SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-10176
DOMINION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2306487
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) 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 JUNE 30, 1999
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 statement 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
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
June 30, September 30,
1999 1998
(Unaudited) (See note below)
Current assets:
Cash and cash equivalents $ 656,620 $ 628,159
Membership receivables, net (including
allowance for doubtful accounts of
$396,719 at June 30, 1999 and $393,423
at September 30, 1998 1,075,163 1,254,793
Prepaid expenses and other assets 521,139 336,060
Investment in mutual fund and other marketable
Securities 111,951 115,242
Accrued interest and other receivables 970,750 933,292
Deferred membership interests held for sale 7,601,703 8,381,774
Total current assets 10,937,326 11,649,320
Property, equipment, furniture and fixtures, net
of accumulated depreciation and amortization of
$209,238 at June 30, 1999 and $160,494 at
September 30, 1998 224,403 201,755
Other assets:
Membership receivables, net (including allowance for
doubtful accounts of $1,492,421 at June 30, 1999
and $1,480,021 at September 30, 1998 4,044,659 4,720,415
Note Receivable - Stonehill Recreation 3,005,305 1,689,573
RTC mortgages 155,791 155,791
Note receivable and accrued interest-
RiceX, Inc. 1,668,147 1,602,639
Investment in RiceX, Inc. 813,396 -0-
Real estate and real estate related
activities 557,027 560,000
Total other assets 10,244,325 8,728,418
Total assets $ 21,406,054 $20,579,493
Note: The balance sheet at September 30, 1998, has been taken from
audited financial statements at that date and condensed.
</TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
June 30, September 30,
1999 1998
(Unaudited) (See note below)
Current Liabilities:
Secured debt, current portion $ 811,129 $ 800,615
Unsecured notes payable, current portion 1,599,042 1,680,000
Accounts payable and accrued liabilities 5,009,359 4,796,550
Deferred membership revenue 11,939,435 11,658,639
Total current liabilities 19,358,965 18,935,804
Long-term liabilities:
Secured debt, net of current maturities 2,948,067 3,100,381
Unsecured notes payable, net of current
maturities 10,663,504 8,434,327
13,611,571 11,534,708
Redeemable common stock; par value $0.01 per
share and 408,333 shares outstanding at June
30, 1999 and 483,333 shares outstanding at
September 30,1998; redeemable at $3.00 per
share in July 1998 through July 2000 1,225,000 1,450,000
Stockholders' equity:
Common stock, $0.01 par value; Authorized -
25,000,000 Shares; issued and outstanding
- 7,630,576 shares at June 30, 1999 and
- 5,058,354 shares at September 30, 1998 76,306 50,584
Additional paid-in-capital 5,819,484 5,270,206
Accumulated deficit (17,284,359) (15,260,896)
Less: 1,350,646 shares held in treasury at
June 30, 1999 and at September 30, 1998 (1,400,913) (1,400,913)
Total stockholders' equity (12,789,482) (11,341,019)
Total liabilities and stockholders'
equity $ 21,406,054 $ 20,579,493
Note: The balance sheet at September 30, 1998, has been taken from audited
financial statements at that date and condensed.
