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 March 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)
(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, 5,158,354
$0.01 par value
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED MARCH 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 3-4
Condensed consolidated statements of cash flows 5-6
Notes to condensed consolidated financial statements 7-14
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
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<S> <C> <C>
March 31, September 30,
1998 1997
(Unaudited) (See note below)
Current assets:
Cash and cash equivalents $ 697,878 $ 126,368
Membership receivables, net
(including allowance for
Doubtful accounts of $340,926
at March 31, 1998 and $362,377
at September 30, 1997 1,499,020 1,570,991
Prepaid expenses and other assets 455,980 644,197
Investment in mutual fund and
other marketable securities 302,425 327,403
Accrued interest and other
receivables (including receivables
to related parties of $464,819 at
March 31, 1998 and $245,055 at
September 30, 1997) 1,693,751 988,807
Deferred membership interests
held for sale 9,511,132 8,603,925
Total current assets 14,160,186 12,261,691
Property, equipment, furniture
and fixtures, net of accumulated
depreciation and amortization of
$126,077 at March 31, 1998 and
$90,507 at September 30, 1997 230,954 258,927
Other assets:
Membership receivables, net
(including allowance for Doubtful
accounts of $1,282,533 at March 31,
1998 and $1,348,296 at September 30,
1997 5,577,412 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. 1,558,967 1,515,295
Investment in Food Extrusion, Inc. 68,597 164,125
Real estate and real estate related
activities 786,874 745,504
Total other assets 8,260,854 15,344,593
Total assets $ 22,651,994 $ 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 BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
March 31, September 30,
1998 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 4,793,879 5,781,453
Deferred membership revenue 12,511,863 11,732,701
Total current liabilities 19,656,063 20,064,998
Long-term liabilities:
Secured debt, net of current
maturities 2,220,345 3,951,683
Unsecured notes payable, net of
current maturities 8,293,367 227,732
10,513,712 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 March 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 (12,897,658) (459,079)
Less: 1,350,646 shares held in
treasury at March 31, 1998 and
at September 30, 1997 (1,400,913) (1,400,913)
Total stockholders' equity (9,017,781) 3,620,798
Total liabilities and
stockholders' equity $ 22,651,994 $ 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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Revenues:
Membership revenue $ 402,794 $ 222,817
Membership annual fee revenue 147,106 317,530
Other revenue 107,266 7,265
Total revenues 657,166 547,612
Expenses:
Other operations 171,888 41,699
Membership operations 528,905 883,684
Membership maintenance 255,254 (477,840)
Marketing and selling 834,918 372,816
General and administrative expenses 367,427 307,584
Depreciation and amortization 6,502 96,351
Total expenses 2,164,894 1,224,294
Income (loss) from operations (1,507,728) (676,682)
Other income (expenses):
Interest income 335,475 176,170
Interest expense (983,335) (47,608)
Gain on sale (loss) of RTC mortgages 42,259 (207,165)
Gain on Sale of Bill Hill property 840,000 -0-
Gain on Sale of marketable securities 916,260 -0-
Gain on Sale of Resort Club contracts 345,000 -0-
Great American Settlement (12,426,510) -0-
Total other income (expenses) (10,930,851) (78,603)
Income (loss) before income taxes (12,438,579) (755,285)
Income taxes -0- -0-
Net income (loss) $(12,438,579) $ (755,285)
Net income (loss) per common share $ (2.41) $ (0.18)
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 OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Revenues:
Membership revenue $ 402,794 $ 113,878
Membership annual fee revenue 71,738 245,991
Other revenue 67,210 18,008
Total revenues 541,742 377,877
Expenses:
Other operations 96,933 20,438
Membership operations 392,948 498,234
Membership maintenance 174,862 259,841
Marketing and selling 614,056 128,234
General and administrative expenses 147,931 231,862
Depreciation and amortization 3,251 48,176
Total expenses 1,429,981 1,186,785
Income (loss) from operations (888,239) (808,908)
Other income (expenses):
Interest income 259,067 97,919
Interest expense (506,928) (33,712)
Gain on sale of RTC mortgages 2,136 -0-
Gain on sale of Bill Hill property 840,000 -0-
Gain on sale of marketable securities 33,625 -0-
