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, 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
(State or other jurisdiction of
incorporation or organization)
22-2306487
(IRS Employer Identification No.)
355 Madison Avenue, Morristown, NJ 07960
(Address of principal executive offices)
(Zip Code)
(973) 538-4177
(Registrant's telephone number, including area code)
NONE
(Former name, former address, and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) or the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has
been subject to such filing requirements for the past 90
days.
Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the close of the
latest practicable date.
Class
Common Stock, $0.01 par value
Outstanding at June 30, 1997
$4,208,354
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED JUNE 30, 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 3-4
Condensed consolidated statements of cash flows 5-6
Notes to condensed consolidated financial statements 7-24
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, 1997 September 30,
1996
(Unaudited) (See note below)
Current assets:
Cash and Cash Equivalents $ 778,096 $ 903,659
Cash held in escrow (Note 3) -0- 400,000
Investment in mutual fund and
other marketable securities 449,918 493,936
Membership Receivables, Net
(including allowance for doubtful
accounts of $339,902 at June 30,
1997 and $261,798 at September
30, 1996 1,620,053 1,335,268
Accrued interest and other
receivables 1,190,109 235,269
Prepaid expenses and other assets 568,088 86,389
Deferred Membership Interests
Held For Sale 8,291,384 7,105,621
Total current assets 12,897,648 10,560,142
Property, equipment, furniture,
and fixtures, net of accumulated
depreciation and amortization of
$246,635 at June 30, 1997 and
$1,147,312 at September 30, 1996 1,239,818 1,486,121
Other assets:
Membership Receivables, Net
(including allowance for
doubtful accounts of $1,278,680
at June 30, 1997 and $928,191
at September 30, 1996 6,094,483 4,619,960
Mortgages receivables 645,922 1,523,585
Note Receivable - Great Gorge 97,135 97,135
Note Receivable - Food Extrusion, Inc 1,493,459 1,474,861
Investment in Food Extrusion, Inc. 254,895 361,941
Assets Held For Sale 165,700 165,700
Real Estate and Real Estate
related activities 2,228,035 1,690,864
Total other assets 10,979,629 9,934,046
Total assets $ 25,117,095 $ 21,980,309
</TABLE>
Note: The balance sheet at September 30, 1996, has been
taken from audited financial statements at that date and
condensed.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
June 30, 1997 September 30,
1996
(Unaudited) (See note below)
Current liabilities:
Secured Debt, current portion $ 1,021,370 $ 29,117
Notes payable, current portion -0- 1,611,490
Capital Lease 30,597 76,498
Accounts payable and accrued
liabilities 6,709,575 6,950,172
Deferred Membership Revenue 10,763,407 9,326,866
Total current liabilities 18,524,949 17,994,143
Long-term liabilities:
Secured Debt, net of current maturities 3,222,856 294,745
Total long-term liabilities 3,222,856 294,745
Stockholders' equity:
Common stock, $0.01 par value;
authorized - 25,000,000 shares;
issued and outstanding - 4,208,354
shares at June 30, 1997 and
4,229,354 at September 30, 1996 42,084 42,294
Additional paid-in capital 5,058,706 5,058,706
Retained earnings (deficit) (330,587) (26,284)
Less: 1,319,596 shares held
in treasury (1,400,913) (1,383,295)
Total stockholders' equity 3,369,290 3,691,421
Total liabilities and
stockholders' equity $ 25,117,095 $ 21,980,309
</TABLE>
Note: The balance sheet at September 30, 1996, has been
taken from audited financial statements at that date and
condensed.
