SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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
incorporation or organization) Identification No.)
355 Madison Avenue, Morristown, NJ 07960
(Address of principal executive offices) (Zip Code)
(973) 538-4177
(Registrant's telephone number, including area code)
NONE
(Former name, former address, and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) or the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days.
Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable
date.
Class Outstanding at February 1, 2000
Common Stock, $0.01 par value 7,630,576
DOMINION RESOURCES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED DECEMBER 31, 1999
FINANCIAL INFORMATION
PART I
Item 1. Financial Statements
The attached unaudited financial statements of Dominion Resources,
Inc. and its wholly owned subsidiaries (the "Company") reflect all
adjustments which are, in the opinion of management, necessary to
present a fair statement of the operating results for the interim
period presented.
Condensed consolidated balance sheets 1-2
Condensed consolidated statements of operations 3
Condensed consolidated statements of cash flows 4-5
Notes to condensed consolidated financial statements 6-11
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
December 31, September 30,
1999 1999
(Unaudited) (See note below)
Current assets:
Cash and cash equivalents $ 29,630 $ 82,110
Membership receivables, net (of allowance
for doubtful accounts of $0 at
December 31, 1999 and $396,373 at September
30, 1999 721,417 1,000,895
Prepaid expenses and other assets 147,627 412,062
Investment in mutual fund and other
marketable securities 73,138 73,127
Accrued interest and other receivables 2,139,277 2,387,460
Total current assets 3,111,089 3,955,654
Property, equipment, furniture and fixtures,
net of accumulated depreciation and
amortization of $82,948 at December 31,
1999 and $227,122 at September 30, 1999 115,729 209,707
Other assets:
Membership receivables, net (of allowance
for doubtful accounts of $0 at
December 31, 1999 and $1,491,119 at
September 30, 1999 2,587,833 3,765,272
RTC mortgages 25,099 25,099
Note receivable - Stonehill Recreation
(Note 3) 3,128,832 3,128,832
Note receivable - RiceX, Inc. 912,886 1,689,983
Investment in RiceX, Inc. 813,396 813,396
Real estate and real estate related
activities 872,026 871,526
Total other assets 8,340,072 10,294,108
Total assets $11,566,890 $ 14,459,469
</TABLE>
Note: The balance sheet at September 30, 1999, has been taken
from the audited financial statements at that date and condensed.
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
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December 31, September 30,
1999 1999
(Unaudited) (See note below)
Current Liabilities:
Secured debt, current portion $ 1,227,032 $ 1,816,316
Notes payable, current portion 71,822 11,747,123
Accounts payable and accrued liabilities 3,550,686 2,848,127
Deferred revenue 140,841 176,051
Total current liabilities 4,990,381 16,587,617
Long-term liabilities:
Secured debt, net of current maturities 2,252,354 4,519,289
Commitments and Contingencies (Note 5):
Redeemable common stock; par value $0.01
per share 358,333 and 383,333 shares
outstanding at December 31, 1999 and
September 30, 1999; redeemable at $3.00
per share in July 1998 through July 2000 1,075,000 1,150,000
Stockholders' equity:
Common stock, $0.01 par value; Authorized
- - 25,000,000 Shares; issued and outstanding
- - 7,630,576 shares at December 31, 1999
and September 30, 1999, respectively 76,306 76,306
Additional paid-in-capital 5,819,484 5,819,484
Accumulated deficit (1,245,722) (12,292,314)
Less: 1,350,646 shares held in treasury
at December 31, 1999 and September 30, 1999 (1,400,913) (1,400,913)
Total stockholders' equity 3,249,155 (7,797,437)
Total liabilities and
stockholders' equity $ 11,566,890 $ 14,459,469
</TABLE>
Note: The balance sheet at September 30, 1999, has been taken
from the audited financial statements at that date and condensed.
