was a Director, and the former
President and Chief Operating Officer of such corporation. Mr.
Gene Mulvihill's son, Andrew Mulvihill is an Executive Officer of
Resort Club and a former officer of GMD.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
On March 29, 1996, but effective as of June 1, 1993, Resort Club
entered into amended and restated agreements with Vernon Valley,
Great Gorge and Great Valley Real Estate Corp. ("Great Valley"),
all subsidiaries of Great American whereby in consideration for an
aggregate payment of 10% of the gross sales price of each Resort
Club membership, these entities were to provide amenities and
access to certain properties for the benefit of Resort Club
members. The amenities provided by Great American include
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,
all for a period of 35 years. As of September 30, 1997, Resort
Club had an unpaid balance of $540,795 for these amenities. Also
on March 29, 1996, Resort Club entered into an amended and
restated agreement with Stonehill Recreation, the entity which
owns and operates the Spa at Great Gorge (the "Spa") on terms
similar to those that were entered into with Great American,
except that the consideration payable to Stonehill Recreation from
Resort Club represents $25,000 for each condominium controlled by
Resort Club in the Great Gorge Village. As of September 30, 1997,
Resort Club had an unpaid balance of $738,178 due to Stonehill
Recreation for amenities. During fiscal 1997, the Company
advanced funds on behalf of Stonehill Recreation in connection
with a settlement in the Great American bankruptcy. In
consideration for these advances, ownership of Stonehill
Recreation transferred to the Company on the effective date of
confirmation of the Great American plan of reorganization, which
was October 16, 1997. Subsequently, the Company exchanged its
ownership interest in Stonehill Recreation effective October 16,
1997 for a 100% equity interest in Bill Hill, Inc, a real estate
holding company affiliated with Mr. Mulvihill with real estate
assets in Vernon, New Jersey (see Note 5).
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. On April 2, 1996, Great
American and its wholly owned subsidiaries, Vernon Valley, Great
Valley, Great Gorge, Great Heritage, Inc., TAV, Inc., Stonehill
Management Corp., Stonehill Maintenance Corp., Stonehill Water,
Inc., Stonehill Sewer, Inc. and Vernon Valley Sewer, Inc. 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 Company provides financing to the purchasers of its membership
interests. Through fiscal 1997, the Company advanced
approximately $10,637,000 to Resort Club primarily for working
capital purposes. This financing is generally evidenced by non-
recourse installment sales contracts. The down payment received
by the Company for such sales is at least 10% of the sales price.
The down payment is often less than the direct expense of
commissions and selling and the difference is financed either by
borrowings by the Company or by the Company's internally generated
funds. In order to ensure the collectability of the advances made
to Resort Club and maintain the viability of Resort Club's future
business operations, management determined that it has been in the
best interest of the Company to assist Great American and its
affiliated entities for the reason that the majority of the Resort
Club amenity package was owned and operated by Great American and
affiliated entities. Management also determined that in order for
Resort Club to continue to operate as a going concern, the Great
American recreational assets must not only emerge from bankruptcy
but operate competitively with nearby Resort facilities.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
On July 10, 1997 the Company and its wholly owned subsidiaries
Resort Club and Diamond Leasing entered into a Memorandum of
Understanding (the "MOU") which outlined a settlement agreement in
connection with the Great American bankruptcy between Great
American, Praedium and Mr. Gene Mulvihill and entities affiliated
with Mr. Gene Mulvihill including the Company. Pursuant to the
terms of the MOU, the Company and its affiliates were required to
make certain contributions and received certain benefits which are
outlined below:
I. Contributions by the Company
A. The full settlement and satisfaction of the claims, liens
and security interests of Summit Bank ("Summit"), Lakeview
Savings Bank ("Lakeview") and Public Loan Company in a
manner that permitted the assets of the Great American
entities contemplated by the MOU to be sold in a Section 363
Sale and the proceeds of such sale to be free and clear of
all liens, claims and encumbrances.
B. Payment of $1.8 million in cash which included $100,000
allocated for costs in connection with soliciting the plan.