See accompanying notes
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Revenues
Membership revenue $ 2,690,852 $ 2,001,911
Membership annual fee revenue 380,445 293,765
Ski rental shop revenue
and other revenue 276,319 1,274,023
Total revenues 3,347,616 3,569,699
Expenses:
Ski rental shop and
other operations 43,036 1,081,686
Membership operations 2,575,864 4,095,990
Membership maintenance (468,430) 4,205,366
Marketing and selling 2,165,417 2,967,901
General and administrative expenses 558,204 716,651
Depreciation and amortization 144,526 53,285
Total expenses 5,018,617 13,120,879
Income (loss) from operations (1,671,001) (9,551,180)
Other income (expenses):
Interest income 331,576 137,567
Interest expense (204,893) (511,960)
Loss on Sale of Real Estate
and RTC Mortgages (300,139) -0-
Gain on Sale of marketable securities 1,540,154 2,628,808
Total other income (expenses) 1,366,698 2,254,415
Income (loss) from continuing
operations before income taxes (304,303) (7,296,765)
Income taxes -0- -0-
Net Income (loss) from
continuing operations (304,303) (7,296,765)
Discontinued operations (Note 3):
Gain (loss) from operations of
Cellular Telephone System (less
applicable income tax (benefit)
of $24,294) -0- (36,442)
Gain on Sale of Cellular Telephone
System (less applicable income
taxes of $728,294) -0- 10,087,483
Income from discontinued operations -0- 10,051,041
Net income (loss) $ (304,303) $ 2,754,276
Net income (loss) from continuing
operations per common share $ (0.07) $ (1.46)
Net income (loss) from discontinued
operations per common share $ -0- $ 2.01
Net Income (loss) per common share $ (0.07) $ 0.55
Weighted average number of shares
used in computing net
income per share 4,221,687 4,991,595
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Revenues:
Membership Revenue $ 2,468,035 $ 2,001,911
Membership annual fee revenue 62,915 293,765
Ski rental shop and other revenue 269,054 215,714
Total revenues 2,800,004 2,511,390
Expenses:
Ski rental shop and other operations 1,337 14,455
Membership operations 1,692,180 4,095,990
Membership maintenance 9,410 4,205,366
Marketing and selling 1,792,601 2,967,901
General and administrative expenses 250,620 266,224
Depreciation and amortization 48,175 49,739
Total expenses 3,794,323 11,599,675
Income (loss) from operations (994,319) (9,088,285)
Other income (expenses):
Interest income 155,406 (313,016)
Interest expense (157,285) (267,260)
Amortized discount on warrants
and deferred financing costs (300,139) -0-
Gain on sale of PriCellular Stock
and other marketable securities 1,747,319 177,464
Total other income (expenses) 1,445,301 (402,812)
Income (loss) from continuing
operations before income taxes 450,982 (9,491,097)
Income taxes -0- (203,177)
Net Income (loss) from
continuing operations 450,982 (9,287,920)
Discontinued operations (Note 3):
Gain (loss) from operations of
Cellular Telephone System System -0- 7,890
Gain on Sale of Cellular
Telephone System -0- 2,787,756
Income from discontinued operations -0- 2,795,646
Net income (loss) $ 450,982 $ (6,492,274)
Net income (loss) from continuing
operations per common share $ 0.11 $ (2.19)
Net income (loss) from discontinued
operations per common share $ -0- $ 0.66
Net Income (loss) per common share $ 0.11 $ (1.53)
Weighted average number of share used
in computing net income per share 4,211,706 4,239,404
See accompanying notes.
</TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Cash flows provided by (used in) continuing operating activities:
Net Income (loss) $ (304,303) $ (7,296,765)
Adjustments to reconcile net income to net cash provided by continuing
operating activities:
Depreciation and amortization 144,526 53,285
Changes in assets and liabilities:
Membership receivables (1,759,308) (1,576,779)
Accrued interest receivable and
other receivables (954,840) (23,984)
Prepaid expenses and other assets (481,699) (42,838)
Deferred member expenses (1,185,763) (1,706,524)
Accounts payable and accrued expenses (240,597) 4,628,181
Deferred membership revenue 1,436,541 3,005,694
Net cash provided by (used in)
continuing operations (3,345,443) (2,959,730)
Cash flows provided by discontinued operating activities:
Net Income (loss) -0- (36,442)
Adjustments to reconcile net (loss) to net cash
provided by discontinued operating activities:
Depreciation and amortization -0- 109,601
Changes in assets and liabilities:
Trade receivables -0- 3,986
Inventories -0- (892)
Prepaid expenses and other assets -0- 31,216
Accounts payable and accrued expenses -0- 154,460
Gain on Sale of Cellular Assets -0- 7,263,902
Net cash provided by discontinued
operations -0- 7,525,831
Cash flows from investing activities:
Sale of PriCellular Stock -0- 4,992,350
Convert related party receivable
to equity investment -0- 1,019,467
Note Receivable - Food Extrusion 88,448 (1,750,000)
Note Receivable - Great Gorge -0- (97,135)
Investment in real estate and real
estate related activities (537,171) 23,875
Purchase of amusement ride -0- (1,229,010)
Purchase of Piston Bullies -0- (165,700)
Investment in mutual fund and other
marketable securities 44,018 (539,057)
Investment in mortgages receivables 877,663 (1,523,585)
Capital expenditures 101,777 (120,226)
Net cash (used in) investing activities 574,735 610,979
Cash flows from financing activities:
Proceeds from borrowings 2,652,165 1,165,700
Repayment of borrowings (389,192) (4,566,022)
Purchase of treasury stock (17,828) (1,386,516)
Net cash provided by (used in)
financing activities 2,245,145 (4,786,838)
Increase (Decrease) in cash (525,563) 390,242
Cash balance, beginning of year 1,303,659 666,697
Cash balance, June 30, 1997 $ 778,096 $ 1,056,939
</TABLE>
See accompanying notes
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<S> <C> <C>
1997 1996
Investment in PriCellular $ -0- $ 7,497,063
Retained Earnings -0- (7,497,063)
Resort Club assets accrued -0- 7,523,132
Resort Club liabilities assumed -0- (7,523,132)
Total Non-Cash Operating, Investing
and Financing Activities $ -0- $ -0-
See accompanying notes.