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Revenues:
Other revenue $ 2,185 $ 4,050
Total revenues 2,185 4,050
Expenses:
Other operations 29,092 19,094
General and administrative expenses 114,521 178,967
Depreciation and amortization 2,566 3,674
Total expenses 146,179 201,735
Income (loss) from operations (143,994) (197,685)
Other income (expenses):
Interest income 267,160 142,067
Interest expense (163,059) (129,908)
Financing fee income -0- 531,714
Amortization of deferred financing costs (29,259) (14,931)
Gain on sale of real estate and RTC
mortgages -0- 6,630
Total other income (expenses) 74,842 535,572
Income (loss) from continuing operations
before provision for income taxes (69,152) 337,887
Provision for income taxes -0- -0-
Income (loss) from continuing operations (69,152) 337,887
Discontinued Operations:
Loss from operations of Resort Club
less applicable tax benefit of $0 in 1999
and 1998 -0- (843,943)
Gain on sale of Resort Club (less applicable
income taxes of $0 at December 31, 1999) 11,115,744 -0-
Income (loss) from discontinued operations 11,115,744 (843,943)
Net income (loss) $11,046,592 $ (506,056)
Income (loss) per common share -
continuing operations $ (0.01) $ 0.07
Income (loss) per common share -
discontinued operations $ 1.46 $ (0.16)
Net income (loss) per common share $ 1.45 $ (0.09)
Weighted average number of share used in
computing net income (loss) per share 7,630,576 5,130,818
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
<TABLE>
<S> <C> <C>
1999 1998
Cash flows from operating activities:
Net Income (loss) $ 11,046,592 $ (506,056)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Depreciation and amortization 2,566 3,674
Amortization of interest income (60,017) (21,836)
Amortization of interest expense -0- 337,734
Amortization of deferred financing costs 29,259 14,931
Financing fee income (RiceX) -0- (531,714)
Gain on sale of Resort Club (11,115,744) -0-
Changes in assets and liabilities:
Membership receivables -0- 504,570
Accrued interest receivable and other
receivables (4,257) (443,256)
Prepaid expenses and other assets (390) (35,562)
Deferred member expenses -0- 363,929
Accounts payable and accrued expenses 29,248 (39,733)
Deferred revenue (35,210) (63,254)
Net cash used in operating activities (107,953) (416,573)
Cash flows from investing activities:
Sale of (investment in) real estate
and real estate related activities (500) 2,973
Note Receivable - Stonehill Recreation -0- (572,539)
Sale of (investment in) mutual fund
and other marketable securities (11) (10)
RiceX proceeds 1,750,000 -0-
RiceX - loan participation (912,886) -0-
Capital expenditures -0- (54,669)
Net cash provided by (used in) investing activities 836,603 (624,245)
Cash flows from financing activities:
Proceeds from sale of common stock -0- 400,000
Proceeds from borrowings -0- 1,002,876
Repayment of borrowings (706,130) (244,706)
Redemption of Common Stock (75,000) (75,000)
Net cash provided by (used in)
financing activities (781,130) 1,083,170
Increase (Decrease) in cash (52,480) 42,352
Cash and cash equivalents balance, beginning of year 82,110 628,159
Cash and cash equivalents balance, December 31, $ 29,630 $ 670,511
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
SUPPLEMENTARY SCHEDULE
OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
<TABLE>
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1999 1998
Investment in RiceX $ -0- $ 813,396
Financing fee income -0- (531,714)
Deferred interest income -0- (281,682)
Total Non-Cash Operating, Investing
and Financing Activities $ -0- $ -0-
</TABLE>
See accompanying notes.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 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 December 31, 1999 and September 30, 1999,
the results of operations for the three months ended December 31,
1999 and 1998, and cash flows for the three months ended December
31, 1999 and 1998. Operating results for the three months ended
December 31, 1999, are not necessarily indicative of the results
which may be expected for the year ended September 30, 2000.
These statements should be read in conjunction with Form 10-KSB
for fiscal 1999 which is on file with the Securities and Exchange
Commission.
On March 1, 2000, the Company negotiated the sale of its 65%
interest in Resort Club to an unaffiliated entity. The transaction
is effective October 1, 1999 and requires the Company to use its
best efforts but is not obligated to restructure certain notes
payable of GAR which aggregate approximately $11,483,000 at
September 30, 1999. The sales price is in the form of a royalty
payment based on 3% future sales revenues. The Company recorded a
net gain of approximately $11.1 million on the transaction which
included a write-down to net realizable value of the Company's
notes receivable in Resort Club of approximately $20 million (See
Note 3).
