10QSB/A 1 form10qsba.txt FORM 10QSB/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB/A Amendment No. 2 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2000 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 January 1, 2001 Common Stock, $0.01 par value 7,630,576 DOMINION RESOURCES, INC. AND SUBSIDIARIES FORM 10-QSB/A QUARTER ENDED DECEMBER 31, 2000 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 6-9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K DOMINION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS December 31, September 30, 2000 2000 (Unaudited) (See note below) Current assets: Cash and cash equivalents $ 112,909 $ 26,072 Membership receivables, net (of allowance for doubtful accounts of $0 at December 31, 2000 and at September 30, 2000 421,839 487,333 Prepaid expenses and other assets 30,452 59,568 Investment in marketable securities 7,231 7,279 Accrued interest and other receivables 583,861 586,221 Total current assets 1,156,292 1,166,473 Property, equipment, furniture and fixtures, net of accumulated depreciation and amortization of $93,372 at December 31, 2000 and $91,458 at September 30, 2000 145,811 147,226 Other assets: Membership receivables, net (of allowance for doubtful accounts of $0 at December 31, 2000 and September 30, 2000 1,586,917 1,833,299 Mortgages receivables 17,354 20,177 Note receivable - Stonehill Recreation 3,128,787 3,128,787 Note receivable - RiceX, Inc. -0- 948,655 Investment in RiceX, Inc. 24,612 24,612 Real estate and real estate related activities 895,409 875,326 Total other assets 5,653,079 6,830,856 Total assets $6,955,182 $8,144,555 Note: The balance sheet at September 30, 2000, has been taken from the audited financial statements at that date and condensed. See accompanying notes. 1 DOMINION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Continued) LIABILITIES AND STOCKHOLDERS' DEFICIT December 31, September 30, 2000 2000 (Unaudited) (See note below) Current Liabilities: Secured debt, current portion $ 624,298 $ 775,240 Notes payable, current portion 14,576 33,955 Accounts payable and accrued liabilities 1,302,961 1,408,440 Deferred revenue -0- 35,210 Total current liabilities 1,941,835 2,252,845 Long-term liabilities: Secured debt, net of current maturities 3,320,166 3,672,707 Resort Club Reserve 757,366 927,769 Notes Payable 31,559 33,134 Total long-term liabilities 4,109,091 4,633,610 Commitments and Contingencies (Note 5): Redeemable common stock; par value $0.01 per share 358,333 shares outstanding at December 31, 2000 and September 30, 2000; redeemable at $3.00 per share in July 1998 through July 2000 1,075,000 1,075,000 Stockholders' deficit: Common stock, $0.01 par value; Authorized - 25,000,000 Shares; issued and outstanding - 7,630,576 shares at December 31, 2000 and September 30, 2000, respectively 76,306 76,306 Additional paid-in-capital 5,819,484 5,819,484 Accumulated deficit (4,630,785) (4,276,941) Accumulated other comprehensive loss (34,836) (34,836) Less: 1,350,646 shares held in treasury at December 31, 2000 and September 30, 2000 (1,400,913) (1,400,913) Total stockholders' deficit (170,744) 183,100 Total liabilities and stockholders' deficit $ 6,995,182 $ 8,144,555 Note: The balance sheet at September 30, 2000, has been taken from the audited financial statements at that date and condensed. See accompanying notes. 2 DOMINION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) 2000 1999 Revenues: Other revenue $ 600 $ 2,185 Total revenues 600 2,185 Expenses: Other operations 19,555 29,092 General and administrative expenses 183,928 114,521 Depreciation and amortization 1,914 2,566 Total expenses 205,397 146,179 Loss from operations (204,797) (143,994) Other income (expenses): Interest income 39,029 242,534 Interest expense (158,817) (138,433) Amortization of deferred financing costs (29,259) (29,259) Total other income (expenses) (149,047) 74,842 Loss from continuing operations before provision for income taxes (353,844) (69,152) Provision for income taxes -0- -0- Loss from continuing operations (353,844) (69,152) Discontinued Operations: Gain on sale of Resort Club (less applicable income taxes of $0 at December 31, 2000) -0- 11,115,744 Income from discontinued operations -0- 11,115,744 Net income (loss) (353,844) 11,046,592 Loss per common share - continuing operations $ (0.05) $ (0.01) Income per common share - discontinued operations $ 0.00 $ 1.46 Net income (loss) per common share $ (0.05) $ 1.45 Weighted average number of share used in computing net income (loss) per share 7,630,576 7,630,576 See accompanying notes. 