</TABLE>
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 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
June 30, 1997, the results of operations for the nine months
ended June 30, 1997 and 1996, and cash flows for the nine
months ended June 30, 1997 and 1996. Operating results for
the nine months ended June 30, 1997, are not necessarily
indicative of the results which may be expected for the year
ended September 30, 1997. These statements should be read
in conjunction with Form 10-KSB for fiscal 1996 which is on
file with the Securities and Exchange Commission.
NOTE 2 - RECLASSIFICATION:
Certain fiscal 1997 items have been reclassified to conform
with the fiscal 1996 presentation.
NOTE 3 - DISCONTINUED OPERATIONS - SALE OF CELLULAR ASSETS:
On November 16, 1994, the Company announced that its wholly
owned subsidiary Dominion Cellular, Inc. ("DCI") had
retained an independent broker on an exclusive basis to
attempt to find a potential purchaser for DCI's cellular
system (also referred herein as the "System") or a
possible merger partner with DCI. Management of the Company
determined to seek a purchaser because it believed that
DCI's cellular system had been developed to a point where it
represented an attractive acquisition for potential
acquirers in the cellular industry at a price, based on
current market conditions, substantially in excess of DCI's
costs in developing the System.
On May 8, 1996, the Company and DCI executed an Asset
Purchase Agreement (Subsequently amended on August 14, 1995
and December 14, 1995) with two unaffiliated entities,
PriCellular Corporation ("PriCellular") and PriCellular's
wholly-owned Northland subsidiary, providing for the sale
to Northland of the System operated by DCI in the Bibb,
Alabama RSA (the "AL-4 RSA"). The System was
substantially the Company's only source of revenues.
Immediately after completion of the sale of the System, the
Company had no significant operations.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS - SALE OF CELLULAR ASSETS
(Continued):
The sale of the System was contingent upon obtaining the
consent of the Federal Communications Commission ("FCC")
to the assignment by DCI of the licenses to operate the
System to Northland (which consent was obtained on June 9,
1995) and upon obtaining the approval of the sale from
holders of a majority of the outstanding shares of the
Company's Common Stock (which approval was obtained on
November 6, 1995).
The Assets sold (subject to certain liabilities related to
the System and being assumed by the Purchaser) included the
FCC nonwireline license for the AL-4 RSA, the cellular
sites, towers and related equipment used by the System, the
real property on which the cellular sites are located, and
the bulk of DCI's current assets.
The parties also agreed that effective August 1, 1995,
PriCellular would become the manager of the System pursuant
to a management agreement providing for a management fee to
be paid to PriCellular equal to 7% of the gross revenues of
the System during the term of the management agreement.
Through November 7, 1995, the Company accrued $114,600 in
connection with the management agreement.
The original purchase price of the system was $19,900,000
(after a $100,000 reduction for the amount by which certain
liabilities assumed by the purchaser at the closing exceeded
DCI's current assets) payable as follows: (a) $6,000,000 in
cash, payable at the Closing which occurred on November 7,
1995, (b) $3,900,000 in cash payable 30 days following the
Closing, and (c) $10,000,000 by delivery at the Closing of
PriCellular's five-year, 4% Convertible Subordinated Note
in the principal amount of $10,000,000 (also referred herein
as the "PriCellular Note"). The PriCellular Note was
convertible into shares of PriCellular Class A Common
Stock at $8.51 per share (i) at the option of the holder
and (ii) at the option of PriCellular if the closing
price for PriCellular Class A Common Stock when trading on
the American Stock Exchange (or such other exchange which at
such time may be the principal exchange where such stock is
traded) is $10.60 or higher for ten consecutive trading
days.
At the closing, the initial $6,000,000 cash portion of the
purchase price was reduced to the extent required to repay
DCI's outstanding debt to Motorola (approximately
$2,864,000) incurred to finance construction of the System,
and to repay the 8%, $2,000,000 loan extended to DCI by
PriCellular on April 7, 1995 in anticipation of the
execution of the Asset Purchase Agreement. At the second
closing, the $4,000,000 cash portion of the purchase price
was decreased by $100,000 the amount by which assumed
current liabilities exceeded DCI's current assets. An
aggregate $400,000 of the $3,900,000 balance of the purchase
price was required to be held in
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS - SALE OF CELLULAR ASSETS
(Continued):
escrow for a one year period following the closing, to
ensure the accuracy of the Company's representations and
warranties.
Also at the closing, PriCellular elected to force conversion
of its five-year, 4%, $10,000,000 Convertible Subordinated
Note to DCI into 1,175,088 shares of its Class A Common
Stock. The high and low sales prices for PriCellular Class
A Common Stock, as traded on The American Stock Exchange on
November 7, 1995, were $13.125 and $12.75, respectively. As
a result, the Company recorded the 1,175,088 converted
shares at a value of $7,497,061 an amount which reflects a
50% discount of the closing sales price of PriCellular Class
A Common Stock on November 7, 1995 of $12.75. The Company
recorded a 50% discount because of the trading restrictions
placed on the stock.