</TABLE>
See accompanying notes
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Revenues
Membership revenue $ 103,429 $ 402,794
Membership annual fee revenue 400,606 347,973
Other revenue 70,530 203,516
Total revenues 574,565 954,283
Expenses:
Other operations 25,290 193,794
Membership operations 753,441 853,487
Membership maintenance 651,834 460,775
Marketing and selling (41,215) 1,043,015
General and administrative expenses 632,717 422,564
Depreciation and amortization 11,022 9,856
Total expenses 2,033,089 2,983,491
Income (loss) from operations (1,458,524) (2,029,208)
Other income (expenses):
Interest income 668,669 447,695
Interest expense (1,703,926) (1,435,631)
Financing fee income 531,714 -0-
Amortization of deferred financing costs (73,448) (87,477)
Gain (loss) on sale of real estate and
RTC mortgages 12,052 169,482
Gain on sale of marketable securities -0- 1,139,995
Gain on sale of Bill Hill property -0- 840,000
Gain on sale of Resort Club contracts -0- 345,000
Great American Settlement -0- (12,426,510)
Total other income (expenses) (564,939) (11,007,446)
Income (loss) before income taxes (2,023,463) (13,036,654)
Income taxes -0- -0-
Net income (loss) $ (2,023,463) $(13,036,654)
Net income (loss) per common share $ (0.30) $ (2.53)
Weighted average number of share used in
computing net income per share 6,768,936 5,158,354
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Revenues:
Membership revenue $ 67,733 $ -0-
Membership annual fee revenue 251,733 200,867
Other revenue 16,380 96,250
Total revenues 335,846 297,117
Expenses:
Other operations (11,705) 21,906
Membership operations 367,784 324,582
Membership maintenance 237,269 205,521
Marketing and selling (121,741) 208,097
General and administrative expenses 246,800 142,614
Depreciation and amortization 3,674 3,354
Total expenses 722,081 906,074
Income (loss) from operations (386,235) (608,957)
Other income (expenses):
Interest income 242,574 112,220
Interest expense (575,567) (452,296)
Amortization of deferred financing
costs (29,258) -0-
Gain (loss) on sale of real estate and
RTC mortgages 2,654 127,223
Gain on sale of marketable securities -0- 223,735
Gain on sale of Bill Hill property -0- -0-
Great American Settlement -0- -0-
Total other income (expenses) (359,597) 10,882
Income (loss) before income taxes (745,832) (598,075)
Income taxes -0- -0-
Net income (loss) $ (745,832) $ (598,075)
Net income (loss) per common share $ (0.10) $ (0.12)
Weighted average number of share used in
computing net income per share 7,630,576 5,158,354
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Cash flows provided by (used in) operating
activities:
Net Income (loss) $ (2,023,463) $(13,036,654)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 11,022 38,924
Amortization of interest income (65,508 (65,508)
Amortization of interest expense 1,013,202 1,013,203
Amortization of deferred financing costs 73,448 87,477
Financing fee income (RiceX) (531,714 -0-
Gain on sale of Bill Hill property -0- (840,000)
Gain on sale of marketable securities -0- (1,139,995)
Gain on sale of Resort Club contracts -0- (345,000)
Great American Settlement -0- 12,426,510
Changes in assets and liabilities:
Membership receivables 855,386 844,847
Accrued interest and other receivables (37,458) 29,604
Prepaid expenses and other assets (83,527) 216,479
Deferred member expenses 780,071 425,081
Accounts payable and accrued expenses (68,873) (583,525)
Deferred membership revenue 280,796 411,839
Net cash provided by (used in) operations 203,382 (516,718)
Cash flows from investing activities:
Investment in real estate and real estate
related activities 2,973 1,547,494
Investment in mutual fund and other
marketable securities 3,291 1,329,089
Note Receivable - Stonehill Recreation (1,315,732) -0-
Investment in RTC mortgages -0- 153,999
Sale of Resort Club contracts -0- 345,000
Capital expenditures (33,670) (8,922)
Net cash (used in) investing activities (1,343,138) 3,366,660
Cash flows from financing activities:
Proceeds from borrowings 1,754,725 -0-
Proceeds from sale of common stock 400,000 -0-
Repayment of borrowings (761,508) (2,280,915)
Redemption of common stock (225,000) -0-
Net cash provided by (used in) financing
Activities 1,168,217 (2,280,915)
Increase (decrease) in cash 28,461 569,027
Cash balance, beginning of year 628,159 126,368
Cash balance, June 30, 1999 $ 656,620 $ 695,395
</TABLE>
See accompanying notes
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Investment in RiceX $ 813,396 $ -0-
Financing fee income (531,714) -0-
Deferred interest income (281,682) -0-
Deferred financing costs 175,000 -0-
Great American Settlement -0- 8,805,210
Unsecured notes payable -0- (7,505,210)
Common stock (3,500) 5,000
Additional paid-in-capital (171,500) 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
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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
June 30, 1999, the results of operations for the nine months ended
June 30, 1999 and 1998, and cash flows for the nine months ended
June 30, 1999 and 1998. Operating results for the nine months
ended June 30, 1999, 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 of $2,217,139 for the nine months
ended June 30, 1999. In addition, the Company's current
liabilities exceeded its current assets as of June 30, 1999 by
$4,083,907, 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
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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 June 30, 1999, 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
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
the amenities it agreed to provide to Resort Club members and owed
approximately $738,000 to
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 $4.7 million.
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 million (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
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(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
$205,076 as of June 30, 1999 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 two years ended June 30, 1999 and 1998, the
Company paid to the partnership $7,500 and $18,696 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.