3 DOMINION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) 2000 1999 Cash flows from operating activities: Net Income (loss) $ (353,844) $ 11,046,592 Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,914 2,566 Amortization of interest income -0- (60,017) Amortization of deferred financing costs 29,259 29,259 Gain on sale of Resort Club -0- (11,115,744) Changes in assets and liabilities: Membership receivables 311,876 -0- Accrued interest receivable and other receivables 2,360 (4,257) Prepaid expenses and other assets (143) (390) Accounts payable and accrued expenses (275,882) 29,248 Deferred revenue (35,210) (35,210) Net cash used in operating activities (319,670) (107,953) Cash flows from investing activities: Sale of (investment in) real estate and real estate related activities (17,260) (500) Sale of (investment in) mutual fund and other marketable securities 48 (11) RiceX proceeds -0- 1,750,000 RiceX - loan participation 948,655 (912,886) Capital expenditures (499) -0- Net cash provided by investing activities 930,944 836,603 Cash flows from financing activities: Repayment of borrowings (524,437) (706,130) Redemption of Common Stock -0- (75,000) Net cash used in financing activities (524,437) (781,130) Increase (Decrease) in cash and cash equivalents 86,837 (52,480) Cash and cash equivalents balance, beginning of period 26,072 82,110 Cash and cash equivalents balance, end of period $ 112,909 $ 29,630 See accompanying notes. 4 DOMINION RESOURCES, INC. AND SUBSIDIARIES SUPPLEMENTARY SCHEDULE OF NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) 2000 1999 Total Non-Cash Operating, Investing and Financing Activities $ -0- $ -0- See accompanying notes. 5 DOMINION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (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, 2000 and September 30, 2000, the results of operations for the three months ended December 31, 2000 and 1999, and cash flows for the three months ended December 31, 2000 and 1999. Operating results for the three months ended December 31, 2000, are not necessarily indicative of the results which may be expected for the year ending September 30, 2001. These statements should be read in conjunction with Form 10-KSB/A for fiscal 2000 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, Inc. ("Resort Club"). 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, Inc. which aggregate approximately $11,483,000 at December 31, 2000. The sales price is in the form of a royalty payment based on 3% of future sales revenues. The Company recorded a net gain of approximately $10.3 million on the transaction which included a write-down to net realizable value of the Company's notes receivable in Resort Club of approximately $20.8 million (See Note 3). NOTE 2 - RECLASSIFICATION: Certain fiscal 2000 items have been reclassified to conform with the fiscal 2001 presentation. NOTE 3 - DISCONTINUED OPERATIONS (continued): In September, 1999, the Board of Directors adopted a plan to dispose of Resort Club through sale or liquidation. In connection with the Company's disposal plan, Resort Club ceased operations as of September, 1999. 6 DOMINION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) NOTE 3 - DISCONTINUED OPERATIONS (continued): On March 1, 2000, the Company negotiated the sale of its 65% interest in Resort Club. 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, Inc. which aggregate approximately $11,483,000 at September 30, 1999. Pursuant to the terms of the transaction, the Company is entitled to receive a 3% royalty payment to be paid out of the net cash flow of Resort Club. No minimum payment of royalty is required under the agreement and the transaction was not conditioned upon the receipt of any payment under the royalty arrangement. When recording this transaction as a sale, the Company took into consideration that the 3% royalty payment is subordinate to the prior payments under the GAR Notes of approximately $11.5 million. The Company concluded, in view of these obligations, that realization of any royalty payment is remote and not a material part of the transaction. 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 $10,302,712 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 20,796,387 Net gain $10,302,712 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: Since January 1, 1999, the Company has not been a party to any material transactions with any officers, directors or holders of more than 5% of the outstanding common stock of the Company. 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. The adjustments included disallowed deductions from the Company's principal subsidiary in the amount of $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 7 DOMINION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) NOTE 5 - COMMITMENTS AND CONTINGENCIES (continued): 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. To date, the Appeals Division of the Internal Revenue Service has conceded to approximately $645,000 of the above disallowances. The Company is continuing the appeal process. 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. NOTE 6 - 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 "RicX". 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 8 DOMINION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) NOTE 6 - FOODCEUTICALS PARTICIPATION (continued): 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, along with advances for certain legal and professional fees, has been carried on the Company's Financial Statements as the basis in the FoodCeuticals loan, which was repaid on December 31, 2000. As of December 30, 2000, the Company held 39,421 shares of RiceX common stock and a warrant to purchase 1,229,338 shares of RiceX common stock. Based on the market value of the RiceX common stock at September 30, 2000, the Company adjusted the carrying value of these shares and warrants in is financial statements to reflect a valuation allowance of $459,191 which primarily relates to an adjustment to the carrying value in the RiceX warrant of $442,562. This arises because the market value of the RiceX common stock at September 30, 2000 was less than the exercise price of the warrants. NOTE 7 - SUBSEQUENT EVENTS: The Company is continuing the negotiation for the 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. 