In connection with the second closing, the Company entered
into a second amendment to the Asset Purchase Agreement
dated December 14, 1995 whereby the Company and PriCellular
resolved certain disputes with respect to the adjusted
purchase price of the cellular telephone system. As
amended, the Company received $3,500,000 at the second
closing, with the $400,000 balance being held in escrow. As
part of the second amendment, the Company retained ownership
of certain accounts receivable deemed to be uncollectible as
of August 1, 1995 in the aggregate principal amount of
approximately $124,000. In addition, the Company reserved
the right to the proceeds of any insurance claim arising
from a loss that took place in the month of August 1995.
Use of Proceeds from the System Sale
In addition to receipt of the PriCellular Class A Common
Stock, the Company received an aggregate of approximately
$9,900,000 (less closing costs and associated expenses) in
cash payments from PriCellular at the initial closing and at
the Second Payment Date (of which $400,000 is being held in
escrow for a one year period as previously described).
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS - SALE OF CELLULAR ASSETS
(Continued):
The cash payments and the proceeds from the Sale of
PriCellular Stock during fiscal 1996 were applied
substantially as follows:
<TABLE>
<S> <C>
a) Repayment of Motorola debt and accrued
interest incurred to finance construction
of the System. $ 2,864,226
b) Closing costs 747,955
c) Escrow account deposit 400,000
d) Advances to Resort Club 6,225,442
e) Investment in mutual fund and other
marketable securities 381,723
f) Investment in RTC mortgages 1,600,000
g) Prepaid lease 950,000
h) Investment in Food Extrusion 1,750,000
i) Purchase of the Company's common stock
from former President 1,664,450
j) Purchase of the Company's common stock
from unrelated parties 562,343
k) Investments in real estate and real
estate related activities 1,018,740
l) Investment in Space Shot and Piston Bullies 1,394,710
Total: $19,559,589
</TABLE>
Proceeds from the System Sale to Former President
In lieu of a severance payment and in appreciation for her
services in developing the System, the Board of Directors
had agreed in principle with Ms. Evers-Tierney that in the
event of consummation of the sale of the System, the Company
would repurchase all of the shares of the Company's Common
Stock owned by Ms. Evers-Tierney, her son and her husband,
at a price equal to the "book value" of such shares computed
as of the first business day after the Closing. The
determination of "book value" would be made by the Company's
auditors, computed on an accrual basis giving effect to the
sale and the expenses and taxes to be incurred in connection
with the sale, but without deducting any severance payment
obligations to Ms. Evers-Tierney
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS - SALE OF CELLULAR ASSETS
(Continued):
(which were waived) or the stock repurchase obligation to
Ms. Evers-Tierney and her family. Pro rata payment was made
to Ms. Evers-Tierney and her family. Ms. Evers-Tierney and
her family had the right to obtain part of such payments in
PriCellular notes. During fiscal 1996, the Company
purchased an aggregate of 943,411 shares of the Company's
Common Stock from Ms. Evers-Tierney and her family at a
purchase price equal to approximately $500,000 in cash and
182,500 shares of PriCellular Common Stock of which 50% was
allocated to the purchase of Treasury stock and 50% as a
cost in connection with the sale of the System. With the
exception of the described payments to the Company's former
president and members of her family, no portion of the sale
proceeds were distributed directly to the Company's
shareholders.
NOTE 4 - RELATED PARTY TRANSACTIONS:
During the period of October 1, 1995 through June 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 Chairman of the Board and
Chief Executive Officer of the Company was a 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.
On March 29, 1996, but effective as of June 1, 1993, Resort
Club, Inc. ("Resort Club") a subsidiary of the Company
entered into amended and restated agreements with Vernon
Valley Recreation Association, Inc. ("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. Also on March 29, 1996, Resort Club
entered into an amended and restated agreement with
Stonehill
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
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 June 30,
1997, Resort Club had an unpaid balance of approximately
$1,883,000 due to Great American and 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.
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. 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. Through June
30, 1997, the Company advanced approximately $9,331,000 to
Resort Club primarily for working capital purposes. 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
maintain its operations, the Great American assets must not
only emerge from bankruptcy but operate competitively with
nearby Resort facilities.
On November 10, 1995, the Company entered into an assumption
agreement with Mr. Gene Mulvihill, whereby the Company
assumed indebtedness of $750,000 for a loan previously
advanced to Mr. Mulvihill by his two partners in St. Marks
Associates, the Company's current landlord, on or about May
19, 1995. The Company assumed the said indebtedness in
exchange
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
for an equal amount of Resort Club receivables. The loan
was paid in full on February 15, 1996 together with interest
at 15%.