NOTE 2 - RECLASSIFICATION:
Certain fiscal 2000 items have been reclassified to conform with
the fiscal 1999 presentation.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS:
In September, 1999, the Board of Directors adopted a plan to
dispose of the Resort Club through sale or liquidation. In
connection with the Company's disposal plan, Resort Club ceased
operations as of September, 1999. Net liabilities of the Resort
Club at September 30, are as follows:
<TABLE>
<S> <C> <C>
1999 1998
Cash $ 72,642 $ 86,784
Member receivables, net 1,266,167 5,975,208
Accounts receivable other, net 179,798 37,780
Deferred membership expense -0- 8,381,774
Other assets 235,566 241,302
Fixed assets, net 91,412 72,295
Accounts payable and accrued liabilities (1,560,157) (3,970,464)
Deferred revenue -0- (11,658,639)
Secured debt (2,193,797) (2,271,276)
Unsecured debt (11,631,593) (8,856,145)
Net liabilities $(13,539,962) $(11,961,381)
</TABLE>
Net liabilities of Resort Club exclude debt owed to its parent
and an affiliated corporation, Dominion Resources, Inc. and
Diamond Leasing and Management Corp., a subsidiary of Dominion
Resources, Inc. of approximately $19,980,000 and $17,860,000 as of
September 30, 1999 and 1998 respectively. This debt and
corresponding receivable has been eliminated in the consolidated
financial statements of the Company. Of the outstanding
indebtedness of Resort Club as of September 30, 1999 aggregating
approximately $15,386,000, Dominion Resources, Inc. and its
subsidiaries other than Resort Club are liable on an aggregate of
approximately $1,394,000 of the secured debt of Resort Club. To
the extent these liabilities of approximately $1,394,000 are not
paid out of the liquidated assets of Resort Club, Dominion
Resources, Inc. will remain liable for the balance.
Resort Club Accommodation Inventory Held in Trust
Management determined that in order to adequately assure to the
members the availability of the Resort Club accommodations, title
to certain of the resort condominium properties needed to be
conveyed to and held by a trustee. A trustee holds title to 42
condominium units including 27 units that are the subject of mortgages
aggregating as of September 30, 1999 in the amount of approximately
$1,194,000. These mortgages will be repaid out of the net member
receivables of Resort Club aggregating approximately $1,266,000 as
of September 30, 1999. The trustee will administer the collection
of the annual maintenance assessments from membership owners which
will be applied to the payment of insurance, taxes, maintenance
fees and capital improvements. The trustee will pay the balance
of the collections over to the Resort Club on a regular basis.
Under the trust greement and a management agreement, the Resort
Club will have the exclusive rights to the control and
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 3 - DISCONTINUED OPERATIONS (continued):
Resort Club Accommodation Inventory Held in Trust (continued)
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 the
trust. The net present value of the condominiums in trust are
recorded on the Company's books in the amount of approximately
$272,000 at December 31, 1999.
On March 1, 2000, the Company negotiated the sale of its 65%
interest in Resort Club to an unaffiliated entity. The
transaction is effective October 1, 1999 and requires the Company
to use its best efforts but is not obligated to restructure
certain notes payable to GAR which aggregate approximately
$11,483,000 at September 30, 1999. The sales price is
in the form of a royalty payment based on 3% of future sales
revenues. As a result of the sale, a gain of $11,115,744 was
recorded which is broken out as follows:
Net liabilities as of September 30, 1999 $33,523,317
Less: Contingency reserve for mortgages,
fulfillment and GAR, Inc. restructuring 2,424,218
Subtotal 31,099,099
Less: Write-down to net realizable value, the
Company's notes receivable due from Resort Club 19,983,355
Net gain $11,115,744
For federal income tax purposes, the Company did not include
Resort Club, its former 65% owned subsidiary, in its federal
consolidated income tax return. Accordingly, the Company did not
record an income tax expense in connection with the gain on sale.
Such gain was the result of a reduction of net liabilities of
Resort Club, which the Company has no obligation to pay. These
net liabilities were previously included in the consolidated
financial statements of the Company in accordance with generally
accepted accounting principles.
NOTE 4 - RELATED PARTY TRANSACTIONS:
Certain of the Company's executive officers, Directors, and
principal stockholders have been at various times, including
during the two years ended December 31, 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.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 4 - RELATED PARTY TRANSACTIONS (continued):
The Resort Club is obligated to Mr. Gene Mulvihill in the amount
of approximately $180,000 as of December 31, 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
is liable on the indebtedness to the extent this indebtedness is
not paid out of the liquidated assets of Resort Club.