9 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/A for the year ended September 30, 2000. A. Liquidity and Capital Resources During the first three months of fiscal 2001, the Company had a net loss of approximately $353,800. Included in the net loss is depreciation of $1,914 and amortization of deferred financing costs of $29,259 both of which are non-cash expenses. Also during the first three months of fiscal 2001, changes in assets and liabilities included a decrease in prepaid expenses and other assets of $143, and a decrease in deferred revenue of $35,210, and a decrease in accounts payable and accrued liabilities of $275,882 offset by an increase in membership receivables of $311,876 and an increase in accrued interest and other receivables of $2,360. After reflecting the net changes in assets and liabilities, net cash used in operations was approximately $319,700. During the first three months of fiscal 2001, investing activities provided net cash of $930,944 and includes primarily the proceeds of the FoodCeuticals loan of $948,655, offset by investments in real estate activities of approximately $17,300. During the first three months of fiscal 2001, financing activities used net cash of $524,437 which resulted from the repayment of borrowings. Accordingly, during the first three months of fiscal 2001, the Company's cash increased by approximately $86,840. 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, 2000, these operations are treated as discontinued. 10 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) Management presently intends to apply the bulk of the Company's resources in some or all of the following real estate development activities: residential, commercial and resort development. Some of such activities may be conducted with entities affiliated with management. The Company's involvement may be as a sole principal, a partner, a joint venture or in some other form. In addition, the Company is also researching several Internet opportunities. 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, 2000 compared with three months ended December 31, 1999. Other revenue was $600 in the first three months of fiscal 2001 compared with $2,185 in the first three months of fiscal 2000 for a decline of $1,585 or 72.54%. The decline in revenues was primarily the result of decreased rental income from the Company's rental properties in Fort Lee, New Jersey. Other operations expenses were $19,555 in the first three months of 2001 compared with $29,092 in the first three months of fiscal 2000, for a decrease of $9,537 or 32.78%. The decrease was primarily the result of additional charges incurred in fiscal 2000 related to moving the Company's brewery equipment located in Vernon, New Jersey to storage. General and administrative expenses increased to $183,928 in the first three months of fiscal 2001 from $114,521 in the first three months of fiscal 2000, or by $69,407 or 60.61% primarily as a result of additional legal and professional fees. Depreciation and amortization was $1,914 in the first three months of fiscal 2001 compared to $2,566 in the first three months of fiscal 2000, resulting in a decrease of $652. This decrease is essentially unchanged. Interest income was $39,029 in the first three months of fiscal 2001, compared with $242,534 in the first three months of fiscal 2000. The decrease of $203,505 was primarily the result of a reserve of interest income relating to the Stonehill Recreation loan receivable. Interest expense increased to $158,817 in the first three months of fiscal 2001, compared with $138,433 in the first three months of fiscal 2000. The increase of $20,384 was the result of an increase in debt for the comparable periods. 11 DOMINION RESOURCES, INC. AND SUBSIDIARIES ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS B. Results of Operations (continued) Continuing Operations (continued): 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 were $29,259 in the first three months of fiscal 2001 and 2000. Discontinued Operations: On March 1, 2000, the Company negotiated the sale of its 65% interest in Resort Club. 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 $10,302,712 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 20,796,387 Net gain $10,302,712 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. 12 DOMINION RESOURCES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION Part II Item 6. Exhibits and Reports on Form 8-K During the quarter ended December 31, 2000: None. 13 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: May 7,2002 /s/Joseph R. Bellantoni --------------------------- Joseph R. Bellantoni President, Chief Executive Officer and Chief Financial Officer 14