On March 31, 1996, the Company entered into an agreement to
purchase 9 condominiums which are used by Resort Club from
Mr. Gene Mulvihill for an aggregate purchase price of
$878,500 which management believes approximates fair market
value. Of the condominiums purchased, eight condominiums
are located in the Great Gorge Resort and one is located in
the Resort of Palmas Del Mar, Puerto Rico. As of June 30,
1997, the Company has a remaining balance due on the
purchase of approximately $345,600 which is evidenced by a
promissory note bearing interest at an effective rate of
10.25%.
Subsequent to the sale of the System, the Company
transferred its executive offices to 355 Madison Avenue,
Morristown, New Jersey. In connection with this move, the
Company entered into a lease agreement with St. Marks
Associates, a real estate partnership owned 50% by Mr. Gene
Mulvihill. The lease provides for a lease term of 5 years
commencing December 1, 1995 with a base rent of $1,558 per
month and a monthly payment of approximately $519 for the
Company's proportionate share of impositions and operating
expenses which management believes approximates fair market
value. The lease provides for rental adjustments for
changes in the Consumer Price Index.
On December 1, 1995, Diamond Leasing entered into a lease
agreement with Vernon Valley. The lease term commenced on
December 15, 1995 and expired on March 15, 1996. Pursuant
to the lease, Diamond Leasing leased the Vernon Valley/Great
Gorge Ski Area Rental Shops and all fixtures located thereon
as well as the ski rental equipment. In consideration for
this lease, Diamond Leasing agreed to: 1) pay a base
rent of $950,000; 2) pay additional rent of $75,000
which represented an unallocated payment for services
provided by Vernon Valley, including but not limited to
security, maintenance of the leased premises, and general
administrative services; and 3) pay a percentage of gross
revenue equal to 50% of gross revenues in excess of
$1,000,000. The Lease provided for a cap limitation equal
to a 28% rate of return to Diamond Leasing. Proceeds
received in excess of a 28% rate of return were required to
be remitted to Vernon Valley. The Lease also provided
Diamond Leasing with the absolute right of renewal for
three additional consecutive December 15 - March 15 lease
terms. During fiscal 1996, Diamond Leasing received net
proceeds of approximately $984,000 (excluding the $75,000
additional rent which was paid directly to Vernon Valley
from ski rental receipts) on this transaction and owes no
further obligation to Vernon Valley, and consequently had a
net gain on the transaction.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
Diamond Leasing entered into a capital lease for two Piston
Bullies with Bombardier Capital, Inc. ("Bombardier")
commencing January 1, 1996 for a term of 18 months ending
September 1, 1997. Piston Bullies are snow grooming
machines used for grooming ski trails. The lease provided
for 11 payments with aggregate rental payments of
approximately $165,700 and has a $10,901 purchase option at
the end of the lease term. Concurrent with entering into
the lease agreement with Bombardier, Diamond Leasing entered
into a sublease agreement with Vernon Valley on similar
terms with Diamond Leasing's lease agreement with Bombardier
except that the rental payment had been adjusted to reflect
a rate of return to the Company of 28%. In connection with
the lease agreement, Bombardier filed financing statements
to protect its security interest. In addition, the Company
pledged 10,000 shares of its PriCellular Class A Common
Stock with Bombardier as additional collateral. As of June
30, 1997, the remaining balance due Bombardier along with
the purchase option was paid in full and the additional
collateral was returned to the Company. In connection with
the settlement agreement to the Great American bankruptcy,
the Company transferred the Piston Bullies to Great American
free and clear of all liens (see Note 7).
On January 26, 1996, Diamond Leasing entered into a loan
agreement and advanced $269,500 to Great American in
connection with a loss suffered by Great American resulting
from a flood that occurred on January 12, 1996. As
collateral for the $269,500 loan, Great American assigned to
Diamond Leasing its interest in the insurance proceeds to
the extent of $269,500 together with interest at 9% per
annum. As further consideration, Diamond Leasing and Vernon
Valley amended the ski rental shop lease to provide that
prior to any "additional rent" being paid to Vernon Valley
pursuant to the lease agreement funds will be paid to
Diamond Leasing until the principal amount of the loan is
fully paid with accrued interest. As of June 30, 1997,
Diamond Leasing received payments of $172,366 on this loan
pursuant to the assignment and "additional rent" described
above with a remaining balance of $97,134 outstanding as of
June 30, 1997. In connection with the settlement agreement
relating to the Great American bankruptcy, the Company
agreed to accept $46,000 as payment in full for the
outstanding balance (see Note 7).