Gain on Sale of Resort Club contracts 345,000 -0-
Great American Settlement -0- -0-
Total other income (expenses) 972,900 64,207
Income (loss) before income taxes 84,661 (744,701)
Income taxes -0- -0-
Net income (loss) $ 84,661 $ (744,701)
Net income (loss) per common share $ 0.02 $ (0.18)
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
Cash flows provided by (used in) operating activities:
Net Income (loss) $ (12,438,579) $ (755,285)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 35,570 96,351
Amortization of interest income (43,672) (43,029)
Amortization of interest expense 675,467 -0-
Gain on sale of Bill Hill property (840,000) -0-
Gain on sale of marketable securities (916,260) -0-
Gain on sale of Resort Club contracts (345,000) -0-
Great American Settlement 12,426,510 -0-
Changes in assets and liabilities:
Membership receivables 339,754 (1,508,981)
Accrued interest receivable and
other receivables 195,056 (149,325)
Prepaid expenses and other assets 188,217 (40,343)
Deferred member expenses (125,207) (3,458,367)
Accounts payable and accrued expenses (48,180) (273,002)
Deferred membership revenue 779,162 3,865,794
Net cash provided by (used in) operations (117,162) (2,266,187)
Cash flows from investing activities:
Sale of (investment in) real estate
and real estate related activities 1,320,620 (877,801)
Sale of (investment in) mutual fund
and other marketable securities 1,036,766 61,540
Sale of RTC mortgages 40,786 877,663
Sale of Resort Club contracts 345,000 -0-
Capital expenditures (7,597) (44,481)
Net cash (used in) investing activities 2,735,575 16,921
Cash flows from financing activities:
Proceeds from borrowings -0- 1,338,036
Repayment of borrowings (2,046,903) (45,901)
Purchase of treasury stock -0- (1,000)
Net cash provided by (used in)
financing activities (2,046,903) 1,291,135
Increase (Decrease) in cash 571,510 (958,131)
Cash balance, beginning of year 126,368 1,303,659
Cash balance, March 31, 1998 $ 697,878 $ 345,528
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<S> <C> <C>
1998 1997
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
SIX MONTHS ENDED MARCH 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
March 31, 1998 and September 30, 1997, the results of
operations for the six months ended March 31, 1998 and 1997,
and cash flows for the six months ended March 31, 1998 and
1997. Operating results for the six months ended March 31,
1998, 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 Chief
Executive Officer of the Company is a former principal shareholder
and former 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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
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 6).
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
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:
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 3 - RELATED PARTY TRANSACTIONS (Continued):
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.
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
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 6), 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 referrals.
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
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 4 - INTRAWEST TRANSACTION:
The entity presently providing 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 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 the 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 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 has had a devastating
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 jeopardy of
maintaining its operations.
NOTE 5 - SALE OF MARKETABLE SECURITIES:
During the first six months of fiscal 1998, the Company sold
152,600 shares of Food Extrusion, Inc. and recognized a gain
of $776,477 on the transactions. As of March 31, 1998, the
Company was the beneficial owner of 110,000 shares of Food
Extrusion, Inc. common stock. Also during the first six
months of fiscal 1998, the Company sold its remaining 15,700
shares of PriCellular common stock and recognized a $145,521
gain on the transactions.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1998 AND 1997
NOTE 6 - BILL HILL TRANSACTION:
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.
NOTE 7 - SUBSEQUENT EVENTS:
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 or Stonehill Recreation's
operations. As a result, the Company may restructure or
divest its interests in these entities.
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 six months of fiscal 1998, the Company had
a net loss from operations of approximately $12,438,600.