C. Resort Club agreed to allocate 100% of its net cash flow to
pay the notes of professionals, indenture trustees, Richard
Wright and Matt Harrison, both restructuring officers of
Great American ("Resort Club Notes") and a $7.5 million
unsecured creditors' note (the "Resort Club Unsecured
Creditors' Note"). Similarly, any proceeds dividended to
reorganized Great American from Stonehill Recreation 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 as follows: The first
$1,000,000 of such net cash flow will be allocated and
distributed to pay the Resort Club Notes in partial
satisfaction of unpaid allowed professional fees and
expenses and unpaid allowed indenture trustee administrative
claims, and unpaid claims of Richard Wright and Matt
Harrison which amount to approximately $6.1 million. 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; and provided further, that the amount and the terms of
the Resort Club Notes and Resort Club Unsecured Creditors'
Note shall be reasonably satisfactory to the holders of such
notes and be limited in a matter so as not to materially
impair the operation of the business of the Resort Club.
The Resort Club Notes and the Resort Club Unsecured
Creditors' Note are non-interest bearing. As a result, the
Company imputed an interest rate of 24% and recorded the
notes at a discounted value of $7,505,210.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
D. Transfer, release or otherwise convey all right, title and
interest in and to the Piston Bullies previously leased to
Vernon Valley by the Company, and 54 building lots owned by
the Company (the "Lots") to Great American, free and clear
of all liens, claims and encumbrances prior to the
commencement of the Section 363 Sale. Praedium, the
successful purchaser, has the right to develop the lots in
its discretion, in whole or in part, and the Company will
reasonably cooperate with Praedium with respect to the
development of the lots and or any other property acquired
from Great American, including, without limitation, to
affect the transfer of any and all rights, easements or
other interests necessary for the successful purchaser to
exercise its development rights; provided however, that such
cooperation will be reasonably limited to acts which do not
interfere materially with the operation of the Mulvihill
interests' businesses.
E. Promptly after the execution of the MOU, the Mulvihill
interests and Public Loan Company agreed to enter into
appropriate agreements with respect to the granting or the
conveyance of all water rights, sewer rights, other access
rights and rights appurtenant to the land on which Great
American operates its businesses, and the Mulvihill entities
and Public Loan Company will receive reciprocal rights with
respect to the land on which the Mulvihill interests and
Public Loan Company operate their business; provided,
however, that (i) such transfers and grants by the Mulvihill
interests and Public Loan Company are not conditional upon
the consummation of the Section 363 Sale or the Plan, (ii)
the rights granted to the Mulvihill interests and Public
Loan will be reasonably limited in a manner so as not to
interfere materially with Praedium's operation of its
business, as determined in Praedium's reasonable discretion.
F. Reorganized Great American received (i) 35% of the common
equity of Resort Club and 35% of the common equity of
Stonehill Recreation and (ii) a $7.5 million note from the
Resort Club (i.e., the Resort Club Unsecured Creditors
Note), as more fully described below. Great American,
Stonehill Recreation and the Company entered into a
shareholders agreement covering the permissible expenditures
which Stonehill Recreation may make on a going-forward basis
to the effect that the 35% equity interest in Stonehill
Recreation granted to Reorganized Great American under the
Plan, and the amounts to be dividended on account of such
35% equity interest, shall not be diluted by any insider,
affiliate or non-ordinary course transaction. Reorganized
Great American has been granted appropriate representation
on the boards of both Stonehill Recreation and Resort Club
in connection with its 35% interest in each. Reorganized
Great American received customary anti-dilution rights in
respect of such equity interests.
G. The Company entered into an amended and restated lease
with respect to the Space Shot with Praedium on
mutually acceptable terms.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
II. Resort Club Operating Agreements
A. Resort Club will receive 275 excess capacity passes per day
(the "Excess Passes") for use at the Great Gorge Resort.
The Excess Passes are non-transferable and utilizable only
by actual Resort Club members. Daily usage of the Excess
Passes are limited, in the reasonable discretion of the
operator of the Great Gorge Resort, to such number of Excess
Passes that will not interfere with the usage (based upon
full utilization of all lifts, rides, attractions and other
amenities) of the Great Gorge Resort land and amenities by
resulting in greater than capacity usage of the Great Gorge
Resort. The capacity of the Great Gorge Resort is defined
as follows: (i) as to the ski resort facilities, 4,000 day
pass skiers per day and (ii) as to the summer participation
theme park, 10,000 patrons per day.