On March 19, 1996, Diamond Leasing agreed to purchase 92
condominium lots from GMD, at a price of $1,820,000 payable
as follows: (i) $270,500 on or before April 1, 1996, (ii)
the assumption of any and all filed liens affecting the
property; and (iii) the balance from the net cash flow
realized from the development of the property. Each of the
parties agreed to seek Bankruptcy Court approval for this
transaction. The closing occurred on April 1, 1996 with
Diamond Leasing acquiring good and marketable title to the
property insurable at regular rates and with customary
adjustments made at the closing. Finally, Diamond Leasing
offered GMD
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
the Option to participate in the development of the
property. In connection with the settlement agreement
relating to the Great American bankruptcy, the Company
transferred 54 condominiums to Great American in
consideration for $145,000 (see Note 7).
On April 5, 1996, the Company, through a wholly owned
subsidiary, Star II Leasing Corporation, agreed to purchase
an attraction known as the Space Shot from S & S Sports
Power, Inc. for the sum of $1,250,000. Concurrently,
Diamond agreed to lease the Space Shot to Vernon Valley at
an annual rental equal to $300,000 for a term of four (4)
years subject, however, to Vernon Valley achieving a certain
level of revenues, failing which no payment will be made to
the Company, but will accrue and be due and payable to the
Company in the subsequent years of the said Lease Agreement.
An entity controlled by the immediate family of Mr. Gene
Mulvihill, an officer and director of the Company, is a 50%
owner of S & S Sports Power, Inc. In connection with the
acquisition of this ride, this entity has agreed to forfeit
all allocated profits and direct same to the Company. No
payments were made in fiscal 1996 pursuant to this lease
agreement. In connection with the settlement agreement
relating to the Great American bankruptcy, Praedium agreed
to purchase the Space Shot for $900,000 (see Note 7).
As of June 30, 1997, the Company, through Diamond Leasing,
advanced approximately $1,337,000 to Summit and Lakeview in
connection with a limited forbearance agreement entered into
between Summit, Lakeview, Mr. Gene Mulvihill and Messrs.
Robert and Stanley Holuba.
On March 1, 1994, loans made by Summit and Lakeview to
Vernon Valley had matured and were immediately due and
payable. Vernon Valley failed to fully pay the loan
obligations which constituted a material default under the
Vernon Valley loan documents, and together with the filing
of bankruptcy by Vernon Valley, also constituted a material
event of default under the Vernon Valley loan documents.
As part of the original loan transactions, Mr. Mulvihill and
Mr. Stanley and Robert Holuba (the "guarantors")
guaranteed the Summit and Lakeview loans. The payments made
by the Company to Summit and Lakeview were made in
connection with a limited forbearance agreement for which
the banks agreed to forebear from exercising their
respective rights and remedies under the Vernon Valley loan
documents.
In connection with the settlement relating to the Great
American bankruptcy, the Company satisfied the full
settlement of the claims, liens and security interests of
Summit and Lakeview in a manner that permitted the assets of
the Great American entities contemplated by the MOU to
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued):
be sold in a Section 363 sale and the proceeds of such sale
to be free and clear of all liens, claims and encumbrances
(see Note 7).
NOTE 5 - DEBT:
On May 18, 1997 the Company entered into a loan agreement
with Binghamton Savings Bank ("Binghamton"), the Company's
primary lender in the principal amount of $2,000,000.
Pursuant to the loan agreement, the amount owed from the
Company is collateralized by a first mortgage on
substantially all of the Company's assets. The loan bears
interest at 12.25% and is due and payable as follows:
17 consecutive monthly interest payments, beginning June 13,
1997, with interest calculated on the unpaid principal
balance at an interest rate of 12.25% per annum 6
consecutive monthly principal payments of $50,000.00 each,
beginning June 13, 1997, with interest calculated on the
unpaid principal balances at an interest rate of 12.25% per
annum; 6 consecutive monthly principal payments of
$75,000.00 each, beginning December 13, 1997, with interest
calculated on the unpaid principal balance at an interest
rate of 12.25% per annum; 5 consecutive monthly principal
payments of $100,000.00 each, beginning June 12, 1998, with
interest calculated on the unpaid principal balance at an
interest rate of 12.25% per annum; and 1 principal and
interest payment of $757,911.46 on November 13, 1998, with
interest calculated on the unpaid principal balance at an
interest rate of 12.25% per annum.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
At June 30, 1997, based on the number of membership points
sold, the Company is required to purchase a minimum
inventory of 39 condominium units. Currently, the Company
owns 8 condominium units free and clear, and has purchased
24 condominium units which are subject to mortgages in the
principal amount of $1,331,952. In addition, the Company has
entered into contracts to purchase the remaining 7
condominium units for a purchase price of approximately
$670,500.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued):
On July 10, 1997 the Company and its wholly owned
subsidiaries Resort Club and Diamond entered into a
Memorandum of Understanding ("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,
Resources and its affiliates were required to make certain
contributions and received certain benefits (see Note 7).