Included in the net loss from operations is depreciation of
approximately $35,570 and amortization of interest expense
of approximately $675,500, which are noncash expenses. In
addition, the net loss includes a loss of approximately
$12,426,500 resulting from the settlement with Great
American, a gain on the sale of marketable securities of
approximately $916,300, a gain on the sale of the Bill
Hill property of $840,000 and a gain on the sale of Resort
Club contracts of $345,000, all of which are non-recurring.
After reflecting the net change in assets and liabilities,
net cash used by operations was approximately $117,200.
Investing activities provided net cash of approximately
$2,735,600 and primarily includes the sale of real estate
assets of approximately $1,320,600, the sale of marketable
securities which generated proceeds of approximately
$1,036,800 and the sale of certain Resort Club contracts to
Intrawest of approximately $345,000. Financing activities
used net cash of approximately $2,046,900 which resulted
from the repayment of borrowings. Accordingly, during the
first six months of fiscal 1997, the Company's cash
increased by approximately $571,500.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations
Six months ended March 31, 1998 compared with six months
ended March 31, 1997.
The net loss from operations applicable to common
shareholders for the first six months of fiscal 1998 was
$11,138,579 ($2.16 share) as compared to net income from
operations applicable to common shareholders of $755,285
($0.18 share) in the comparable prior year period.
The net income from operations applicable to common
shareholders for the three months ended March 31, 1998 was
$84,661 ($0.02 per share) as compared to a net loss from
operations applicable to common shareholders of $744,701
($0.18 per 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 six months of fiscal 1998, the Company
recognized $402,794 in membership revenue as compared to
$222,817 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 six
months of fiscal 1998, the Company had adjusted Deferred
Membership Interest Held for Sale over budget in the
aggregate amount of approximately, $559,000 as compared to
$1,087,000 in the comparable fiscal 1997 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)
Six months ended March 31, 1998 compared with six months
ended March 31, 1997.
Notes receivable with payment delinquencies of 90 days or
more have been considered in determining the Allowance for
cancellation. Cancellations occur when the note receivable
is determined to be uncollectible and related collateral, if
any, has been recovered.
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 March 31, 1998, management has determined that based on
the average per point assessment as of March 31, 1998, a
deficit of $3,048,000 exists as compared to a deficit of
$3,236,000 in the prior year period.
Membership Annual Fee Revenue was $147,106 in the first six
months of fiscal 1998 compared to $317,530 during the
comparable fiscal 1997 period, a decrease of $170,424
(53.7%).
Other Revenue for the first six months of fiscal 1998 was
$107,266, up from $7,265 for the same period last year.
Other Expense also increased, becoming $171,888 in fiscal
1998 as compared to $41,699 for the first six months of
fiscal 1997.
Depreciation and amortization was $6,502 in the first six
months of fiscal 1998 compared to $96,351 in the comparable
fiscal 1997 period, resulting in a decrease of $89,849
(93.3%). 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)
Six months ended March 31, 1998 compared with six months
ended March 31, 1997.
During the first six months of fiscal 1998, the Company
recorded a gain on the sale of marketable securities of
$916,260, 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 six months of fiscal 1998, the Company
recorded a gain on Sale of Real Estate and RTC Mortgages of
$42,259. During the comparable period in fiscal 1997, the
Company recorded a loss of $207,165 on the sale of RTC mortgages.
During the first six months of fiscal 1998, Interest income
was $335,474 as compared to $176,170 for the comparable
fiscal 1997 period. In addition, interest expense was
$983,335 in the first six months of fiscal 1998 as compared
to $47,608 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 of the Notes to
the Consolidated Financial Statements).
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 18, 1998, the
Company sold these land holdings to Intrawest realizing net proceeds
of $840,000.
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 March 31, 1998:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended March 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
MARCH 31, 1998 FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
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<PERIOD-END> MAR-31-1998
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