B. Resort Club will be permitted to purchase additional passes
over and above the available Excess Passes. Excess Passes
shall not, under any circumstances, be used to solicit new
Resort Club members.
C. Resort Club was granted (i) a 25 year license to use six of
the existing cabins and four lots on the Evergreen
Campground and (ii) a lease of the Evergreen Campground for
a nominal price for an initial term of one (1) year, with
twenty-four (24) automatic one year extensions.
D. Resort Club was granted one-time five year leases to operate
winter time-share sales offices at two specified locations
and a summer time-share sales office at one specified
location. Each of the three leases shall be at a rental of
$100 per month.
E. Resort Club will be granted a ten (10) year lease to operate
a time-share "closing house" at a rental of $500 per month.
F. All Resort Club promotional materials and agreements shall
specify that Resort Club is not affiliated with the
ownership of the summer participation theme park and winter
recreational ski area. Resort Club will affect notice of
this matter to all existing Resort Club members.
G. Resort Club will assume the defense of, and assume and pay
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 Section 363 Sale; provided, however, that to the
extent possible, payment of such liabilities shall first be
made from the $300,000 amusement bond held by Great
American.
III. Stonehill Recreation
A. Praedium received a first priority $3.2 million mortgage
lien on the assets of Stonehill Recreation, including, but
not limited to, the Spa (the "Spa Mortgage").
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
B. Praedium granted to the Mulvihill entities (excluding
Stonehill Recreation) an option (the "Option") to purchase
the Spa Mortgage for $1 million (the "Option Price"). The
Option must be exercised, and fully paid for, within 18
months of the consummation of the Section 363 Sale. The
Option Price may be paid in 18 monthly installments, at an
interest rate of ten (10%) percent per annum.
C. Great American transferred, without representation or
warranty, all of its right, title and interest in and to the
9-hole executive golf course and clubhouse adjacent to the
Spa; provided, however, that Stonehill Recreation will grant
reasonable rights of usage of such golf course and clubhouse
to Praedium with respect to not less than 20% of all tee
times at a 20% discount to the customary charges paid by the
public for the use of such amenities.
Management believes that the contributions made by the Company in
connection with the MOU hereinafter referred to as the "Great
American Settlement Assets" are realizable as of September 30,
1997. Management believes that the Great American Settlement
Assets are realizable primarily through the forgiveness of
indebtedness as of September 30, 1997 owed to Great American
related entities and Stonehill Recreation for the use of amenities
by Resort Club members, its investment in the Spa which was
subsequently exchanged for Bill Hill, Inc. (see Note 5),
leasehold rights and receipt of real estate assets. In addition,
management believes that the entry of Intrawest will provide
significantly greater value to Resort Club members which will
increase the collectability of membership receivables and increase
membership.
On October 16, 1997, the Company recorded a loss on the Great
American Settlement which is broken down as follows:
<TABLE>
<S> <C>
Cash payment $ 1,855,000
Contribution of land 2,070,000
Contribution of Lakeview mortgage 2,649,467
Loss on sale of Space Shot 65,651
Contribution 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
Forgiveness of debt-amenities (1,544,778)
Receipt of leasehold and contract rights (782,000)
Release of mortgages on real estate (469,500)
$12,426,510
</TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 4 - SALE OF MARKETABLE SECURITIES:
During the first three months of fiscal 1998, the Company sold
140,000 shares of Food Extrusion, Inc. and recognized a gain of
$737,114 on the transactions. As of December 31, 1997, the
Company was the beneficial owner of 112,600 shares of Food
Extrusion, Inc. common stock. Also during the first three months
of fiscal 1998 the Company sold its remaining 15,700 shares of
PriCellular common stock and recognized a gain of $145,521 on the
transactions.