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 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 June 30, 1997, management has determined that based on
the average per point assessment as of June 30, 1997, a
deficit of $.93 per point exists. As a result, an
approximate $250,000 per year deficit exists which is the
obligation of Resort Club. Management has calculated the
net present value of this obligation to be approximately
$3,353,000.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS :
On July 10, 1997 the Company and its wholly owned
subsidiaries Resort Club and Diamond Leasing entered into
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, 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. 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
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
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.
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.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
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 the Praedium on
mutually acceptable terms.
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;
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
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").
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 June 30, 1997. Management believes that the Great
American Settlement Assets are realizable primarily through
the forgiveness of indebtedness as of June 30, 1997 owed to
Great American related entities and Stonehill Recreation for
the use of amenities by Resort Club members, its
participation in the option to purchase the $3.2 million
first mortgage in the Spa from Praedium, and the 65% equity
interest in the Spa. 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. In connection with Resort Club's
obligation under the MOU with respect to the issuance of the
Resort Club Notes and Resort Club Unsecured Creditor's Note,
Resort Club is obligated to record in the first quarter of
1998 approximately $5.0 million of indebtedness which
represents the approximate discounted value of these
obligations.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
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
the 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 (described above)
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 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.
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
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
Recreation's operations. As a result, the Company may
restructure or divest its interests in these entities.
On August 6, 1997, the Company entered into a second loan
agreement with Binghamton in the principal amount of
$1,500,000. The loan bears interest at 12.25%.
Simultaneously with the closing of the second loan
agreement, the Company entered into a Mortgage Modification
and Consolidation Agreement, whereby the first mortgage and
the second 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 August 6, 1997, the balance due and
owing on this loan was $3,025,000 payable as follows:
The principal sum of $100,000.00 plus accrued interest on
the 13th day of each month commencing September 13, 1997 and
on the 13th day of each month thereafter until March 13,
2000, when the entire unpaid principal balance plus accrued
interest is due and payable.
On July 30, 1997, the Company entered into an agreement to
purchase and accept by assignment from Public Loan Company,
Public Loan Company's entire right, title and interest in a
loan in the principal amount of $1,668,300 and accrued and
unpaid interest of $1,302,717. The loan is collateralized
by certain land on top of the Vernon Valley/Great Gorge ski
areas. The purchase price of the loan was comprised of
800,000 shares of the Company's common stock and an interest
free note in the principal amount of $540,000 payable in 36
equal monthly installments of $15,000 commencing June 15,
1997. The loan was discounted to $450,000 and yields an
effective interest rate of 12.25%. In connection with the
issuance of the 800,000 shares, the Company has agreed to
repurchase 500,000 shares in the event Public Loan Company
is unable to sell 500,000 shares at $3.00 per share over a
twelve month period following the full execution of the
agreement or the delivery of the shares to Public Loan
Company, whichever is earlier, then in that event, the
Public Loan Company shall have an option over the following
twelve months to require the Company to repurchase the
500,000 shares from Public Loan Company at $3.00 per share
over a two year period commencing on the date Public Loan
Company exercises this option in such amounts as Public Loan
Company and the Company mutually agree, provided, however,
such shares are fully repurchased within the said subsequent
two year period and Public Loan Company repurchases such
number of shares on a monthly basis such that the proceeds
payable
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
NOTE 7 - SUBSEQUENT EVENTS (Continued):
to Public Loan Company by the Company are not less than the
sum of $62,500.00 per month, thereby resulting in Public
Loan Company receiving the sum of $1,500,000 from the
Company.
On September 22, 1997, the Company entered into a loan
agreement with an unaffiliated party in the principal amount
of $700,000. Pursuant to the loan agreement, the amount
owed by the Company is collateralized by a second mortgage
on substantially all of the Company's assets. The loan
bears interest at 12.25% and is due and payable on February
19, 1998. As additional consideration, the Company issued
150,000 shares of its common stock to the lender.
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, 1996.
A. Liquidity and Capital Resources
During the first nine months of fiscal 1997, the Company had
a net loss from continuing operations of approximately
$304,000. Included in the net loss from continuing
operations is depreciation of approximately $145,000, which
is a noncash expense. After reflecting the net change in
assets and liabilities, net cash used by operations was
approximately $3,345,000. Investing activities provided net
cash of approximately $575,000 and includes primarily the
sale of investments in mortgages of approximately $878,000
and the sale of the Company's office building in Clanton,
Alabama offset by approximately $537,000 invested in real
estate related activities. Financing activities provided
net cash of approximately $2,245,000 which resulted from
additional borrowings of approximately $2,652,000, offset by
purchase of treasury stock of $17,828 and repayment of loans
of approximately $389,200. Accordingly, during the first
nine months of fiscal 1997, the Company's cash decreased by
approximately $525,600.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Results of Operations
Nine months ended June 30, 1997 compared with nine months
ended June 30, 1996.