The Company's executive office premises are leased in a building
owned by a general partnership in which Mr. Gene Mulvihill is a
50% partner. During the three months ended December 31, 1999 and
1998, the Company paid to the partnership $1,500 pursuant to the
terms of the lease, respectively.
At December 31, 1999, Stonehill Recreation owed the Company
approximately $3,129,000 arising out of cash advances from the
Company to Stonehill Recreation. The obligation bears interest at
18% per annum and is due on demand.
Also at December 31, 1999, the Company is obligated to Berkowitz
Wolfman Assoc., Inc. in the amount of approximately $2,252,000
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 which sum was applied
to the outstanding principal amount of the loan in fiscal 1999.
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 the 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 approximately $22,600. The loan bears interest at 8% and is
due on demand.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
In October, 1999, the Company received a Letter and Examination
Report from the District Director of the Internal Revenue Service
that proposed a tax deficiency based on an audit of the Company's
consolidated 1995 tax return. The Examination Report proposed
adjustments that the Company does not agree to.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued)
The adjustments included disallowed deductions from the Company's
former principal subsidiary in the amount of approximately
$5,124,000 which represented accruals and deductions related to
membership fulfillment expense and membership product cost. The
Internal Revenue Service's position was that these deductions
should have been capitalized. Additionally, approximately $498,000
of deductions representing a write down of packaged loans acquired
from Resolution Trust Company and certain normal business
deductions were disallowed. The Internal Revenue Service also
disallowed $830,000 as a compensation deduction related to a
former officer's stock redemption, claiming the disallowed
deduction should have been classified as treasury stock.
The Company does not agree with the proposed adjustments and is
contesting the proposed tax assessment of $2,164,000 (not
including interest and penalties) at the appeals level of the
Internal Revenue Service. The Company believes that when there is
a final resolution, the proposed tax deficiencies will be
substantially reduced. No provision has been made in the
accompanying financial statements for the proposed additional
taxes and interest. Additionally, the Company has adequate net
operating losses which could be utilized to offset any unresolved
tax adjustments related to this examination.
Of the outstanding indebtedness of Resort Club as of September 30,
1999 aggregating approximately $15,386,000, Dominion Resources,
Inc. and its subsidiaries other than Resort Club are liable on an
aggregate of approximately $1,394,000 of the secured debt
of Resort Club. To the extent these liabilities of approximately
$1,394,000 are not paid out of the liquidated assets of Resort
Club, Dominion Resources, Inc. will remain liable for the balance.
NOTE 6 - COMMON STOCK:
On October 5, 1999, the Company entered into an agreement to
convert 366,655 of the Company's redeemable common stock, par
value $0.01 per share for 1,622,000 shares of the Company's common
stock, par value $0.01 per share and a warrant to purchase a
number of shares of common stock equal to 25% of all shares of
common stock issued by the Company from October 1, 1999 through
March 31, 2000. The Company is finalizing a definitive agreement
and expects to close on this transaction in the 2nd quarter of
fiscal 2000.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 7 - FOODCEUTICALS PARTICIPATION:
In March 1996, the Company entered into a $1.75 million secured
loan with The RiceX Company ("RiceX"). Subsequently, in December
1998, the Company entered into a Loan Participation Agreement with
FoodCeuticals, L.L.C. ("FoodCeuticals") whereby the Company
contributed its secured loan, 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. FoodCeuticals had made its loan to RiceX
in December 1998. RiceX is an agribusiness food technology
company which has developed a proprietary process to stabilize
rice bran. Its shares of Common Stock are quoted on the OTB
Bulletin Board under the symbol "RiceX". The Company and
FoodCueticals' collateral includes certain tangible and intangible
assets of RiceX including RiceX's extrusion machines located at
two rice mills in California, contract rights, and all of RiceX's
intellectual property. These assets represent substantially all
of the assets in RiceX . In conjunction with its loan to RiceX,
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 December 1998 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. In November 1999, RiceX
repaid the borrowing incurred in 1996 in the amount of $1.75
million, plus accrued interest of approximately $320,753.