NOTE 5 - SUBSEQUENT EVENTS:
The entity presently providin Resort Club members with admission
to its summer participation theme park and skiing facilities is
Great Gorge Resorts, Inc. ("Resorts"), a subsidiary of Intrawest
Corporation ("Intrawest"), which owns and operates the summer
participation theme park and a winter recreational ski area in
Vernon Township, Sussex County, New Jersey. Resorts completed the
purchase of the ski area and the summer participation theme park
on February 17, 1998 from Angel. Angel, an affiliate of Praedium,
purchased the summer participation theme park and skiing
facilities pursuant to a section 363 sale under the Federal
Bankruptcy Rules whereby the summer participation theme park and
ski area were purchased "free and clear" of all liens from Great
American.
On February 19, 1998, the Company, along with certain entities
affiliated with Mr. Gene Mulvihill, completed the sale of certain
assets to Intrawest pursuant to an Asset Purchase Agreement dated
December 31, 1997 and subsequently amended on February 5, 1998.
Pursuant to the agreement, the Company agreed to enter into a non-
compete agreement whereby it agreed to stop selling membership
interests within a designated vicinity, specifically Great Gorge
Village. Management believes that there is sufficient condominium
inventory in the Great Gorge Resort Area such as Seasons Hotel,
Hidden Valley ski area and neighboring facilities to fulfill its
long-term operational objectives.
Management believes that the entry of Intrawest into the Great
Gorge Resort will significantly increase the existing members'
satisfaction which will increase member referrals. In addition,
since Resort Club is a multi-site, points based vacation club,
Resort Club can sell inventory in South Carolina or Brigantine,
New Jersey and continue to utilize the Intrawest draw in Vernon.
Management also believes that due to the deteriorating conditions
of the Great Gorge Resort during the summer of 1997 and the winter
of 1997/1998 which had a devasting impact on Resort Club's ability
to sell membership interests, it was necessary that a professional
and experienced operator take over the operations of the Great
Gorge Resort. Management believes that unless a professional and
experienced operator managed the Great Gorge Resort, Resort Club
would have been in jeapardy of maintaining its operations.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
NOTE 5 - SUBSEQUENT EVENTS (Continued):
On or about March 13, 1998, three Indenture Trustees representing
bondholders in the Great American bankruptcy filed a complaint to
revoke the order of confirmation entered September 16, 1997. The
complaint was filed against certain parties involved with the
Great American Reorganization. Although Management believes there
is no merit to the claims made by the Indenture Trustees, the
cloud over the Resort Club which this complaint has created has
caused severe harm to the Resort Club and may have a material
impact on the Resort Club and Stonehill Recreation's operations.
As a result, the Company may restructure or divest its interests
in these entities.
During the second quarter of fiscal 1998, the Company exchanged
its 65% equity interest in Stonehill Recreation for a 100% equity
interest in Bill Hill, Inc., a real estate holding company with
land holdings in Vernon, New Jersey. On February 19, 1998, the
Company sold these land holdings to Intrawest realizing net
proceeds of $840,000. The Company is currently negotiating with
Stonehill Recreation with respect to future use of amenities by
Resort Club members.
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, 1997.
A. Liquidity and Capital Resources
During the first three months of fiscal 1998, the Company had a
net loss from operations of approximately $12,523,000. Included
in the net loss from operations is depreciation of approximately
$17,700 and amortization of interest expense of approximately
$337,700, which are noncash expenses. In addition, the net loss
includes a loss of approximately $12,426,500 resulting from the
settlement with Great American and a gain on the sale of
marketable securities of approximately $882,600, which are non-
recurring. After reflecting the net change in assets and
liabilities, net cash provided by operations was approximately
$299,500. Investing activities used net cash of approximately
$1,162,500 and primarily includes sale of real estate assets of
approximately $129,800 and the sale of marketable securities of
approximately $995,200. Financing activities used net cash of
approximately $911,200 which resulted from the repayment of
borrowings. Accordingly, during the first three months of fiscal
1998, the Company's cash decreased by approximately $48,200.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations
Three months ended December 31, 1997 compared with three months
ended December 31, 1996.