The net loss from continuing operations applicable to common
shareholders for the first nine months of fiscal 1997 was
$304,303 ($0.07 share) as compared to a net loss from
continuing operations applicable to common shareholders of
$7,296,765 ($1.46 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 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 1997, the Company recognized
$2,690,852 in membership revenue as compared to $2,001,911
in the comparable fiscal 1996 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. Deferred
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 nine
months of fiscal 1997, the Company had adjusted Deferred
Membership Interests Held for Sale for items over budget in
the aggregate amount of approximately, $2,368,000 as
compared to $5,634,317 in the comparable fiscal 1996 period.
Management believes that the 1997 overbudget was primarily
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.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Results of Operations
Nine months ended June 30, 1997 compared with nine months
ended June 30, 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. 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 June 30, 1997, management has determined that based on
the average per point assessment, a deficit of $0.93 per
point exists. As a result, a per year deficit of
approximately $250,000 exists which is the obligation of
Resort Club. Management has calculated the net present
value of this obligation to be $3,300,778. As of June 30,
1996, Management calculated the per point deficit to be
$1.41. The $0.48 decrease is primarily attributed to lower
administration, management fees and replacement reserves
than were originally budgeted. Accordingly, the Company
decreased the fulfillment deficit by approximately $862,000
during the first nine months of fiscal 1997. During the
first nine months of fiscal 1996, the Company recorded a
provision of approximately $3,818,000.
Membership Annual Fee Revenue was $380,445 in the first nine
months of fiscal 1997 compared to $293,765 in the comparable
fiscal 1996 period. The increase of $86,680 (29.51%) in
Membership Annual Fee Revenue is a result of the increase in
membership interests.
Ski Rental Shop Revenue and Other Revenue was $276,319 in
the first nine months of fiscal 1997 compared to $1,274,023
in the comparable fiscal 1996 period and Ski Rental Shop and
Other Expenses was $43,036 in the first nine months of
fiscal 1997 compared to $1,081,686 in the comparable fiscal
1996 period. These decreases are a direct result of the
Company not operating the Vernon Valley/Great Gorge Ski
Rental Shop.
Depreciation and amortization was $144,526 in the first nine
months of fiscal 1997 compared to $53,285 in the comparable
fiscal 1996 period resulting in an increase of $91,241
(171.23%). This increase is a direct result of the Company
recording a full year's depreciation on its Space Shot ride
purchased in fiscal 1996.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Results of Operations
Nine months ended June 30, 1997 compared with nine months
ended June 30, 1996.
During the first nine months of fiscal 1997, the Company
recorded a gain on the sale of marketable securities of
$1,540,154 primarily resulting from a gain on the sale of
PriCellular Stock of $1.4 million as compared to a gain on
the sale of marketable securities in the comparable fiscal
1996 period of $2,628,808 primarily resulting from a gain on
the sale of PriCellular Stock.
During the first nine months of fiscal 1997, the Company
recorded a loss on Sale of Real Estate and RTC Mortgages of
$300,139. During the first nine months of fiscal 1997, the
Company recorded a loss in connection with the sale of its
Clanton, Alabama office building of approximately $93,000
with the remaining balance relating to the sale of certain
of its RTC Mortgages.
During the first nine months of fiscal 1997, Interest income
was $331,576 as compared to $137,567 in the comparable
fiscal 1996 period. In addition, interest expense was
$204,893 in the first nine months of fiscal 1997 as compared
to $511,960 in the comparable fiscal 1996 period.
The net income from discontinued operations applicable to
common shareholders for the first nine months of fiscal 1997
was $0.00 ($0.00 per share) as compared to net income from
discontinued operations applicable to common shareholders of
$10,051,041 ($2.01 per share) in the comparable prior year
period.
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, 1997:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended June 30, 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/ Gene Mulvihill
Gene Mulvihill
Chief Executive Officer
Dated: By: /s/ Joseph R. Bellantoni
Joseph R. Bellantoni
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE JUNE 30, 1997
10QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 778,096
<SECURITIES> 449,918
<RECEIVABLES> 1,959,955
<ALLOWANCES> 339,902
<INVENTORY> 0
<CURRENT-ASSETS> 12,897,648
<PP&E> 1,486,453
<DEPRECIATION> 246,635
<TOTAL-ASSETS> 25,117,095
<CURRENT-LIABILITIES> 18,524,949
<BONDS> 0
0
0
<COMMON> 42,084
<OTHER-SE> 5,058,706
<TOTAL-LIABILITY-AND-EQUITY> 25,117,095
<SALES> 3,347,616
<TOTAL-REVENUES> 3,347,616
<CGS> 0
<TOTAL-COSTS> 5,018,617
<OTHER-EXPENSES> 300,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204,893
<INCOME-PRETAX> (304,303)
<INCOME-TAX> 0
<INCOME-CONTINUING> (304,303)
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<EXTRAORDINARY> 0
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<NET-INCOME> (304,303)
<EPS-PRIMARY> (0.07)
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