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.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS (continued):
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 June 30, 1999, Stonehill Recreation owed the Company $3,005,305
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 June 30, 1999, the Company is obligated to Berkowitz
Wolfman Assoc., Inc. in the amount of $2,294,156 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. Stonehill Recreation is currently in
negotiations with Lakeview to extend this loan.
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 $19,052.
The loan bears interest at 8% and is due to be repaid on demand.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
NOTE 4 - DEBT:
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.
NOTE 5 - 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.
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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
NOTE 6 - 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 secured loan due from RiceX in the
amount of $1.85 million. The Company and FoodCeuticals' collateral
includes certain tangible and intangible assets by 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
3,743,540 shares of RiceX's common stock 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.
NOTE 7 - 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.
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 Great American 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 nine months of fiscal 1999, the Company had a net
loss from operations of approximately $2,023,460. Included in the
net loss from operations is depreciation of approximately $11,000,
amortization of interest expense of approximately $1,013,200 and
amortization of deferred financing costs of $73,448, all of which
are non-cash expenses. Amortization of interest income of $65,505
offset these items. The Company had non-cash income from its
transaction with RiceX in the amount of $531,714.
Also during the first nine months of fiscal 1999, changes in assets
and liabilities included an increase in membership receivables of
approximately $855,400 a decrease in accrued interest and other
receivables of approximately $37,460, a decrease in prepaid
expenses and other assets of approximately $83,500, an increase in
deferred member expenses of approximately $780,100, a decrease in
accounts payable and accrued expenses of approximately $68,900 and
an increase in deferred membership revenue of approximately
$280,800. After reflecting the net changes in assets and
liabilities, net cash provided by operations was approximately
$203,400.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
A. Liquidity and Capital Resources
During the first nine months of the fiscal 1999, investing
activities used net cash of approximately $1,343,140 and includes
primarily the purchase of furniture and equipment of approximately
$33,700 and additional advances to Stonehill Recreation of
approximately $1,315,700.
During the first nine months of the fiscal 1999, financing
activities provided net cash of approximately $1,168,200, which
resulted primarily from $1,754,700 from proceeds from borrowings
and sale of common stock of common stock of $400,000 offset by
repayment of borrowings in the amount of approximately $761,500 and
redemption of common stock of approximately $225,000.
Accordingly, during the first nine months of fiscal 1999, the
Company's cash increased by approximately $28,500.
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 $2.5 million 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
substantially reduced operating activities with respect to 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 June 30, 1999, the Company had engaged in various
transactions with certain of its officers, directors, principal
stockholders and certain of their affiliated. In addition, as of
June 30, 1999, 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
Nine months ended June 30, 1999 compared with nine months ended
June 30, 1998.
The Company's income during the three fiscal periods ended June 30,
1998 was derived from membership revenue, membership annual fee
revenue, and ski rental shop revenue and other revenue. Membership
revenue consists of revenue from the sale of vacation memberships.
Membership annual fee revenue consists of the annual membership
dues established to cover each member's pro rata share of the
estimated annual maintenance and operating expenses, including
reserves, for all of the units, facilities, and amenities of the
Resort Club program. Other revenue in fiscal 1998 and 1997
consists primarily of lease income from its office building in
Selma, Alabama and overnight rental income generated by vacant
Resort Club condominiums.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Results of Operations (continued)
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 places in service free and clear of all
encumbrances. 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 nine months of fiscal 1999, the Company recognized
approximately $103,400 in membership revenue as compared to
approximately $402,800 in the first nine months of 1998.
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. Deferred Membership Interests Held
for Sale are valued at the lower 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 Real Estate Projects." During the first nine
months of fiscal 1999, the Company had adjusted Deferred membership
Interests Held for Sale for items over budget in the aggregate
amount of approximately, $916,400 as compared to approximately
$1,073,000 in the first nine months of fiscal 1998.
Membership revenue was $103,429 in the first nine months of fiscal
1999 compared with $402,794 in the first nine months of fiscal 1998.
The decline in revenues was the result of the sale of fewer
memberships in fiscal 1999. This decline in sale of memberships
was the result of the adverse impact on the Company resulting from
the Great American Chapter 11 Proceedings.