The net loss from operations applicable to common shareholders for
the first three months of fiscal 1998 was $11,223,240 ($2.18
share) as compared to net income from operations applicable to
common shareholders of $10,585 ($0.00 share) in the comparable
prior year period.
Sales of membership interests are recognized and included in
Revenues after certain "down payment" and other "continuing
investment" criteria are met. The agreement for sale generally
provides for a down payment and a note payable to the Company in
monthly installments, including interest, over a period of up to 7
years. Revenue is recognized after the requisite rescission
period has expired and at such time as the purchaser has paid at
least 10% of the sales price for sales of membership interests and
the condominium is placed in service. The sales price, less a
provision for cancellation, is recorded as revenue and the cost
related to such net revenue of the membership interest is charged
against income in the year that revenue is recognized. If a
purchaser defaults under the terms of the contract, after all
rescission and inspection periods have expired, payments are
generally retained by the Company. During the first three months
of fiscal 1998, the Company did not recognize membership revenue
as compared to $108,939 recognized in the prior year period.
Costs incurred in connection with preparing membership interests
for sale are capitalized and include all costs of acquisition,
renovation and furnishings of condominiums as well as operating,
marketing and selling expenses. Membership interests held for
sale are valued at the lower of cost or net realizable value in
accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 67, "Accounting for Costs and
Initial Rental Operations of Real Estate Projects". During the
first three months of fiscal 1998, the Company had adjusted
Deferred Membership Interest Held for Sale over budget in the
aggregate amount of approximately, $357,000 as compared to
approximately $547,000 in the prior year period.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Three months ended December 31, 1997 compared with three months
ended December 31, 1996.
In connection with the purchase of a Resort Club membership, a
member is obligated to pay annual membership dues. Annual
membership dues have been established to cover each club member's
pro rata share of the estimated annual maintenance and operating
expenses, including reserves, for all of the units, facilities,
and amenities with the present Resort Club program. Each Resort
Club member's pro rata share of the annual expenses is based on
the ratio of Resort Club member's total contract points to the
total contract points in the Resort Club program. The initial
annual membership dues may be increased by Resort Club as of each
fiscal year by a percentage not to exceed the percentage increase,
if any, in the Consumer Price Index ("CPI"). The annual
membership dues may be increased by an amount greater than the CPI
if the increase is put to a vote of all Resort Club members and
approved by a majority of the points voted. As of December 31,
1997, management has determined that based on the average per
point assessment as of December 31, 1997, a deficit of $3,062,742
exists as compared to $3,025,958 in the prior year period.
Membership Annual Fee Revenue was $75,368 in the first six months
of fiscal 1998 compared to $71,539 during the comparable fiscal
1997 period, an increase of $3,829 (5.4%).
Other Revenue for the first three months of fiscal 1998 was
$40,056, as compared to ($10,743) for the same period last year.
Other Expense was $74,955 for the first three months in fiscal
1998 as compared to $21,261 for the same period in fiscal 1997.
Depreciation and amortization was $3,251 in the first three months
of fiscal 1998 compared to $48,175 in the comparable fiscal 1997
period. The decrease is primarily attributed to the sale of the
Space Shot in connection with the Great American Settlement.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Three months ended December 31, 1997 compared with three months
ended December 31, 1996.
During the first three months of fiscal 1998, the Company recorded
a gain on the sale of marketable securities of $882,635, resulting
from the sale of Food Extrusion and PriCellular stock. No gain or
loss was recorded in the comparable fiscal 1997 period.
During the first three months of fiscal 1998, Interest income was
$76,407 as compared to $78,251 for the comparable fiscal 1997
period. In addition, interest expense was $476,407 in the first
three months of fiscal 1998 as compared to $13,897 for the same
period in fiscal 1997. Interest expense increased primarily as a
result of the Binghamton Savings Bank loan, the Resort Club Notes
and the Resort Club Unsecured Creditors' Note.
On October 16, 1997, the Company recorded a loss on the Great
American Settlement of $12,426,510 (see Note 3 to the Notes to the
Consolidated Financial Statements).
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, 1997:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended December 31, 1997:
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
17
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THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE DECEMBER 31,
1997 10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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