Pursuant to the terms of the Loan Participation Agreement,
approximately $912,900 was advanced to FoodCeuticals as a
pro-rata share of the loan proceeds. This amount is carried
on the Company's Financial Statements as the basis in the
FoodCeuticals loan due December 31, 2000.
NOTE 8 - SUBSEQUENT EVENTS:
The Company is negotiating a restructuring of Resort Club's $7.5
million Unsecured Creditors Note with GAR, Inc. Pursuant to the
terms of the agreement, the Company will issue up to 750,000 shares
of its common stock in return for the cancellation of the $7.5
million Unsecured Creditors Note.
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, 1999.
A. Liquidity and Capital Resources
During the first three months of 2000, the Company had net income
of approximately $11,046,600. Included is depreciation of $2,566
and amortization of deferred financing costs of $29,259, both of
which are non-cash expenses. Amortization of interest income of
$60,017 offset these items. In addition, a gain on the sale of
the Company's 65% interest in Resort Club, a non-cash gain of
$11,115,744, is included in net income.
Also during the first three months of the fiscal 2000, changes in
assets and liabilities included a decrease in accrued
interest and other receivables of $4,257, a decrease in prepaid
expenses and other assets of $390, and a decrease in deferred
revenue of $35,210, offset by an increase in accounts payable and
accrued liabilities of $29,248. After reflecting the net changes
in assets and liabilities, net cash used by operations was
approximately $108,000.
During the first three months of the fiscal 2000, investing
activities provided net cash of $836,600 and includes primarily
the proceeds of the RiceX Note of $1,750,000, offset by the
participation in FoodCeutical's loan of approximately $912,900.
During the first three months of the fiscal 2000, financing
activities used net cash of $781,100 which resulted primarily from
the repayment of borrowings in the amount of $706,100 and the
purchase of redeemable common stock of $75,000.
Accordingly, during the first three months of fiscal 2000, the
Company's cash decreased by approximately $52,500.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A. Liquidity and Capital Resources (continued)
Resort Club Accommodation Inventory Held in Trust
Management determined that in order to adequately assure to the
members the availability of the Resort Club accommodations, title
to certain of the resort condominium properties needed to be
conveyed to and held by a trustee. A trustee holds title to 42
condominium units including 27 units that are the subject of
mortgages aggregating as of September 30, 1999 in the amount of
approximately $1,194,000. These mortgages will be repaid out of
the net member receivables of Resort Club aggregating
approximately $1,266,000 as of September 30, 1999. The trustee
will administer the collection of the annual maintenance
assessments from membership owners which will be applied to the
payment of insurance, taxes, maintenance fees and capital
improvements. The trustee will pay the balance of the collections
over to the Resort Club on a regular basis. Under the trust
agreement and a management agreement, the Resort Club will
have the exclusive rights to 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 the trust. The net present value of the
condominiums in trust are recorded on the Company's books in
the amount of approximately $272,000 at December 31, 1999.
Future Business Plans
Through fiscal 1999, the Company's primary business operations
were in connection with the sale of membership interests through
Resort Club. During the third quarter of fiscal 1999, the Company
substantially reduced its operating activities with respect to
selling new Membership Interests through Resort Club primarily as
a result of its inability to obtain financing. As of the end of
the fiscal year ended September 30, 1999, these operations are
treated as discontinued.
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 venturer or in some other form.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A. Liquidity and Capital Resources (continued)
Future Business Plans (continued)
As of December 31, 1999, the Company had engaged in various
transactions with certain of its officers, directors, principal
stockholders and certain of their affiliated entities. In
addition, as of December 31,1999, 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
Continuing Operations:
Three months ended December 31, 1999 compared with three months
ended December 31, 1998.
Other revenue was $2,185 in the first three months of
fiscal 2000 compared with $4,050 in the first three months
of fiscal 1999 or a decline of $1,865 or 46.05%. The decline
in revenues was primarily the result of a decrease in rental
income from the Company's condominiums in Fort Lee, New Jersey.
Other operations expenses were $29,092 in the first three
months of 2000 compared with $19,094 in the first three months
of fiscal 1999, or an increase of $9,998 or 52.36%. The
increase was primarily the result of expenses related to moving
the Company's brewery equipment located in Vernon, New Jersey to
storage. The Company previously had a security interest in the
equipment and took possession in lieu of payment. The brewery
has not been operational since 1994.