Membership annual fee revenue was $400,606 in the first nine months
of fiscal 1999 compared with $347,973 in the first nine months of
fiscal 1998, or an increase of $52,633 (15.13%). This was
primarily the result of additional memberships as well as an
increase in maintenance fees per membership in accordance with an
increase in the consumer price index.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Other revenue was $70,530 in the first nine months of fiscal 1999
compared with $203,516 in the first nine months of fiscal 1998 or a
decline of $132,986 (65.34%). The decline in revenues was
primarily the result of less overnight rental income generated by
vacant Resort Club condominiums.
Other operations expenses were $25,290 in the first nine months of
fiscal 1999 compared with $193,794 in the first nine months of
fiscal 1998, or a decrease of $168,504 (86.95%). The decrease was
the result of certain non-recurring operating expenses that the
Company recorded in the first nine months of fiscal 1998.
Membership operations expenses decreased in the first nine months
of fiscal 1999 to $753,441 from $853,487 in the first nine months
of fiscal 1998, or by $100,046 (11.72%) as a result of the decrease
in the sale of membership interests.
Membership maintenance expenses increased in the first nine months
of fiscal 1999 to $651,834 from $460,775 in the first nine months
of fiscal 1998, or by $191,059 as a result of increased real estate
taxes, condominium fees, check-in services and repairs and
maintenance.
Marketing and selling expenses were negative $41,215 in the first
nine months of fiscal 1999 compared with $1,043,015 in the first
nine months of fiscal 1998, a decrease of $1,084,230. 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.
General and administrative expenses increased to $632,717 in the
first nine months of fiscal 1999 from $422,564 in the first nine
months of fiscal 1998, or by $210,153 as a result of increased
legal fees in connection with the FoodCeuticals, Inc. transaction
and the GAR restructuring.
Depreciation and amortization was $11,022 in the first nine months
of fiscal 1999, compared to $9,856 in the first nine months of
fiscal 1998 resulting in an increase of $1,166 (11.83%). This
increase was essentially unchanged.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. Results of Operations (continued)
Interest income was $668,669 in the first nine months of fiscal 1999
compared with $447,695 in the first nine months of fiscal 1998. The
increase of $220,974 was the result of the loan due from Stonehill
Recreation.
Interest expense increased to $1,897,602 in the first nine months
of fiscal 1999 compared with $1,435,631 in the first nine months of
1998. The increase of $461,971 was the result of the Berkowitz
Wolfman Assoc., Inc. loan and the increased loan facility with
Binghamton Savings Bank.
During the first nine months of fiscal 1999 the Company recognized
financing fee income of $531,714 in connection with the
FoodCeuticals transaction (Note 5).
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 Corp. These
costs decreased to $73,448 in the first nine months of fiscal 1999
from $87,477 in the first nine months of fiscal 1998, or a decrease
of $14,029 which was the result of the varying maturities of these
loans.
In the first nine months of fiscal 1999, the Company did not sell
any of its marketable securities
as compared to a gain on the sale of marketable securities in the
first nine months of fiscal 1998 of $1,139,995 primarily resulting
from a gain on the sale of RiceX, Inc. stock.
During the first nine months of fiscal 1998, the Company had a gain
of $840,000 from the sale of the Billhill, Inc. real estate and a
gain of $345,000 from the sale of Resort Club contracts. The
Resort Club contracts sold were the Company's one-time, 5-year
leases of winter timeshare sales at two locations, a summer
timeshare, sales office at one location, as well as the Company's
10-year lease of a timeshare closing house, all located within the
ski facility and summer participation theme park located in Vernon,
New Jersey. In addition, it recognized an expense of $12,426,510
as a result of contributions it made in the resolution of the
Chapter 11 Proceedings. This expense is further discussed below
under Liquidity and Capital Resources.
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 June 30, 1999:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended June 30, 1999:
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 06/30/1999
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
<CASH> 656,620
<SECURITIES> 111,951
<RECEIVABLES> 1,471,882
<ALLOWANCES> 396,719
<INVENTORY> 0
<CURRENT-ASSETS> 10,937,326
<PP&E> 433,641
<DEPRECIATION> 209,238
<TOTAL-ASSETS> 21,406,054
<CURRENT-LIABILITIES> 19,358,965
<BONDS> 13,611,571
0
0
<COMMON> 76,306
<OTHER-SE> (12,865,788)
<TOTAL-LIABILITY-AND-EQUITY> 21,406,054
<SALES> 574,565
<TOTAL-REVENUES> 574,565
<CGS> 0
<TOTAL-COSTS> 2,033,089
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,703,926
<INCOME-PRETAX> (2,023,463)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,023,463)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,023,463)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