General and administrative expenses decreased to $114,521 in
the first three months of fiscal 2000 from $178,967 in the
first three months of fiscal 1999, or by $64,446 or 36.01%
primarily as a result of decreased legal fees in connection with
the GAR restructuring and certain non-recurring items.
Depreciation and amortization was $2,566 in the first three
months of fiscal 2000, compared to $3,674 in the first three
months of fiscal 1999, resulting in a decrease of $1,108 or
30.16%. This decrease was the result of certain assets being
fully depreciated at September 30, 1999.
Interest income was $267,160 in the first three months of
fiscal 2000, compared with $142,067 in the first three months
of fiscal 1999. The increase of $125,093 was the result of
the increased principal balance due from Stonehill Recreation.
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 expense increased to $163,059 in the first three months
of fiscal 2000, compared with $129,908 in the first three months
of fiscal 1999. The increase of $33,151 was the result of the
increase in the Berkowitz Wolfman Assoc., Inc. loan and the
increased loan facility with Binghamton Savings Bank.
During the first three months of fiscal 1999, the Company
recognized financing fee income of $531,714 in connection
with the FoodCeuticals transaction.
Amortization of deferred financing costs consist primarily of
deferred financing costs associated with the Company's borrowings
from Binghamton Savings Bank and Public Loan Corp. These
costs increased to $29,259 in the first three months of fiscal
2000 from $14,931 in the first three months of fiscal 1999, or an
increase of $14,328, which was the result of an increase in the
Binghamton Savings Bank loan facility in January, 1999.
In the first three months of fiscal 2000, the Company did not
incur a gain or loss on the sale of Real Estate and RTC Mortgages
as compared to a gain of $6,630 in the first three months of
fiscal 1999.
Discontinued Operations:
On March 1, 2000, the Company negotiated the sale of its 65%
interest in Resort Club to an unaffiliated entity. The
transaction is effective October 1, 1999 and requires the Company
to use its best efforts but is not obligated to restructure
certain notes payable to GAR which aggregate approximately
$11,483,000 at September 30, 1999. The sales price is
in the form of a royalty payment based on 3% of future sales
revenues. As a result of the sale, a gain of $11,115,744 was
recorded which is broken out as follows:
Net liabilities as of September 30, 1999 $33,523,317
Less: Contingency reserve for mortgages,
fulfillment and GAR, Inc. restructuring 2,424,218
Subtotal 31,099,099
Less: Write-down to net realizable value, the
Company's notes receivable due from Resort Club 19,983,355
Net gain $11,115,744
For federal income tax purposes, the Company did not include
Resort Club, its former 65% owned subsidiary, in its federal
consolidated income tax return. Accordingly, the Company did not
record an income tax expense in connection with the gain on sale.
Such gain was the result of a reduction of net liabilities of
Resort Club, which the Company has no obligation to pay. These
liabilities were previously included in the consolidated financial
statements of the Company in accordance with generally accepted
accounting principles.
For the three months ended December 31, 1998, Resort club incurred
an operating loss of $843,943.
DOMINION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Part II
Item 4. Submission of Matters to a Vote of Security Holders
During the quarter ended December 31, 1999:
None.
Item 6. Exhibits and Reports on Form 8-K
During the quarter ended December 31, 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
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE
DECEMBER 31, 1999 FORM 10QSB AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 29,630
<SECURITIES> 73,138
<RECEIVABLES> 721,417
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,111,089
<PP&E> 198,677
<DEPRECIATION> 82,948
<TOTAL-ASSETS> 11,566,890
<CURRENT-LIABILITIES> 4,990,381
<BONDS> 0
0
0
<COMMON> 76,306
<OTHER-SE> 3,172,849
<TOTAL-LIABILITY-AND-EQUITY> 11,566,890
<SALES> 0
<TOTAL-REVENUES> 2,185
<CGS> 0
<TOTAL-COSTS> 146,179
<OTHER-EXPENSES> 29,259
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,059
<INCOME-PRETAX> (69,152)
<INCOME-TAX> 0
<INCOME-CONTINUING> (69,152)
<DISCONTINUED> 11,115,744
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,046,592
<EPS-BASIC> 1.45
<EPS-DILUTED> 1.45
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